Apple's Japan App Store Policy Changes: Impact on Revenue, Valuation, and Risks

Apple plans to allow developers to use alternative app stores and guide users to external payment options within apps in the Japanese market to comply with Japan’s Mobile Software Competition Act (MSCA). It also reduces commissions on digital goods in the App Store from 21% to 10% and introduces various relief arrangements for small developers, videos, Mini Apps, and subscriptions (after the first year). This move aims to reduce privacy and security risks caused by the new policy while sending a signal of regulatory compromise [1].

1. Commission Revenue Structure Faces Compression
   : The App Store has long relied on 30% (now mostly 21%/10%) commissions as a high-margin service revenue source. The service business accounts for 26.2% of the company’s revenue (FY2025) and has grown steadily in recent years, with the App Store being one of its core components [0]. Although Japan accounts for only about 6.9% of revenue, such regulatory precedents are highly transmissible and may trigger follow-up in other global markets (Europe, the United States), leading Apple to implement lower commissions on a broader scale and increase tolerance for external payments, thereby compressing the overall service gross margin.

2. Developer Bargaining Power Enhances
   : Alternative stores and external payment options reduce developers’ reliance on Apple’s platform, especially for high ARPU apps (e.g., games, subscription services). If Japan takes the lead in providing a “low fee, no mandatory IAP” combination and gains certain developer/user acceptance, it will gradually weaken the value pricing power of Apple’s ecosystem closure, affecting the predictability and growth rate of future service revenue.

3. Platform Operation Costs and Regulatory Compliance Costs Rise
   : The new policy requires additional investment in maintaining multi-channel distribution/payment security, review mechanisms, and privacy protection. At the same time, it may re-escalate legal frictions with developers (delayed lawsuits such as Epic and MSCA), increasing operational uncertainty and costs.

1. Valuation Risks Highlighted
   : The current market capitalization is approximately $4.02 trillion, with a stock price of $272, at a relatively high earnings multiple (PE around 36.4x) [0]. DCF analysis shows that even under conservative/neutral/optimistic scenarios, its fair value is $73.87/$92.16/$136.59 respectively, and the current price is far higher than any conservative scenario [0], indicating that the market’s expectations for Apple’s future growth already include a high assumption of sustained expansion of “services + subscriptions”. If App Store commissions or user stickiness are significantly damaged, future cash flow growth rates, gross margins, and terminal value assumptions will be adjusted, and valuation faces significant downside risks.

2. Leverage and Financial Flexibility
   : Although Apple has strong cash flow (FCF of $26.486 billion), financial analysis has marked a “high risk” level of debt risk—prompting investors to monitor financing costs or debt repayment structure adjustments. If the shrinkage of commission revenue drives down the profit margin of the service segment, the growth rate of overall free cash flow may slow down, which will affect the debt repayment capacity and repurchase/dividend policies.

3. Market Sentiment and Valuation Recalibration
   : Recently, the stock price has risen by 11.5% within the year, but doubts about the sustainability of the service business may trigger repricing. If investors repeatedly assess the probability of the App Store model being eroded, stock price volatility may increase (current daily amplitude shows active trading, with trading volume slightly higher than the 50-day average [0]).

1. Short-term Monitoring
   : Closely track Apple’s key regulatory processes outside Japan (e.g., EU, U.S. judicial trends), as well as actual data on developers’ acceptance of alternative stores/payments (traffic, revenue share ratio, payment retention rate, etc.).

2. Evaluate Service Business Profit Margin
   : If further data indicates that the alternative route is spreading in high ARPU apps (e.g., games, streaming media), consider adjusting the expected growth and gross margin indicators for the “services” segment, thereby revising the revenue/EBITDA assumptions in the DCF model.

3. Capital Allocation Strategy
   : Pay attention to whether the company increases subsidies for channels/markets (e.g., payment subsidies, App Store promotions). If these expenses rise, they will put additional pressure on free cash flow and should be reflected in the model in a timely manner.

4. Optional In-depth Research Mode
   : Given that the event may trigger valuation rebalancing and restructuring of service revenue structure, it is recommended to enable the “in-depth research mode” to obtain more complete A-share/U.S. stock data, industry comparisons, technical indicators and charts, and cite more detailed figures through exclusive databases to assist in evaluating strategic flexibility and risk points under policy transmission.

Japan’s policy has opened a “test field” for the App Store to open up to platformization. In the short term, the direct impact on the company’s service revenue is limited, but its demonstration effect is sufficient to weaken long-term commission pricing power. Investors should include a risk premium in valuation and use in-depth data (such as more detailed revenue breakdowns of multi-store in Japan and Europe) to judge whether the platform business model can still maintain high marginal profits, thereby determining the strategic rhythm of holding/increasing/reducing positions.

[0] Jinling API Data
[1] Financial Times – “Apple announces changes to iOS in Japan” (https://markets.ft.com/data/announce/detail?dockey=600-202512172000BIZWIRE_USPRX____20251217_BW568962-1)