Apple’s App Store May Have Profit Margins As High As 79%

Image Credit: iStock, PhillDanze

Sign up for smart news, insights, and analysis on the biggest financial stories of the day.

In most businesses, an operating margin of 15% would be solid. 25% would be killer.

But comparing Apple to other companies is, for lack of a better phrase, like comparing apples to oranges.

In the pre-trial information-sharing process of the looming Epic Games v. Apple antitrust lawsuit, an expert economics researcher testifying on behalf of the former claimed, that Apple earns a mouthwatering 79% operating margin on revenue from its app store.

Apple Takes a Slice of Every Pie

Epic Games— the studio behind the popular multi-player battle royale Fortnite— claims that figure is even more evidence of Apple’s anti-competitive control over its App Store.

While Apple says the marketplace is nothing more than a service connecting users with applications developed by outside companies— during which Apple takes a 15% to 30% commission on store and in-app purchases— Epic says its nothing more than a way for Apple to unfairly extract money from developers and is suing Apple for antitrust violations on those grounds.

The case began after Fortnite introduced an in-app purchase payment option that bypassed Apple’s commission cut. The Kings of Cupertino promptly responded by kicking the game off its store.

Better Call Foul: Do you want the truth about the App Store’s operating margins? Do you want the truth?!

You can’t handle the truth, Apple says. Because, in their typical holistic, West Coast, all-for-one and one-for-all style, Apple says it doesn’t even bother to calculate the profits and losses of individual units such as business units such as the App Store.

Still, in the past, expert analysts have surmised some figures about the App Store’s outputs:

  • Sensor Tower estimates App Store commissions totaled $22 billion in 2020
  • Bernstein Analyst believe the App Store will run a gross profit of 88% in 2021
the takeaway

The results of this trial may fundamentally reshape the iOS landscape. Sounds pretty… epic.