But subscriptions and new services should pick up the slack, says analyst Amit Daryanani.
From a note to clients that landed on my desktop Tuesday:
The Services business is gradually becoming less dependent on the App Store as demonstrated by the high overall growth in the June-qtr, despite App Store growth of just 18%. Apple indicated on its June-qtr call that it now has 700M paid subscriptions (up 150M over the LTM) across all services and we expect growth in subs and new service offerings to continue to be the main drivers of growth going forward. App Store comps get increasingly challenging through the balance of 2021 and we expect App Store growth to remain below our forecasted Services growth for at least the next two quarters. From a geographic perspective, Japan was the worst performing major market at -2% against a very challenging comp, while China (+32%) outperformed the broader market.
Net/Net: App Store growth will likely remain around 15-20% over the next six months, but we expect other Services to pick up the slack and keep the segment growth rate at 20%+.
Maintains Outperform rating and $180 target.
My take: As Apple has become less dependent on iPhone sales, Services has picked up the slack. Now Services revenue is becoming less dependent on App Store sales. That’s one of Apple’s new superpowers: Always having something else to pick up the slack.