Apple to see little change to its bottom line from EU overhaul
Apple yesterday announced major changes it is making to iOS, Safari, and the App Store as iPhone users will be able to install apps from third-party app storefronts, select a default third-party contactless payment platform to replace Apple Pay, use an alternative payment platform to pay for in-app transactions in the App Store, and more. Before you get too excited, these changes are only happening in the 27 member countries that make up the European Union (EU).
Some analysts are concerned that by reducing the so-called "Apple Tax" in the EU for developers using Apple's in-app payment platform from 15%-30% to 10%-17%, Apple's Services unit will see a speed bump in its growth rate. Additionally, Apple receives no cut of the in-app transactions processed by a third-party platform, something that developers are allowed to do in the EU when the changes kick off in March with the release of iOS 17.4. The developer beta of the build was just released this week.
The changes to iOS, Safari, and the App Store will take place in the EU with the release of iOS 17.4 in March
But there is at least one major investment house that sees little change to Apple's financials after these wholesale changes take effect in the EU. AppleInsider was able to read the latest investment note on Apple sent to clients of J.P. Morgan. The latter believes that a 50-cent fee Apple is imposing in the EU on all apps downloaded after reaching one million installs will make up for the lower Apple Tax in the EU. Besides, the investment house points out that the EU is responsible for only 6% of App Store revenue.
The Services segment is Apple's second-largest business unit after the iPhone and generated revenue of $85.2 billion in fiscal 2023. As far as most investors are concerned, that makes all of the changes Apple announced yesterday important as far as the company's stock price is concerned.
We could see lawmakers in the U.S. seek to emulate the EU's Digital Markets Act (DMA) with some form of legislation that would force Apple to make similar changes to iOS, Safari, and the App Store in the U.S.
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