Amit Daryanani unsurprised by Apple App Store revenue slowdown

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

All You Need to Know: App Store revenue growth came in at 16% in the first month of the quarter, a modest deceleration vs the 19% growth recorded in the Sept-qtr.

The growth slowdown is not surprising and will likely continue for the next two months as we face some very difficult comps from Dec-20. Apple guided to a slowdown in the Services business after reporting 26% growth in the Sept-qtr, so the slowdown in App Store will likely not come as a surprise.

We remain comfortable with our forecast for 18% y/y services growth in Dec-qtr as long as App Store growth remains in the 12-16% range. From a geographic perspective, we saw a slowdown in most regions with the exception of China where growth accelerated to 17% despite the gaming restrictions. Revenue from gaming apps slowed to 9% vs. 12% in the prior month while most other categories held stable except for entertainment where we saw a modest acceleration.

Net/Net: Revenue growth slowed and will likely continue to slow throughout the quarter, but this appears to be well understood by Apple and the Street.

Maintains Outperform rating and $180 target.

My take: Tough compares don’t make headlines.


  1. Bart Yee said:
    Oh jeez, “slowdown” percentage wise compared to last year. How about look at the average changes annually smoothed over time and realize Apple Services have continued to build on a pretty steady basis especially as its installed base keeps growing steadily, additional diversified service revenue streams are added, and Apple’s users new and old continue to spend unlike Android users.

    The primary threat to Services is if Google substantially reduces search placement payments to Apple because of ATT impacts, but I think that unlikely simply because iPhone users are too valuable even for TAC costs to rise and ad dollars curtailed somewhat. Since Meta FB pays none of that for the privilege, screw them.

    As an aside, the last quarter’s $18.3B 5% growth in Services revenue was IMO hardly a surprise given the bewildering consensus 1% rise estimated. Services had NO component shortages and had a growing install base to work from. It’s interesting to note that only Kumar of the pros estimated above Actual services revenues and all other pros underestimated significantly , while 9/13 indies estimated within $0.18B or 1% of actual revenues. For whatever reason, we did not have Daryanani’s estimates at all last quarter.

    November 4, 2021
  2. Gregg Thurman said:
    App Store growth RATE may be slowing, but that’s just normal. If the growth RATE continued to grow you would have exponential growth, which is just not sustainable.

    On the other hand actual revenue, expressed in dollars vs percentages, could be growing.

    Expressing growth in dollars vs percentages is a much better, and more accurate, depiction of what is happening, ie., a very large (largest?) Company growing at a 10% rate could be growing faster than a small Company growing at a 100% rate.

    The fact is growth RATES will naturally decline as the base on which the RATE is determined grows ever larger.

    This is a major failing among (all?) analysts who are focused on the wrong metric. Analysis based on growth RATES is, at best, misleading.

    November 4, 2021
  3. Michael Goldfeder said:
    @ Bart Yee:

    Back in July on the earnings call Luca indicated that he expected a deceleration in App Store revenues based on the return to work as the pandemic was starting to get under control. Turns out the numbers went up significantly in this current reporting period which tells me the subscriber base for iOS consumers is much stronger than anyone has predicted.

    Pandemic or no pandemic, Apple services are delivering at a much higher level than anyone on WS can anticipate with any clarity. Although as you stated, the individuals on the Apple 3.0 blog have a much better understanding of this dynamic playing out right before our eyes.

    November 4, 2021
    • Bart Yee said:
      “Although as you stated, the individuals on the Apple 3.0 blog have a much better understanding of this dynamic playing out right before our eyes.” Agreed, including you, your estimate of $18.21 should have placed you third ahead of the 18.20 estimates, possibly a statistical oversight? Water under the bridge now.

      November 4, 2021
      • Michael Goldfeder said:
        @ Bart: I was only able to come up with the estimated amount for services that I submitted, based solely on having binged watched several episodes of “Ted Lasso.” I was inspired by his surgical dart throwing in the episode at the Pub whereby he displayed his talents concurrent with his explanation that he became quite the “thrower” after being taught by his father. Nobody saw that one coming.

        So I channeled my inner Ted Lasso and got extremely close with a lucky toss for my services revenues for this past quarter.

        The folks such as yourself on this site have more information and knowledge about Apple than anyone on WS will ever understand with the exception of Horace, Dan, Gene, any possibility one or two others who might fit that criteria.

        I appreciate your comment, but I owe it all to an Emmy award winning Apple TV+ phenomenal comedy show. Without “Ted” as my role model, I would have looked as bad as the WS crowd this quarter.

        November 4, 2021
        • Romeo A Esparrago Jr said:
          You sure Lassoed that one in, though, cowboy. Thumbs up!

          November 4, 2021
  4. Fred Stein said:
    Apple’s App Store growth in $$ or %s is still phenomenal, especially since the rest of portfolio is growing. It’s just a matter of time that Services doubles again, even if it takes a year longer than the last doubling.

    Meanwhile, the Mac is poised for a rebirth. Younger people, and emerging markets are not saddled with the PC legacy. For creators, whether in media of bioinformatics, the M-series will run circles around PC-based systems.

    November 4, 2021
    • Robert Stack said:
      @Fred: “the Mac is poised for a rebirth.”

      Yes, agreed, and here’s what Tony Fadell said on Twitter in response to a Q on the M1 Max and Pro chips in the new Macs: “These processors (finally) set the Mac on the same timeline for rapid innovation – like the iPhone, iPad, Watch, Apple TV & AirPods. Apple’s unique capability allows for incredible tech SH/HW leverage across every product.”

      November 4, 2021

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