Apple EPS Faces 2--3% Hit After Epic Ruling

June 05, 2025 09:20 AM PDT | By EODHD

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Apple EPS Faces 2--3% Hit After Epic Ruling — Image source: Kalkine Media

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Apple (NASDAQ:AAPL) is bracing for a 23% EPS headwind after a federal appeals court upheld an injunction requiring link-out payments in the App Store, potentially shifting billions in developer fees over the next two years. Despite this ruling taking effect April 30, May App Store revenue climbed 13% overall (10% in the U.S.), suggesting many developers won't abandon Apple's ecosystem due to the convenience and trust of its billing. Evercore ISI's Amit Daryanani notes the App Store generates about $21 billion in annual sales, with roughly $7 billion of that coming from U.S. developer fees; while a complete fee loss would imply a 6% EPS hit, he expects a more modest impact as developers weigh higher alternative fees against Apple's seamless experience. J.P.

Morgan's Samik Chatterjee agrees on a 2%3% EPS drag, citing an AlphaWise survey where 28% of U.S. iPhone users say they'd be extremely likely to link outputting roughly $3.7 billion in revenue at risk and translating to a worst-case 16-cent EPS hit (2%). Morgan Stanley's data also points to a 2% EPS exposure. Gaming accounts for about 65% of U.S. App Store sales, mostly $0.99 one-time purchases; if users switch to payment platforms like Stripe, they could end up paying 3% plus 30 cents per transactionoften more than Apple's 27% commission.

Apple insists that over 90% of 2024 billings incurred no commission and emphasizes the App Store's role in helping developers reach a global audience. CEO Tim Cook highlighted that so many developers design great apps, build successful businesses, and reach Apple users through this platform. Investors should watch June App Store metrics and upcoming appellate developments to gauge the long-term financial fallout, since even a small EPS hit matters given Apple's $3 trillion valuation. In other news, Apple has tapped India's Tata Group to handle after-sales repairs for iPhones and MacBooks in India, taking over from Taiwan's Wistron unit, ICT Service Management Solutions. Tata already assembles iPhones at three South India facilitiesone of which produces certain partsand will now carry out repairs at its Karnataka assembly site.

This ongoing transition underscores Apple's confidence in Tata as it diversifies manufacturing beyond China, where Tata also assembles devices for domestic and export markets. Apple, Wistron and Tata declined immediate comment. This article first appeared on GuruFocus. View Comments

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