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Apple’s (NASDAQ:AAPL) App Store saw net revenue decline 5% year-over-year in September, investment firm Morgan Stanley said, believed to be “the worst decline in the history of the data.”

Citing third-party data from Sensor Tower, Morgan Stanley noted that Apple’s (AAPL) App Store saw continued weakness in China, while growth in Japan and the U.S. moderated.

“Compared to the month of August, net revenue growth decelerated across all of the App Store’s 10 largest markets (which make up 87% of App Store spend), except for China, Taiwan, and South Korea,” analyst Erik Woodring wrote in a note.

The analyst added that net revenue in China “largely stabilized,” as revenue fell 9% year-over-year, a 1 percentage point jump from August. Gaming was largely responsible for the year-over-year decline, as this segment fell 18% year-over-year.

For Japan and the U.S., the growth rates were -20% and 5% year-over-year, both down from August.

Woodring estimated that total App Store net revenue reached $6.4B, down 2.1% year-over-year.

Assuming the rest of Apple’s (AAPL) Services segments are unchanged, the analyst estimates that the overall segment will generate $19.71B in revenue for the coming quarter, up 7.9% year-over-year, below the $20.25B Wall Street is expecting. Apple (AAPL) is slated to report fourth-quarter results on October 27.

The December quarter is likely to get easier, due to comparisons, as well as the benefit from an extra selling week and increased prices due to currency fluctuations, but Woodring noted it’s clear that consumer spending is slowing and not even Apple (AAPL) is immune.

“We believe the recent App Store results make 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,” Woodring wrote.

“As a result, the App Store debate will likely remain a battleground for investors, even if the trajectory of [year-over-year] growth improves in the December quarter (due to the extra selling week).”

On Friday, investment firm Evercore said that the lead times for Apple’s (AAPL) iPhone 14 Pro models are actually expanding, indicating strong demand.


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