Katy Huberty: Apple App Store growth decelerated in June -- mostly in China

From a note to Morgan Stanley clients that landed on my desktop Tuesday:

App Store net revenue growth decelerates to +2.5% Y/Y in month of June... Based on the latest disclosures from Sensor Tower, we estimate App Store net revenue growth decelerated to +2.5% Y/Y in the month of June, a 1.5 point deceleration from 4% Y/Y growth in the month of May (Exhibit 1). Interestingly, net revenue growth across 6 of the App Store's 10 largest markets accelerated in the month of June (Exhibit 2), a positive surprise, with the US, Australia, Germany and France all growing 9% Y/Y or more...

However App Store net revenue growth in China inflected to 6% Y/Y declines in the month of June (slightly better than we previewed in mid-June) vs. 3% Y/Y growth in May, accounting for more than 100% of the total App Store deceleration in June vs. May.

...which implies 5% Y/Y App Store net revenue growth in the June quarter. With data from the month of June now finalized, we estimate June quarter App Store net revenue reached $6.5B, up 5% Y/Y), or about $67M below our current forecast for 6% Y/Y growth. Assuming our other Apple Services segment forecasts remain unchanged, the slightly slower App Store results in the June quarter would result in Apple Services revenue of $19,460M (+11.3% Y/Y) vs. our current forecast of $19,527M (+11.7% Y/Y) and Consensus of $19,712M (+12.7% Y/Y).

Maintains Overweight rating and $185 target. 

Cue Exhibits 1 and 2:

My take: Katy's back! At least for now.


  1. Robert Paul Leitao said:
    @PED Thank you for sharing this informative note from Katy Huberty at Morgan Stanley with Apple 3.0 readers. From the latest research I’ve seen, games represent about 60% of App Store revenue and nearly 60% of App Store revenue is sourced from two countries – the US and China. The negative y/y revenue growth in China in June and the low single-digit revenue growth rate in China in May are apt to have an out-sized influence on the App Store’s aggregate revenue growth rate in the quarter. Nascent services such as licensing and subscription-based services such as Apple One are likely to increase in percentage contribution to Apple’s Services revenue mix at this time.

    July 5, 2022
  2. Mark Visnic said:
    In FY ‘21 Q3, services revenue was $17.5 billion. In the FY ‘22 Q2 earnings call, Luca Maestri forecast double digit growth in services revenue that would be less than the 17.3% y/y growth in Q1. Assuming the midpoint between 10% and 17.2% growth, services revenue would be $19.88 Billion. Given the iPhone share gains in the PRC reported through May and Luca’s guidance forecast, the probability of a service beat of $19.71 Billion is good imv.

    July 5, 2022
  3. Rodney Avilla said:
    “slower App Store results in the June quarter would result in Apple Services revenue of $19,460M (+11.3% Y/Y) ”

    I guess a +11.3% increase Y/Y headline (expected- nothing to learn here) doesn’t get as much attention as a ‘deceleration’ headline (Oh, no! What’s happening in China?).

    July 5, 2022

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