UBS: Apple App Store revenue growth QTD is ‘a bit soft’

In a note to clients Tuesday, analysts at UBS said Apple’s (NASDAQ:) App Store revenue growth for the quarter-to-date is “still a bit soft” despite the 12% increase year-on-year (YoY) in May.

The investment bank notes that its analysis of Apple’s App Store suggests May’s revenue growth represents a solid uptick compared to the 9% YoY growth in April, despite the 260 basis points harder comp.

The strength, unlike last month, was broad-based across the US (+13.4% YoY) and ROW (+11.5% YoY), according to UBS, compared to soft spending outside the US in April.

“Relative to the guide for Services revenue growth in the June quarter, the App Store is tracking below the broader segment outlook,” analysts caution. “During its most recent earnings call, Apple management expected their Services business to grow at a similar double-digit rate to the first half of
their FY24, implying +12.7% growth.”

“Through the first two months of the quarter, analysts estimate that App Store growth is tracking slightly below 11% (10.6%) compared to their 12.3% Services estimate for the June quarter,” analysts add.

Given the bank’s estimates that the App Store accounts for roughly 25% of Services revenue, analysts believe other categories within Services need to grow in the low teens to hit the guide, which they feel is possible but likely caps the upside near-term.