Morgan Stanley: Apple Inc. (AAPL.US) business divergence, strong demand for iPhone 17 series, slowing growth in service business.

Morgan Stanley's monthly data tracking report shows that Apple Inc.'s core business is showing a significant divergence trend: strong demand for the iPhone 17 series, while growth in services business is slowing down. Demand for the iPhone 17 exceeds expectations, supply improvements difficult to curb delivery delays Since the start of pre-orders, the iPhone 17 series has shown strong demand momentum. As of September 23, the 11th day after the official start of pre-orders, the average delivery time for the iPhone 17 in the global market has increased compared to the same period last year. In the US market and international markets, the delivery time has increased by 2 days compared to the same period last year. Specifically for models, except for the iPhone Air, the delivery time for the other three new models is longer than the previous generation products. This trend is particularly evident in the base model iPhone 17, with an average delivery time increase of 11 days in the tracked countries, with a significant increase of 19.5 days in the Chinese market. Considering that the Chinese market had promotions and subsidies in the second quarter, this performance actually surpasses previous market concerns. Lengthening delivery times are a key indicator of initial demand. Despite improvements in supply compared to last year, delivery times are still longer compared to the same period last year, sending a positive early signal about iPhone demand. In addition, there are reports in the supply chain that production of the base model iPhone 17 will increase significantly by 30% to 40%. These factors combined may put upward pressure on the total production forecast of 86 million iPhone 17 series in the second half of 2025 as predicted by the supply chain team. This strong early demand trend may also indicate potential for an upward adjustment in iPhone shipments for the 2026 fiscal year. Current market consensus and analyst expectations are relatively conservative, predicting shipments between 235 million and 236 million units, similar to the previous fiscal year. However, if the demand for the iPhone 17 remains strong, although it may provide slight resistance to the average selling price, it reflects the strong appeal of the product in the market. App Store revenue growth is diverging, with the gaming category dragging down overall growth In terms of services business, the performance of the App Store is also impressive, bringing surprises for the current fiscal quarter. As of September 21, the net revenue of the App Store has increased by 10.3% compared to the same period last year, which is 140 basis points higher than market expectations. If this growth continues until the quarter ends on September 21, it will push up the forecast for services revenue growth by 40 basis points to 13.3%. By region, the growth rates in the US (+7.9%), Japan (-4.3%), and China (-0.6%) have all slowed down since August, while other regions maintained strong growth of 16.8%. Net revenue from the gaming category decreased by 2.2% compared to the same period last year, while non-gaming categories increased by 16.4%, mainly driven by productivity, photo and video, and entertainment apps. As a key indicator of monetization ability, the year-over-year growth rate in net revenue per download in the US market is 3% as of September, although lower than in July, the magnitude of the slowdown is consistent with the global App Store on this metric. Since the effective date of the related litigation ruling over four months ago, there is currently no conclusive evidence to suggest that Apple Inc.'s monetization ability in the US App Store has been significantly affected, which has somewhat alleviated concerns in the market about the impact of the "external links" policy. Overall, the data shows that Apple Inc.'s hardware demand is strong, especially the iPhone 17 series, which is expected to drive shipments beyond expectations; although growth in services business is slowing down, the structure is shifting towards high-value non-gaming categories.