Apple’s services business — the home of the App Store, Apple TV+, Apple Music, iCloud, and Apple Pay — brought in $31.57 billion in the September quarter, a new all-time high. But the number came with an asterisk: growth slipped to 9.8% year over year, the slowest pace since 2022 and the first time in three years that services growth fell below 10%. The record was not enough to keep investors comfortable. Apple shares dipped in after-hours trading after management guided the December quarter’s services growth to just 8% to 9%, below what analysts had expected.
The results landed on November 2, 2026, in the first earnings report led by new CEO John Ternus, who took over from Tim Cook on September 1. Ternus called it Apple’s “best fiscal year ever,” and the company’s total revenue of $114.5 billion beat Wall Street estimates. Still, the services slowdown became the central talking point on the earnings call and across analyst notes.
What Apple Services Actually Includes
Apple Services is the company’s second-largest business after the iPhone. It covers a long list of digital products: the App Store, Apple TV+, Apple Music, Apple Pay, iCloud storage, AppleCare, Apple Arcade, Apple News+, and Apple’s advertising business. Unlike hardware, services carry much higher profit margins. That is why even a small change in the growth rate gets close attention from investors.
For the full fiscal year, services revenue reached $123.3 billion, up from $109.2 billion in fiscal 2025. Apple also said its paid subscriptions across all services passed 1.5 billion, a double-digit increase from a year earlier. The company reported all-time records in video, cloud services, payment services, and advertising during the quarter.
The Record Quarter in Numbers
The September quarter, which ended on September 26, 2026, delivered several records for Apple. Total company revenue rose 12% to $114.5 billion, and diluted earnings per share came in at $2.10, up 14% year over year. iPhone revenue climbed 17% to $57.58 billion, while Mac revenue jumped nearly 24% to $10.79 billion.
Services contributed roughly 27.6% of Apple’s total revenue and about 43.7% of its gross profit, according to a breakdown of the company’s disclosed figures. That profit share is why the segment matters so much. Services help balance the ups and downs of hardware sales.
The App Store drew close to 1 billion average weekly visitors during the quarter, a record according to Apple. The company also pointed to a strong entertainment quarter for Apple TV+, which had a record 28 Emmy wins and its biggest weekly viewership ever in late September with shows including Mayday, Ted Lasso, Pluribus, and Widow’s Bay.
Why Services Growth Is Slowing
Several factors combined to cool the services growth rate. The App Store has faced regulatory and legal pressure in multiple markets, cutting into the commission revenue Apple collects from developers. Third-party estimates cited in August suggested Apple’s U.S. App Store commission revenue had dropped about 18% that year, with declines also reported in Brazil and Japan after new rules took effect.
A second issue involved OpenAI. The ChatGPT app had been one of Apple’s most lucrative App Store fee generators, but OpenAI began sending potential subscribers to pay through its own website instead, skipping Apple’s cut entirely. The move added pressure to App Store revenue at a time when Apple was already dealing with softer mobile gaming spending.
Currency moves also played a role. Apple executives said foreign exchange “headwinds” were a main reason for the slower services growth, and they expected those headwinds to continue into the December quarter. Google’s search licensing payments to Apple — another part of services — were also weaker on a sequential basis, according to analyst notes.
What Wall Street Is Saying
Analysts did not ignore the record, but many focused on the direction of travel. Ben Reitzes of Melius Research framed services as the company’s central issue.
“We think Services is what matters since this 76% gross margin business is needed to offset the impact of higher memory prices, possibly forever,” Reitzes wrote.
Morgan Stanley kept an Overweight rating on Apple but trimmed its price target to $350 from $355, saying services reacceleration is now key. UBS expected Apple’s price-to-earnings multiple to compress to about 31 times from 36 times, pointing to slowing services and a still-developing AI strategy.
Not everyone was bearish. David Wagner of Aptus Capital Advisors told InvestmentNews that the record still matters.
“Services did cool off a bit, but it still hit a record, and that business keeps getting stickier as the installed base grows,” Wagner said. “Every new device is another customer on the toll road.”
Gene Munster of Deepwater Asset Management called it a “rock solid quarter” for Apple, though he acknowledged that the market did not fully embrace the results. On social media, reactions were mixed. One widely shared post on X highlighted the headline numbers — iPhone up 17% and services up 10% — without hiding the slower services pace.
John Ternus Faces His First Earnings Call
The report was the first under John Ternus, Apple’s new chief executive. Ternus praised the company’s product lineup, including the foldable iPhone Duo, the iPhone 18 Pro series, and the new Siri AI. He also addressed the services business directly.
“I’m delighted with where our services business is today and where it’s going,” Ternus said on the earnings call.
CFO Kevan Parekh gave the financial detail that shaped the market reaction. He said Apple expects total revenue growth of 7% to 10% in the December quarter, and services growth of 8% to 9%. He also guided gross margin to 45% to 46%, below the 47.9% reported in the September quarter, citing higher memory costs and Siri AI costs.
Memory prices came up repeatedly on the call. Apple executives described current memory pricing as “unprecedented” and said the company had raised prices on some products, including iPads, Macs, and iPhones, partly in response. Supply constraints also affected the quarter, particularly for advanced chips, and Apple said memory-related supply limits could affect Mac and iPad in the December period.
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What the Numbers Mean for the Holiday Quarter
Apple’s December-quarter guidance points to what would be the company’s biggest revenue quarter ever, according to management. The services growth range of 8% to 9% is lower than the roughly 11% that analysts had expected, and it extends a slowing trend that began earlier in the year. The services segment grew 12.1% in the June quarter before slipping to 9.8% in September.
Apple returned $28 billion to shareholders during the quarter and generated $28 billion in operating cash flow. The board declared a cash dividend of $0.27 per share, payable on November 16, 2026, to shareholders of record as of November 12, 2026.
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