10% > 7%

The EU’s Share of Apple’s Global Revenue
The DMA allows the EC to penalize “gatekeepers” with fines that are vastly disproportionate to the amount of revenue they generate in EU member states.

In my post a couple weeks ago making the case for the one way Apple could go back on offense against the EU: by threatening to pull their products out of Europe, I thought that while a powerful move, it probably wasn't feasible:

This would all mean a ding in revenue. The EU isn't as important to Apple as the US or China, but it certainly matters.2 Does it matter more than say, 10% of worldwide revenue? Perhaps not! And the broader calculus would have to be something along the lines of: if we give into these EU demands, the whole world will start demanding the same, and that would significantly degrade the largest growth driver of our revenue: Services.

That footnote #2 notes:

Data suggests there are something well north of 100M iOS users (including iPadOS) in the region. And undoubtedly many millions more Mac users.

But actually, that number that matters here is perhaps more directly known, as John Gruber points out, no less than Apple CFO Luca Maestri addressed this head-on during Apple’s Q1 2024 analyst call:

AMIT DARYANANI, EVERCORE: Fair enough, and then as a follow up, you folks have implemented a fair bit of changes around the apps for in Europe post the DMA implementation there. Can you just touch on what are some of the key updates and then Luca, does NetApp at all, do you see it having any significant impact financially to your services or the broader Apple P&L statement.

[Remarks from Tim Cook omitted.]

LUCA MAESTRI: Yes, and Amit, as Tim said, these are changes that we’re going to be implementing in March. A lot will depend on the choices that will be made. Just to keep it in context, the changes apply to the EU market, which represents roughly 7% of our global absolute revenue.

Gruber goes on to note:

It’s unclear whether Maestri was saying that the EU accounts for 7 percent of Apple’s worldwide App Store revenue, or 7 percent of all revenue, but I suspect it doesn’t matter, and that both are around 7 percent. App Store revenue ought to be a good proxy for overall revenue — there’s no reason to think EU Apple users spend any less or any more in the App Store than users around the world.

There’s some “7 percent sounds way too low” confusion that stems from the fact that Apple, in its quarterly consolidated financial statements, breaks results into five geographic regions: Americas, Europe, Greater China, Japan, and “Rest of Asia Pacific”. “Europe” accounts for somewhere around 25 percent of Apple’s global revenue. That’s the number most people think about. But there are a significant number of high-GDP countries in Europe that aren’t in the EU — the UK (most famously), Russia, Turkey, Switzerland, Norway, and Ukraine. More importantly, Apple’s “Europe” includes the entire Middle East.

So this is actually pretty simple math. If the EU is truly going to slap Apple with a fine to the tune of 10 percent of global revenue, there's no way it makes sense for Apple to stay in the 7 percent of global revenue EU. And that's with just the first offense, which Apple is clearly already well down the path of committing in the eyes of the EU. The second offense doubles that fine. At that point, Maestri and Tim Cook would be fired if they paid that fine versus pulling out of the EU.

I still doubt it will come to this. For one thing, by the time this initial EU probe is over, we may actually have probes scoping out Mars for potential landing spots. For another, with a lot of the world undergoing elections this year – including, notably, the EU – the world may look like a very different place in 12 months. Third, lawsuits upon lawsuits upon lawsuits. No matter what happens here, it's going to drag out for years. Apple's revenue feels safe. For now.