Investment firm Evercore ISI indicated that Apple's App Store revenue appeared to stabilize in December, despite continued softness in the gaming sector. Analyst Amit Daryanani maintained an "Outperform" rating on Apple (AAPL.US) with a price target of $325.
Daryanani stated that Apple's App Store revenue achieved year-over-year growth in December, increasing by 6%. Although revenue from gaming applications declined during the month, down 4% year-over-year (compared to a 2% drop in November), this trend remains noteworthy as gaming is the largest revenue source for the App Store, accounting for approximately 44% of its income.
Daryanani further added that the gaming markets in China and Japan performed poorly, with revenues declining by 13% and 15% year-over-year, respectively. He also highlighted that the music business, along with the photo and video segments, demonstrated robust performance, posting revenue growth of 15% and 18% year-over-year, respectively.
Concurrently, the social networking business showed growth, increasing by 11%; the entertainment segment also expanded, rising 3% year-over-year. Geographically, the United States saw a 3% year-over-year increase, while China and Japan experienced declines of 5% and 3%, respectively.
Daryanani wrote in his analysis, "Currently, the weakness in the gaming business, which is particularly pronounced in the Chinese and Japanese markets, remains a key factor hindering overall business growth. However, looking at expectations, the year-over-year performance comparison for the overall gaming business is anticipated to improve in the first quarter of 2026."
"We consistently estimate that App Store revenue constitutes about 20% of total services revenue. Apple has the ability to offset the sluggish growth in gaming with faster-growing areas such as Apple Pay, iCloud, and licensing businesses. This was evident in the fourth quarter of fiscal 2025, where there was approximately a 4% gap between App Store revenue growth and the overall growth reported for the services segment."
