UBS researchers flagged a deceleration in App Store receipts that could temper the upside potential for Apple’s Services revenue, according to a note circulated to clients Thursday. The bank’s analysis found App Store revenue growth slowed into the low single digits in May - the weakest month so far this year.
Analyst David Vogt reported that App Store revenue expanded by approximately 3% on a reported basis in May, a pace about 150 basis points slower than April. That deterioration was driven in part by a roughly 7% drop in the U.S. market. On a foreign-exchange-neutral basis, UBS estimated May growth at roughly 2%.
"May is the first month in the low-single digits, weighed down by the decline of ~7% in the US," Vogt wrote in the client note.
Looking at the quarter-to-date picture, UBS said the App Store is tracking at roughly 4% growth. The bank added that June poses a tougher comparison, with a roughly 12% year-earlier base to clear - a hurdle UBS described as "still not an easy hurdle." That timing means momentum through June will be important to how the App Store contributes to Services results for the quarter.
UBS also called attention to a slowdown in generative AI-related App Store revenue. That category’s year-over-year growth eased to approximately 94% in May from about 190% in January, signaling that earlier rapid expansion in AI-related app monetization has cooled.
Despite the softer App Store trajectory, UBS maintained its forecast for full Services segment growth at approximately 14%. The firm pointed out that consolidated Services growth remained solid at roughly 16% in the most recent quarter, even while App Store growth sat at just 7% during that period.
Still, UBS warned that material upside from the App Store appears unlikely in the near term, particularly because the generative AI growth comparable is similar month over month into June. On valuation, UBS kept its $296 price target on Apple, which the firm derives from a 30x multiple applied to its calendar-year 2027 EPS estimate of $9.86. The bank characterized its view as balancing solid demand against lingering uncertainty around Apple’s AI strategy.
Implications and context
The combination of a U.S. decline in App Store revenue, slowing generative AI-related monetization, and a challenging June comparable creates a constrained upside scenario for Apple’s Services line in the near term. UBS’s retained Services growth forecast and unchanged price target indicate the firm sees offsetting strength elsewhere within Services, but it explicitly flagged limited additional contribution from the App Store.