Morgan Stanley monthly data: As of mid-August, Apple (AAPL.US) App Store net revenue declined by 0.6% year-on-year, turning negative for the first time in four years

Zhitong Finance APP has learned that Morgan Stanley pointed out in a report that, according to monthly tracking data, as of mid-August, Apple (AAPL.US) App Store’s net revenue had turned to a year-on-year decline of 0.6% for the month, marking the first negative year-on-year growth in four years.

The team of analysts led by Erik Woodring added: “The third calendar quarter iPhone production plans remain unchanged, but iPad output has been revised downward, indicating a certain degree of demand elasticity; July PC output saw a significant year-on-year drop of 24%. In addition, the cloud capital expenditure tracking indicator shows that the spending growth rate for the 2027 calendar year is currently +38% (previously +9 percentage points).”

Based on the latest Sensor Tower data, analysts estimate that as of August 17, App Store net revenue was down 0.6% year-on-year for the month, a deceleration of 170 basis points compared to the growth rate in June, while the comparable base last year had already dropped 200 basis points. If the quarter ended on August 17, third calendar quarter App Store revenue would show only 0.5% year-on-year growth, 50 basis points lower than Morgan Stanley’s forecast of 1% year-on-year growth for the September quarter. The analysts further pointed out that this roughly corresponds to about a 20 basis point downside risk (about $45 million) to Morgan Stanley’s forecast of 9.5% services revenue growth for the September quarter (market consensus is 10.7% year-on-year growth).

Looking ahead, analysts believe that services business growth is unlikely to rebound significantly in the short term, as App Store faces multiple pressures including a lower commission rate, redirects to external links, weak gaming demand, and foreign exchange headwinds. However, pricing adjustments for AppleCare are still expected to provide a partial positive offset.

In addition, Woodring and his team stated that third calendar quarter iPhone production plans remain at 54 million units, supporting an estimated September quarter shipment total of around 58 million units; iPad output was revised downward by 1 million units, reflecting the expectation that demand elasticity is limited after price increases.

Furthermore, the analysts said that based on their Greater China technology hardware team’s latest forecasts, July shipments of notebook original design manufacturers (ODMs) dropped 24% year-on-year, the worst year-on-year performance in 40 months and 4% below Morgan Stanley’s estimates, mainly due to weak demand and supply constraints. The analysts pointed out that this signals an accelerating contraction in PC market demand.

The Woodring team also stated: “Our cloud capital expenditure tracking indicator shows that the growth rate for the 2027 calendar year is +38%, while the market consensus is $1.39 trillion and Morgan Stanley’s forecast is $1.61 trillion, indicating there is still room for consensus to move higher.”

The analysts pointed out that with the latest consensus updates included, the enterprises with the largest upward revisions to calendar year 2027 capital expenditure forecasts are as follows: Alphabet (GOOGL.US, +$17.8 billion), Meta (META.US, +$8.8 billion), Microsoft (MSFT.US, +$7.5 billion), Amazon (AMZN.US, +$6 billion), and Nebius (NBIS.US, +$5 billion). The analysts also said they have included SpaceX (SPCX.US) in the cloud capital expenditure tracking, with its incremental capital spending in 2027 reaching $120.9 billion (up $62 billion year-on-year).

The Woodring team concluded that overall, the current market consensus for 2027 cash cloud capital spending is $1.39 trillion, meaning that the capital intensity (i.e., capital expenditure as a proportion of revenue) for the top fifteen cloud providers averages 38.6%, up 380 basis points from the beginning of this month.