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ServicesWide moat

Apple (AAPL) — moat facet

The meter on 2.5 billion devices: margins above 75%, never a down year, and a list of growth drivers that has shrunk to advertising and cloud.

Services is the line that makes Apple look like a software company in the accounts. It brought in $123.3 billion in fiscal 2026, a quarter of net sales, at a gross margin of 76.2%, against 39.3% for products1. It crossed $100 billion for the first time only the year before2.

Services net sales by quarter ($B)23.1Q1'2423.9Q224.2Q325.0Q426.3Q1'2526.6Q227.4Q328.8Q430.0Q1'2631.0Q230.7Q331.6Q4Apple 10-Qs and results exhibits; an all-time high, and up only 2.7% on the June quarter
Twelve straight quarters without a decline, and an all-time high — but the sequential step is shrinking, and the App Store has stopped being named as a driver.

The 10-K lists five kinds of business inside it: advertising, including third-party licensing arrangements and Apple's own advertising platforms; AppleCare; cloud services; digital content, meaning the App Store and subscriptions such as Apple Music, TV+, Arcade and Fitness+; and payment services, including Apple Card and Apple Pay3. The largest licensing arrangement is the one in which Google pays to be the default search engine, about $20 billion a year by the trial evidence4, which has its own page under Competitors. Apple discloses none of these pieces separately; the Services sub-mix under the chart is an estimate and says so.

The business became real with the App Store, which opened in July 2008 and saw more than 10 million downloads in its first weekend5. As a stand-alone category, Services was $19.9 billion in fiscal 20156. Apple recast the line under the new revenue standard in fiscal 2019, which moved about $2.6 billion of fiscal 2018 sales into it7.

How it is paid depends on the piece. The App Store takes a commission of 15% to 30% on digital goods and subscriptions sold inside apps8; iCloud, Music, TV+ and the Apple One bundle are subscriptions; AppleCare is a fee-based support product sold with devices; advertising is sold to developers who want to appear in App Store search results, and from this summer in Apple Maps9; the Google payment is a licence fee. What they share is that none requires a new customer. Apple said on its September-quarter call that paid subscriptions had passed 1.5 billion, growing double digits to an all-time record10.

Profitability is the one thing Apple does disclose about the line, and it has risen almost every year: Services gross margin was 55.0% in fiscal 2017, 63.7% in fiscal 2019 and 69.7% in fiscal 20211112, then 70.8% in fiscal 2023, 75.4% in fiscal 2025 and 76.2% in fiscal 202613. The only fall in that run, in fiscal 2023, was under a point, and in the September quarter the margin reached 76.0%, forty basis points above the quarter before it14. Part of the base is paid in advance: Apple carried $14.9 billion of deferred revenue at its most recent disclosure, in June 2026, and expected to recognise 64% of it within a year15. The cost of running all of it, Services cost of sales, was $29.4 billion in fiscal 202616. The line produced $93.9 billion of gross profit, 40% of Apple's total — a share that fell for the first time, and not because Services weakened17.

Growth has never gone negative. On the recast basis Services grew 16% in both fiscal 2019 and fiscal 2020, 27% in fiscal 2021, 14% in fiscal 2022 and 9% in fiscal 2023, the weakest year, then 13%, 14% and 13%; from fiscal 2019 to fiscal 2026 that compounds at about 15.0% a year18. The filings name the drivers each year, and the list has narrowed: in fiscal 2023 growth came from all lines of business19; in fiscal 2025 from advertising, the App Store and cloud services20; and for the June 2026 quarter the 10-Q cites only advertising and cloud services21. Quarterly growth was 16.3% in March and 12.1% in June22, the June figure below analysts' estimates, with Apple blaming currency23. The September quarter grew 9.8% to an all-time high of $31.6 billion, with records in video, cloud, payment services and advertising — while the App Store itself, on Apple's own account, merely performed similar to the prior year against headwinds in mobile gaming it expects to continue26.

The outlook has two sides, and they meet in the App Store. Advertising keeps finding new inventory. The commission is under pressure on three continents: in the United States the contempt finding in Epic v. Apple was upheld in December 2025, with any fee on linked-out purchases limited to what a court finds reasonable24, and the Supreme Court agreed in June 2026 to review the case25. The detail is on The App Store Toll and the two root threats. For this line the question is simply whether the new lanes grow faster than the old toll leaks, and two quarters in which the App Store has stopped being named as a driver are the first hint of an answer. A second cost now arrives alongside it: Apple guides December Services growth to 8-to-9%, slowed by third-party licensing and currency, and says the cloud bill for running the rebuilt Siri will be charged to this line's cost of sales27.

The measure to watch is the Services gross margin, and it has just gone the right way again — 55% to 76.2% in nine years. What presses on it now has a name rather than a court date: Siri's cloud bill is being charged to this line. A fall of more than a point in a year would mean either that the commission had begun to shrink or that Apple is paying to run an assistant out of the highest-margin dollar it earns. Either reading matters; they are not the same problem.

Moat trajectory: Holding steady

Still growing, at 12.1% in the June 2026 quarter against 16.3% in March, with the margin level at 75.6%. The 10-Q now names only advertising and cloud as drivers, and the App Store commission faces a court-set fee in the United States.

The number that tests this moat
Reported
Services net sales, first nine months of FY2026
$91,728M, +14% year on year

Services has grown every year in the series; the question is the rate. The 10-Q now names only advertising and cloud as drivers, so nine-month growth dropping toward 10% would mean the App Store had stopped contributing.

Source: Apple Form 10-Q, Q3 FY2026 ↗
References
  1. Moat Explorer calcServices revenue of $123.3 billion in FY2026, a quarter of net sales, at a 76.2% gross margin against 39.3% for products.
    Moat Explorer calculation from Apple's Q4 FY2026 results exhibit (growth rates, category and segment shares, products and Services gross margins, gross-profit shares and compound growth rates are all derived from the reported dollar figures) — FY2026 · publ. 3 November 2026 · source ↗
    Method: Shares and margins are the reported dollar lines divided into one another.
  2. ReportedServices revenue of $123,301M in FY2026 against $109,158M in FY2025.
    Apple Inc., Form 8-K Exhibit 99.1 — Q4 FY2026 results: revenue $114,477M (+12%), net income $30,711M, diluted EPS $2.10; twelve months revenue $478,834M, net income $132,175M, diluted EPS $8.98; net sales by category iPhone $254,098M, Services $123,301M, Wearables/Home/Accessories $35,577M, Mac $37,929M, iPad $27,929M; by segment Americas $198,083M, Europe $127,604M, Greater China $82,378M, Japan $30,908M, Rest of Asia Pacific $39,861M; R&D $45,765M; inventories $14,541M vs $5,718M; intangibles $20,278M vs $11,093M; repurchases $86,390M; capex $9,041M; D&A $13,423M — Q4 and FY2026 (quarter and year ended 26 September 2026) · publ. 2 November 2026 · source ↗
  3. ReportedThe 10-K lists five kinds of business inside it: advertising, including third-party licensing arrangements and Apple's own advertising platforms; AppleCare; cloud services; digital content, meaning the App Store and subscriptions such as Apple Music, TV+, Arcade and Fitness+; and payment services, including Apple Card and Apple Pay.
    Apple Form 10-K, FY2025, Item 1 - the iPhone, Mac, iPad and Wearables, Home and Accessories lines (wearables include smartwatches, wireless headphones and spatial computers); Services: advertising incl. third-party licensing arrangements, AppleCare, cloud services, digital content incl. the App Store and subscription services, payment services; reportable segments are geographic; direct and indirect channels 40% and 60% of net sales — FY2025 · publ. 31 October 2025 · source ↗
  4. Third-party estimateThe largest licensing arrangement is the one in which Google pays to be the default search engine, about $20 billion a year by the trial evidence, which has its own page under Competitors.
    United States v. Google LLC (D.D.C., Judge Mehta) — DOJ case page: Aug 2024 liability ruling (default-search payments, about $20B a year largely to Apple, found to be unlawful monopoly maintenance); final judgment and memorandum opinion Dec 5, 2025; the United States' response and opening brief on cross-appeal, July 28, 2026 — Liability ruling Aug 2024; final judgment Dec 5, 2025; appeals 2026 · publ. 2024–2026 · source ↗
  5. ReportedThe business became real with the App Store, which opened in July 2008 and saw more than 10 million downloads in its first weekend.
    Apple press release, 'iPhone App Store Downloads Top 10 Million in First Weekend' (14 July 2008) — July 2008 · publ. 14 July 2008 · source ↗
  6. ReportedAs a stand-alone category, Services was $19.9 billion in fiscal 2015.
    Apple Form 10-K, FY2015 - net sales and unit sales by product FY2013-FY2015 (iPhone $155,041M; iPad $23,227M on 54,856K units, and $31,980M on 71,033K in 2013; Mac $25,471M, $21,483M on 16,341K in 2013; Services $19,909M; Other Products $10,067M) — FY2013-FY2015 · publ. 28 October 2015 · source ↗
  7. Moat Explorer calcApple recast the line under the new revenue standard in fiscal 2019, which moved about $2.6 billion of fiscal 2018 sales into it.
    Moat Explorer calc from Apple Forms 10-K (FY2015-FY2025) and 10-Q (FY2026): category net sales, units to FY2018, products and services gross margin, installed base reported each January — FY2013 to June 2026 · publ. 2026-09-19 · source ↗
    Method: FY2018 Services $39,748M in the FY2019 10-K (recast) against $37,190M as originally reported in the FY2018 10-K = $2,558M.
  8. ReportedThe App Store takes a commission of 15% to 30% on digital goods and subscriptions sold inside apps; iCloud, Music, TV+ and the Apple One bundle are subscriptions; AppleCare is a fee-based support product sold with devices; advertising is sold to developers who want to appear in App Store search results, and from this summer in Apple Maps; the Google payment is a licence fee.
    Apple App Store — published commission schedule (15% small-business / subscriptions after year one; 30% standard) — Current schedule · publ. 2025–2026 · source ↗
  9. ReportedThe App Store takes a commission of 15% to 30% on digital goods and subscriptions sold inside apps; iCloud, Music, TV+ and the Apple One bundle are subscriptions; AppleCare is a fee-based support product sold with devices; advertising is sold to developers who want to appear in App Store search results, and from this summer in Apple Maps; the Google payment is a licence fee.
    MacRumors live coverage of Apple's Q2 FY2026 call (30 April 2026) — June-quarter gross margin guided to 47.5%-48.5%; foreign exchange a 2.5-point tailwind; higher memory costs; Maps ads in the US and Canada this summer; more than 2.5 billion active devices — Q2 FY2026 call · publ. 30 April 2026 · source ↗
  10. ReportedPaid subscriptions passed 1.5 billion, growing double digits to an all-time record.
    Apple Q4 FY2026 earnings call — Ternus: memory pricing "unprecedented"; Khan: manufacturing purchase obligations up $33 billion from the June to the September quarter, December constraints on Mac and iPad "primarily driven by memory"; Parekh: December revenue growth 7-10% and "the best quarter for revenue in the history of the company", Services growth 8-9% with "headwinds, primarily driven by third-party licensing and foreign exchange", gross margin 45-46% on higher memory costs and the Siri AI ramp, Siri AI cloud costs recognised through Services cost of sales; installed base over 2.5 billion active devices; paid subscriptions over 1.5 billion; Services gross margin 76.0%; App Store "performance was similar to the prior year" with "headwinds in mobile gaming" — Quarter ended 26 September 2026 · publ. 2 November 2026 · source ↗
  11. ReportedProfitability is the one thing Apple does disclose about the line, and it has risen almost every year: Services gross margin was 55.0% in fiscal 2017, 63.7% in fiscal 2019 and 69.7% in fiscal 2021, then 70.8% in fiscal 2023 and 75.4% in fiscal 2025.
    Apple Form 10-K, FY2019 - the recast category table (Wearables, Home and Accessories +41% and +36% on AirPods and Apple Watch; iPhone -14% on lower unit sales; Services +16%); gross margin by products and services, services 55.0% (2017) and 63.7% (2019) — FY2017-FY2019 · publ. 31 October 2019 · source ↗
  12. ReportedProfitability is the one thing Apple does disclose about the line, and it has risen almost every year: Services gross margin was 55.0% in fiscal 2017, 63.7% in fiscal 2019 and 69.7% in fiscal 2021, then 70.8% in fiscal 2023 and 75.4% in fiscal 2025.
    Apple Form 10-K, FY2021 - net sales by category FY2019-FY2021 (iPhone +39% on new models launched in the first and fourth quarters; Mac +23%; iPad $31,862M, +34% on iPad Air and iPad Pro; Wearables +25%; Services +27%); services gross margin 69.7% — FY2019-FY2021 · publ. 29 October 2021 · source ↗
  13. Moat Explorer calcServices gross margin of 76.2% in FY2026.
    Moat Explorer calculation from Apple's Q4 FY2026 results exhibit (growth rates, category and segment shares, products and Services gross margins, gross-profit shares and compound growth rates are all derived from the reported dollar figures) — FY2026 · publ. 3 November 2026 · source ↗
    Method: Shares and margins are the reported dollar lines divided into one another.
  14. ReportedServices gross margin of 76.0% in the September quarter, up 40 basis points sequentially.
    Apple Q4 FY2026 earnings call — Ternus: memory pricing "unprecedented"; Khan: manufacturing purchase obligations up $33 billion from the June to the September quarter, December constraints on Mac and iPad "primarily driven by memory"; Parekh: December revenue growth 7-10% and "the best quarter for revenue in the history of the company", Services growth 8-9% with "headwinds, primarily driven by third-party licensing and foreign exchange", gross margin 45-46% on higher memory costs and the Siri AI ramp, Siri AI cloud costs recognised through Services cost of sales; installed base over 2.5 billion active devices; paid subscriptions over 1.5 billion; Services gross margin 76.0%; App Store "performance was similar to the prior year" with "headwinds in mobile gaming" — Quarter ended 26 September 2026 · publ. 2 November 2026 · source ↗
  15. ReportedPart of the base is paid in advance: Apple carried $14.9 billion of deferred revenue at 27 June 2026, and expects to recognise 64% of it within a year.
    Apple Form 10-Q, quarter ended 27 June 2026 - iPhone $54,252M (+22%); Mac $10,352M (+29%); iPad $6,191M (-6%) on iPad mini and Air; Wearables $7,883M (+6%); Services $30,739M (+12%) on advertising and cloud services; nine months: iPhone $196,515M, Mac $27,137M, iPad $21,700M, Wearables $27,277M, Services $91,728M; services gross margin 75.6%; deferred revenue $14.9B, 64% within a year — Q3 FY2026 · publ. 31 July 2026 · source ↗
  16. ReportedServices cost of sales of $29,358M in FY2026.
    Apple Inc., Form 8-K Exhibit 99.1 — Q4 FY2026 results: revenue $114,477M (+12%), net income $30,711M, diluted EPS $2.10; twelve months revenue $478,834M, net income $132,175M, diluted EPS $8.98; net sales by category iPhone $254,098M, Services $123,301M, Wearables/Home/Accessories $35,577M, Mac $37,929M, iPad $27,929M; by segment Americas $198,083M, Europe $127,604M, Greater China $82,378M, Japan $30,908M, Rest of Asia Pacific $39,861M; R&D $45,765M; inventories $14,541M vs $5,718M; intangibles $20,278M vs $11,093M; repurchases $86,390M; capex $9,041M; D&A $13,423M — Q4 and FY2026 (quarter and year ended 26 September 2026) · publ. 2 November 2026 · source ↗
  17. Moat Explorer calcServices produced $93.9 billion of gross profit, 40% of Apple's $233.6 billion total, down from 42% a year earlier.
    Moat Explorer calculation from Apple's Q4 FY2026 results exhibit (growth rates, category and segment shares, products and Services gross margins, gross-profit shares and compound growth rates are all derived from the reported dollar figures) — FY2026 · publ. 3 November 2026 · source ↗
    Method: Shares and margins are the reported dollar lines divided into one another.
  18. Moat Explorer calcServices grew 13% in FY2026 and compounded at about 15.0% a year from FY2019.
    Moat Explorer calculation from Apple's Q4 FY2026 results exhibit (growth rates, category and segment shares, products and Services gross margins, gross-profit shares and compound growth rates are all derived from the reported dollar figures) — FY2026 · publ. 3 November 2026 · source ↗
    Method: Compound annual growth from the FY2019 recast base to FY2026, i.e. (end/start)^(1/7)-1.
  19. ReportedThe filings name the drivers each year, and the list has narrowed: in fiscal 2023 growth came from all lines of business; in fiscal 2025 from advertising, the App Store and cloud services; and for the June 2026 quarter the 10-Q cites only advertising and cloud services.
    Apple Form 10-K, FY2023 - iPhone -2% ($4.9B) on non-Pro models; Mac -27% ($10.8B) on laptops; iPad -3% on iPad mini and Air; Wearables, Home and Accessories -3% ($1.4B); Services +9% ($7.1B) across all lines of business — FY2023 · publ. 3 November 2023 · source ↗
  20. ReportedThe filings name the drivers each year, and the list has narrowed: in fiscal 2023 growth came from all lines of business; in fiscal 2025 from advertising, the App Store and cloud services; and for the June 2026 quarter the 10-Q cites only advertising and cloud services.
    Apple Form 10-K, FY2025, Item 7 - net sales by category 2023-2025 (iPhone $209,586M / $201,183M / $200,583M; Mac $33,708M / $29,984M / $29,357M; iPad $28,023M / $26,694M / $28,300M; Wearables, Home and Accessories $35,686M / $37,005M / $39,845M; Services $109,158M / $96,169M / $85,200M) and the drivers of each change; products and services gross margin 36.8% and 75.4%; services cost of sales $26,844M — FY2023-FY2025 · publ. 31 October 2025 · source ↗
  21. ReportedThe filings name the drivers each year, and the list has narrowed: in fiscal 2023 growth came from all lines of business; in fiscal 2025 from advertising, the App Store and cloud services; and for the June 2026 quarter the 10-Q cites only advertising and cloud services.
    Apple Form 10-Q, quarter ended 27 June 2026 - iPhone $54,252M (+22%); Mac $10,352M (+29%); iPad $6,191M (-6%) on iPad mini and Air; Wearables $7,883M (+6%); Services $30,739M (+12%) on advertising and cloud services; nine months: iPhone $196,515M, Mac $27,137M, iPad $21,700M, Wearables $27,277M, Services $91,728M; services gross margin 75.6%; deferred revenue $14.9B, 64% within a year — Q3 FY2026 · publ. 31 July 2026 · source ↗
  22. Moat Explorer calcQuarterly growth was 16.3% in March and 12.1% in June, the June figure below analysts' estimates, with Apple blaming currency.
    Moat Explorer calc from Apple Forms 10-K (FY2015-FY2025) and 10-Q (FY2026): category net sales, units to FY2018, products and services gross margin, installed base reported each January — FY2013 to June 2026 · publ. 2026-09-19 · source ↗
    Method: Services $30,976M / $26,645M - 1 = 16.3% (Q2 FY2026); $30,739M / $27,423M - 1 = 12.1% (Q3 FY2026).
  23. ReportedQuarterly growth was 16.3% in March and 12.1% in June, the June figure below analysts' estimates, with Apple blaming currency.
    CNBC live coverage of Apple's Q3 FY2026 results (30 July 2026) — Services revenue up 12%; Cook said Apple has 1.5 billion paid subscriptions; gross margin guidance of 47%-48%; memory costs rising — Q3 FY2026 · publ. 30 July 2026 · source ↗
  24. ReportedThe commission is under pressure on three continents: in the United States the contempt finding in Epic v. Apple was upheld in December 2025, with any fee on linked-out purchases limited to what a court finds reasonable, and the Supreme Court agreed in June 2026 to review the case.
    Fenwick, 'Ninth Circuit Largely Upholds Ruling in Epic v. Apple' (22 December 2025) — the panel upheld the contempt finding but held the total ban on commissions for linked-out purchases overbroad; Apple may charge a commission based on costs genuinely and reasonably necessary, and the district court's original injunction had faced a 27% commission — Ninth Circuit ruling, December 2025 · publ. 22 December 2025 · source ↗
  25. ReportedThe commission is under pressure on three continents: in the United States the contempt finding in Epic v. Apple was upheld in December 2025, with any fee on linked-out purchases limited to what a court finds reasonable, and the Supreme Court agreed in June 2026 to review the case.
    Courthouse News Service — the Supreme Court agreed on June 30 to review the contempt finding in Epic Games v. Apple, while the district court continues the remand on what commission Apple may impose on linked-out purchases — June-August 2026 · publ. 2026 · source ↗
  26. ReportedServices grew 9.8% to an all-time high of $31,573M with all-time records in video, cloud services, payment services and advertising, while App Store performance was "similar to the prior year" against headwinds in mobile gaming expected to continue.
    Apple Q4 FY2026 earnings call — Ternus: memory pricing "unprecedented"; Khan: manufacturing purchase obligations up $33 billion from the June to the September quarter, December constraints on Mac and iPad "primarily driven by memory"; Parekh: December revenue growth 7-10% and "the best quarter for revenue in the history of the company", Services growth 8-9% with "headwinds, primarily driven by third-party licensing and foreign exchange", gross margin 45-46% on higher memory costs and the Siri AI ramp, Siri AI cloud costs recognised through Services cost of sales; installed base over 2.5 billion active devices; paid subscriptions over 1.5 billion; Services gross margin 76.0%; App Store "performance was similar to the prior year" with "headwinds in mobile gaming" — Quarter ended 26 September 2026 · publ. 2 November 2026 · source ↗
  27. ReportedDecember Services growth guided to 8-9%, held back primarily by third-party licensing and foreign exchange; Siri AI cloud costs recognised through Services cost of sales.
    Apple Q4 FY2026 earnings call — Ternus: memory pricing "unprecedented"; Khan: manufacturing purchase obligations up $33 billion from the June to the September quarter, December constraints on Mac and iPad "primarily driven by memory"; Parekh: December revenue growth 7-10% and "the best quarter for revenue in the history of the company", Services growth 8-9% with "headwinds, primarily driven by third-party licensing and foreign exchange", gross margin 45-46% on higher memory costs and the Siri AI ramp, Siri AI cloud costs recognised through Services cost of sales; installed base over 2.5 billion active devices; paid subscriptions over 1.5 billion; Services gross margin 76.0%; App Store "performance was similar to the prior year" with "headwinds in mobile gaming" — Quarter ended 26 September 2026 · publ. 2 November 2026 · source ↗
Sources
Generated November 3, 2026