Evercore: Apple's App Store is headed for its first quarterly decline

"The slowdown should be well understood by investors as... Apple guidance indicated Services growth should decelerate further in the Sept-qtr." -- Analyst Amit Daryanani

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

All You Need to Know: App Store revenue [fell] for the second straight month in September. Revenue declined 4% in the month, which brings the Sept-qtr revenue growth rate to -1.5%, the first quarterly decline in the history of the App Store.

The slowdown should be well understood by investors as the App Store grew only 5% in the Jun-qtr and Apple guidance indicated Services growth should decelerate further in the Sept-qtr.

Gaming was the main culprit for the decline as revenue from gaming apps was down 13% and the non-gaming part of the App Store grew 10%. Gaming revenue growth has been low single digit or negative since April-21 as we began to see a hangover effect from the significant pull forward driven by COVID. Declines began to accelerate in May-22, likely due to worse macro, especially in the critical Japanese and Chinese markets and the negative impact on the mobile gaming ecosystem from ATT.

The App Store remains the largest component of services revenue, but it has become less important to the overall services growth rate and Apple was able to post 12% Services growth in June-qtr despite App Store growth of just 5%. New opportunities (payments, advertising) are becoming more significant drivers of growth...

Net/net: Consensus is calling for 11% Services growth which is slightly above our +9% estimate, but should still be achievable despite a 1.5% decline in App Store revenue. We would caution investors against making a call on Services purely on the App Store data as it is only ~30% of revenue and it is difficult to forecast the other components.

Maintains Outperform rating and $190 target.

Cue the bar chart:

My take: If those other Service components include advertising, they may be a mixed blessing.


  1. Fred Stein said:
    But mobile gaming revenue is increasing according to, https://influencermarketinghub.com/mobile-gaming-statistics/

    Perhaps some of the big names have found monetization methods that circumvent the App Store. That may be OK, as it undercuts the monopoly thesis. For example, Tencent Is the Leading iPhone Gaming App Publisher.

    October 4, 2022
  2. Apple provided precise App Store revenues for the month, really? I was under the distinct impression they held that data close, wrapping it in a larger number.
    The nearest I can get to the truth here is that some network source can measure app download traffic & popularity and perhaps extrapolate from that. 4% comes very close to margins of error in many other statistical studies.
    What if all the people planning to upgrade to iPhone 14 held off on new app downloads/purchases on their older iPhone? Could that also cause a 4% drop?
    I’ve grown very skeptical of news articles based on information that is not generally shared. Some traders & robots act on innuendo and then ignore the actual quarterly reports. On October 27th they’ll go right back to unsubstantiated rumors and unnamed sources.

    October 4, 2022
  3. Robert Paul Leitao said:
    This isn’t “bad news.” Until recently games represented close to 60% of App Store revenue and the App Store represented about 30% of Services revenue. However, subscription services such as Apple One – inclusive of Apple Arcade and Apple TV+ – are more likely to comprise a larger percentage of Apple’s Services revenue segment moving forward. I believe this is by design. Regulatory scrutiny of the App Store model as well as legislative interest in greatly reducing Apple’s distribution fee and the company’s restrictions on 3rd-party payment sources combined with developer claims of monopolistic practices may relegate the App Store model to the pages of Apple’s history in due time. Apple doesn’t need the hassle and there are more efficient ways to grow Services revenue, in my view. As I’ve said before, I suspect legislators, regulators and executive branch enforcement agencies will soon be chasing an App Store ghost.

    October 4, 2022
  4. Daniel Epstein said:
    We are really getting into the territory where consensus estimates for all of Apple’s parts are invariably going to be wrong in some way as there is almost no accurate way to gauge things. Apple doesn’t guide for it. Everyone’s channel checks and methods are still interpretative of the answer. Often way off until the quarterly report. So will the street be disappointed if Apple does well in its report but doesn’t grow in the gaming part of the app store as much as they projected? Probably! Somehow people think a company of Apple’s size is going to have no issues in some part of the business. In this crazy world.

    October 4, 2022

Leave a Reply