“If we look at the sequential change from the June quarter, the 12% services we reported to what we're guiding for the September quarter, we are going to see another two and a half point sequential headwind.”

In context

“Kevan Parekh (CFO): Hey, Erik, this is Kevan. I'll take that one. Let's walk from kind of the 16% in our fiscal second quarter to kind of the 12% that we just talked about in the June quarter that you referenced. We look at that, relative to the March quarter. Foreign exchange was the main driver for the change in the year-over-year growth rate sequentially. Also a couple other factors to keep in mind. One is we had the theatrical release of F1, which is one of the highest grossing sports films in history, and this year we didn't have a theatrical release. That had a favorable impact on both the June quarter and also the September quarter in the year ago. We also had some factors that impacted the performance of the App Store. We did see some headwinds in mobile gaming. Keep in mind, we also made some changes to the App Store business model in certain countries. In the U.S., we do continue to operate under a court ruling impacting the link-out transactions. We're pleased the Supreme Court will hear our appeal. Despite this, the App Store did set a June quarter revenue record. We take a step back. There are several positive trends in the services business. During the June quarter, we saw strong double-digit growth in categories like cloud services, video, payment services, and advertising. We set revenue records in every category with June quarter records in advertising, the App Store, AppleCare, music, and video, where Apple TV+ viewership reached an all-time high in the quarter. We also set all-time records in cloud services and payment services, where Apple Pay saw a record level of users in both developed and emerging markets. Services also had a June quarter record in emerging markets. As we outlined in the prepared remarks, our services continue to attract more customers, and we now have surpassed one and a half billion in paid subscriptions. Our transacting and paid accounts hit an all-time high with double-digit growth in both those two in emerging markets. I think when I step back, if I look at how we landed versus our expectations that we had outlined in the March quarter for the June quarter, I would say that we roughly met our expectations, but we did see a bit more softness on mobile gaming in the App Store. As we go into the September quarter, what I would say is we expect foreign exchange will continue to be a headwind. In fact, this is a theme that's impacting the services business more so than the total company. We expect foreign exchange to drive about a 5 percentage point headwind to the year-over-year growth rate from the March to September quarter. If we look at the sequential change from the June quarter, the 12% services we reported to what we're guiding for the September quarter, we are going to see another two and a half point sequential headwind.”