Evercore: Apple App Store growth decelerates

Get ready for some tough compares, warns analyst Amit Daryanani.

From a note to clients that landed on my desktop Wednesday:

All You Need to Know: App Store growth slowed in May against tough comps (App Store revenue was +39% in May-20). We estimate total App Store developer revenue grew to ~$4.9bn in May; up 13% Y/Y (vs. +18% in April, +31% in March).

The deceleration was primarily driven by a slowdown in gaming revenue as we lap the benefits from last year’s COVID shutdowns. Revenue in the App Stores top 10 countries was up 21%, indicating the slowdown was more acute in smaller markets. Street models are calling for Services revenue growth to decelerate to 23% y/y in the June-qtr, down from 27% in the Mar-qtr. This deceleration looks appropriate as App Store revenue will likely be high teens to low 20s growth.

The App Store is facing difficult comps after reporting +33% growth in June-20. Apple care is another component of the Services business that will likely slow down as it tends to be relatively correlated to iPhone sales. From a geographic perspective, Japan was the slowest growing major market at +7%, while both the US (+29%) and China (+21%) outperformed the broader market.

Net/Net: Services growth looks set to decelerate as we come up against some difficult comps. Longer-term, we remain confident in our call for high-teens annual services growth.

Maintains Outperform rating and $175 target.

Cue the chart:

My take: Y/Y growth may have plummeted, but it's still in positive territory,


  1. Gregg Thurman said:
    It’s all in the telling. 2020 growth was 39% over 2019. 2021 growth over 2020 was 13%.

    2021 growth was 44% over 2019.

    June 2, 2021
  2. Horace Dediu said:
    Sales up 13% is not a slowdown in sales. Growth is slowing but sales are growing. As stores open, AppleCare is growing. Last year saw a thinning of AppleCare. The bigger story is the 24% growth in ecosystem transactions during a global economic slump and the projection of $1 trillion in ecosystem value by 2023 and $2 trillion Apple Economy (HW, Services, Ecosystem) by 2025.

    June 2, 2021
    • Kirk DeBernardi said:
      @ Horace Dediu —

      Thanks for helping to place focus where focus should be placed.

      As Gregg Thurman stated previously — “It’s all in the telling.”

      More important — what gets told.

      June 2, 2021
  3. Jerry Doyle said:
    “…. Apple care is another component of the Services business that will likely slow down as it tends to be relatively correlated to iPhone sales.”

    Too many folk believe the 5G super cycle is a one year event. Some believe it is a two year event. Others believe it is a three year event. My personal belief is that 5G is a multi-year event and I do not see iPhone sales slowing overall. Few people I know got the iPhone 12. Many are waiting for the 13 and some for the year after. To my knowledge, we still have no 5G coverage in my state. So, beyond being a professional photographer or a photographer aficionado there is little incentive for most folk to rush out in many parts of the country to upgrade to 5G.

    June 2, 2021
  4. Jerry Doyle said:
    Apple’s Services business will continue to grow going forward, but it is the hardware side that will give surprise. Most all large companies are moving to some form of a hybrid work environment. This will benefit Apple. Concomitantly, Apple has its new M1 chip machines and is poised to roll-out more powerful performance-heavy computers at the most propitious time as the world-of-work transitions to the new hybrid work environment. I suspect that we continue to see Apple selling more Macs and iPads as the next-gen M2 chips roll out. The good news for continued Apple growth only is beginning. Laissez le bon temps rouler. Geaux Apple!

    June 2, 2021
    • All those school districts in Japan, Germany and US purchased massive numbers of iPads for learning, not to store them for the next pandemic or study from home event. These iPads are accelerating learning & the ongoing transition from thick paper schoolbooks with static knowledge to eBooks. The perennial image of little schoolchildren lugging a heavy randoseru vanishes! Interactive texts plus the eventual removal of the Texas State Board of Education from the textbook approval process!

      June 2, 2021
  5. Mark Visnic said:
    my take: against 2022 consensus numbers Apple’s June, September, and December numbers will be a cake walk.

    June 2, 2021
  6. Fred Stein said:
    Look at the blue bars and be happy that it shows growth.

    Also, Apple and TSMC have breakthroughs in storage and display technology that will not only….

    1) Drive upgrades across all Apple device in the next five years; But also

    2) Expand Apple technology and user experience lead across the portfolio; And

    3) Drive services growth with the device sales growth.

    June 3, 2021

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