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.
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?).