Apple's Indian Antitrust Battle Adds to Global Regulatory Risks

What happened

Apple has asked an Indian court to block an antitrust watchdog from seeking its global financial records as part of an investigation into app store policies, while challenging the underlying law's validity. This move reflects Apple's aggressive defense of its high-margin Services segment, which the DeepValue report notes generates ~$109B revenue at ~75% gross margins and faces similar scrutiny in the EU and US. The Indian case extends regulatory pressures to a key emerging market, complicating Apple's global compliance efforts and potentially increasing legal costs. Despite recent iPhone strength and a China rebound highlighted in the report, this news underscores the persistent threat to Services economics from antitrust actions worldwide. Apple's resistance here aligns with its pattern of defending App Store rents, but it risks escalating fines or policy changes that could compress margins.

Implication

The Indian antitrust probe expands regulatory challenges beyond developed markets, increasing the geographic scope of potential fee adjustments and compliance burdens. Apple's defensive stance suggests ongoing legal battles that may lead to fines or enforced changes, mirroring DMA impacts in the EU, which the DeepValue report identifies as a headwind to Services growth. With Services contributing roughly half of Apple's profit, any margin compression from such actions threatens the bull case of ~$300 implied value and aligns with the bear scenario of ~$210. Monitoring indicators from the report, like Services margins staying above 72% and China share stability, remain crucial, but now require added attention to regulatory outcomes in India and other emerging markets. Overall, this news reinforces the caution embedded in the investment thesis, suggesting that entry points near $230 offer better risk-reward given the elevated regulatory overhang.

Thesis delta

The core thesis remains unchanged, as regulatory pressures on Services were already a key risk factor in the DeepValue report. However, the expansion to India highlights that these challenges are broadening geographically, potentially increasing the cumulative impact on Apple's high-margin profit pools. This reinforces the downside risks and supports maintaining a cautious 'WAIT' stance until clearer regulatory outcomes emerge.