Analysts: App Store seeing better-than-expected revenue growth due to entertainment category

Apple has shifted its focus to Services as part of its efforts to combat slowing iPhone sales. In a new investor note, Morgan Stanley now says the App Store could show better-than-expected revenue growth for the month of August, citing new data from app analytics platform Sensor Tower.

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The data from Sensor Tower suggests that August App Store revenue saw its biggest year-over-year growth since February of 2018, and “the largest month-over-month acceleration since early 2015.” For the month of August, Sensor Tower reports 28 percent year-over-year growth for the App Store, which is up from the 18.9 percent growth experienced in July.

The entertainment category in the App Store was a big driver of that growth, with its revenue up 28 percent year-over-year, compared to the 8.3 percent jump it saw in July. Morgan Stanley thinks this growth should help ease concerns about entertainment apps “bypassing the App Store billing platform.”

Some subscription services have moved away from using the App Store billing system to avoid Apple taking its 15 to 30 percent cut. Netflix, for instance, ditched in-app billing for new customers back in December. With the strong growth of the entertainment category, this doesn’t necessarily seem like a widespread trend just yet, though.

As detailed by CNBC, with this strong App Store growth in mind, Morgan Stanley maintains its $247 price target on Apple’s stock. AAPL currently sits at around $213.

“Even considering the expected foreign exchange headwind, App Store revenue is on track to beat our September quarter forecast of +18% Y/Y with compares becoming easier in the month of September,” Morgan Stanley analyst Katy Huberty said.

Apple is expected to offer more details on upcoming Services including Apple TV+ and Apple Arcade at its September event next week. Apple Arcade specifically could further boost App Store and gaming revenue for the company.

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Chance is an editor for the entire 9to5 network and covers the latest Apple news for 9to5Mac.

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