Apple App store revenue fell roughly 5% in their last earnings report.
Tech Super-power Apple had another hit in the midst of numerous teething problems with their iPhone 14. According to banking giant Morgan Stanley, the Apple App store, where customers come to buy or download apps needed on any of the Apple devices, net revenue fell about 5% in September. This decline is the steepest drop for the business since Morgan Stanley started recording data for each of its customers in 2015.
The App store saw declines in a number of regions worldwide, including the US, Canada, and Japan, according to Morgan Stanley analysts. This data was based on data from Sensor Tower, a business that tracks various app downloads and sales.
The main culprit of this decline was gaming revenue, down 14% in September. As previously thought, with the newest iPhone drop, consumers are being more careful with their expendable money and are spending less due to economic concerns and the rising cost of living.
With recessionary risks increasing every day, people are putting more money aside for a rainy day that is coming in fast and thick.
“We believe the recent App Store results make it clear that the global consumer has somewhat de-emphasized App Store spending in the near-term as discretionary income is reallocated to areas of pent-up demand,” Adam Woodring, an analyst from Morgan Stanley, stated.
It is not just Apple that is going to have to tighten its belts. Morgan Stanley analysts expect the primary Android app, Google Play, to also see a revenue drop. They estimate Google’s revenue fell 9% in September.
Apple takes between 15% and 30% of app and in-app purchases made on Apple devices. While it doesn’t report on App Store sales individually, it does include it as part of the services business. This section also includes warranties and subscriptions such as Apple Music and Apple One.
While the App Store’s revenue fell in September, the overall service revenue for Apple should show an 8% increase. Apple’s service section has always been a point of interest for investors. They want users to spend money after buying the device as well as on the device alone. In the second quarter of this year, Apple reported a 12% increase in its service section revenue to $19.6 billion.
With hyperinflation, war, and uncertain economic times, super companies like Apple are starting to tighten their margins. While sales were up in the last quarter, Apple’s financial chief, Luca Maestri, does not believe that will be the case again in the next quarter. He said that the company expects less than 12% growth in services in the third quarter of 2022.
Also, Maestri blamed difficult comparisons in growth to elevated service results during the COVID-19 pandemic when everyone was in lockdown and most companies suspended work. All companies, big or small, are feeling the financial hit of the uncertain volatile economy. Unfortunately, not even technology giants like Apple are safe.