Apple product users have been spending a lot more time and money in the App Store during the COVID-19 pandemic shutdowns. Apple App Store sales climbed 35% in the first two months of Apple’s third quarter, Morgan Stanley analyst Katy Huberty estimates.
Importantly, growth accelerated from April to May, even as economies started to reopen.
“High levels of engagement have sustained as the ‘new normal’ (at least in the near-to-medium-term) includes more time spent indoors, which should remain a tailwind to App Store performance,” Huberty wrote in a note to investors.
Overall, Huberty expects strong App Store sales to lead to a 16.7% increase in services revenue for Apple versus the 12% she previously modeled. That’s over $500 million in additional revenue. Considering that the App Store is one of Apple’s highest margin services, that revenue will likely produce a profit margin well above Apple’s average services gross margin of about 65%…
Huberty sees the surge in App Store revenue as having a sustained effect on Apple’s bottom line. She sees earnings per share of $1.99 for the June quarter… versus her prior estimate of $1.92. Importantly, she also sees the September quarter getting a similar boost in earnings, indicating sustained App Store spending at least through the rest of Apple’s fiscal year.
MacDailyNews Take: A silver lining to the dark cloud 2020 have been so far is that it led a lot of Mac, iPhone, iPad, Apple TV, Apple Watch, and iPod touch users to discover or rediscover Apple’s respective App Stores!