In a note on Friday, analysts at the investment bank said the Cupertino, California-based device and services company’s App Store hauled in record revenue in August.
“App Store net revenue growth accelerated to +25.8% Y/Y in August from +18.9% in July, representing the strongest Y/Y growth since February 2018 and the third largest month-to-month acceleration in Y/Y growth since early 2015, according to data from Sensor Tower,” they said.
“Results were very well-rounded, with each of the 10 largest markets posting an acceleration in Y/Y growth from July,” the analysts added.
Meanwhile, shares in Apple continued to trade higher on Friday at $213.94 after the US and China agreed to meet for another round of trade negotiations in October.
China driving revenue
According to the Morgan Stanley analysts, China contributed significantly to the App Store’s revenue growth.
“In China, total App Store spend grew 31.8% Y/Y, a considerable acceleration from just 4.8% Y/Y growth 2 months ago, with total gaming revenue in China growing 29.1% Y/Y in August vs 21% Y/Y in July and 1% Y/Y in June,” they said in the note.
The analysts also pointed out that the entertainment category, which is the second largest next to gaming and “represents 7% of App Store spend, posted 28.0% Y/Y growth in August,” despite concerns among bears that large entertainment companies bypassing the App Store billing platform will become more widespread and drive a deceleration in entertainment App Store revenue growth.
“Quarter-to-date through August, we estimate the App Store has generated $2.9 billion in net revenue, up 22.4% Y/Y and well ahead of our +18% Y/Y growth forecast for the September quarter,” the Morgan Stanley analysts said.
“For App Store results to come in-line our September quarter estimate, the App Store needs to generate $1.3 billion in net revenue in September, which implies just 9.1% Y/Y growth on easing comps,” they added.
Must-see TV at Apple’s fall event
Meanwhile, a CFRA analyst is expecting a “boring” slate of iPhones on Tuesday at Apple’s annual fall event, but he’s still betting that the event will be “must-see TV” due to the expected announcements on services.
“We think Apple could look to perhaps bundle its Apple TV+ offering (for instance, alongside Apple Music) at a discounted rate to spur new subscribers,” said the CFRA analyst in a note.
New iPhones typically go on sale just over a week after the Apple September event. Apple is likely to release three new iPhone models. According to CNBC, the two higher-end iPhones will have a 5.8-inch and a 6.1-inch OLED display.
“These phones can be seen as sequels to the current iPhone XS and iPhone XS Max, which cost a minimum of $999 and $1099 respectively,” reported CNBC.
The upcoming low-end model may again feature an LCD screen, but this might be the last time Apple goes with LCD technology in one of its new phones. Refreshed versions likely promise a faster processor across all models and a triple-lens camera for the two more expensive versions.
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