Apple’s decision to lower App Store commission fees in mainland China is expected to provide a modest but meaningful boost to the profitability of leading gaming firms Tencent and NetEase, according to Morningstar.
The iPhone maker said it would reduce fees on in-app purchases and paid transactions to 25% from 30%, effective Sunday.
The move comes amid mounting regulatory pressure in China, its second-largest market, and growing global scrutiny of its app payment policies.
Morningstar analyst Ivan Su said the fee reduction, alongside similar moves by Google on its Play Store, could lift operating profits of Chinese gaming companies by low single-digit percentages this year.
Morningstar maintains fair value estimates of HK$800 for Tencent and $200 for NetEase, indicating both stocks remain significantly undervalued despite recent gains.
Potential for broader industry impact
The benefits could widen if Android ecosystem players follow suit.
Su noted that if app stores run by Huawei and Xiaomi also cut commissions, operating profit growth for developers could increase to mid- to high-single-digit percentages.
Lower platform fees are expected to ease cost pressures on developers and improve margins in an industry where distribution expenses have been a persistent drag on profitability.
Chinese state media estimated the fee cut could save developers more than 6 billion yuan annually in operating costs.
“This adjustment will … improve consumption choices and information transparency,” the Economic Daily said.
“The premium for digital goods and services on the iOS side will be gradually eliminated, and the prices of membership subscriptions, game recharges, live broadcast tips, mini programs, and other scenarios are expected to decrease, which is expected to save consumers up to nearly 1 billion yuan per year.”
Regulatory pressure and geopolitical backdrop
Apple’s decision reflects a delicate balancing act as it navigates regulatory expectations in China while facing geopolitical tensions between Beijing and Washington.
The company has previously encountered hurdles in rolling out new technologies in China, including delays linked to regulatory approvals for artificial intelligence features.
At the same time, it has been diversifying its supply chain, shifting a portion of iPhone production to India amid escalating trade tensions.
Tencent earnings in focus
Investor attention is now turning to Tencent’s upcoming fourth-quarter results, due after markets close on Wednesday.
Market estimates suggest Tencent will report revenue of around 193.5 billion yuan, marking roughly 12% year-on-year growth, a slowdown from the previous quarter’s pace.
Net profit attributable to shareholders is expected to rise 16.4%, while operating margins may ease sequentially to 36.6%, though still improving on an annual basis.
Gaming is likely to remain the core growth driver, supported by steady performance from domestic titles and strong engagement trends for newer offerings such as Valorant Mobile.
However, analysts caution that international gaming growth may moderate as one-off revenue contributions from certain titles normalise.
Investors will closely track whether the underlying momentum in overseas markets remains intact.
Meanwhile, Tencent’s advertising business is expected to sustain high-teens growth, aided by AI-driven improvements, while fintech and business services could see steady expansion as consumer activity gradually recovers.
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