Morgan Stanley monthly data: As of mid-August, Apple Inc. (AAPL.US) App Store net revenue decreased by 0.6% year-on-year, marking the first decline in four years.

Morgan Stanley pointed out in a report that, based on monthly tracking data, as of mid-August, the net revenue of Apple Inc. (AAPL.US) App Store has decreased by 0.6% year-on-year for the month, marking the first year-on-year decline in four years. The analyst team led by Erik Woodring added, The iPhone production plan for the third calendar quarter remains unchanged, but the iPad production has been adjusted downward, indicating a certain degree of demand elasticity; in July, PC production saw a significant year-on-year decline of 24%. Additionally, the cloud capital expenditure tracking indicator shows that the growth rate of expenditures for the calendar year 2027 is currently +38% (previously +9 percentage points). Based on the latest data from Sensor Tower, analysts estimate that as of August 17, the net revenue of the App Store has declined by 0.6% year-on-year for the month, a slowdown of 170 basis points from the growth rate in June, while the year-on-year comparison from the same period last year itself dropped by 200 basis points. If the quarter ends on August 17, the year-on-year growth rate of App Store revenue for the third calendar quarter would only be 0.5%, which is 50 basis points lower than Morgan Stanley's forecast of a 1% year-on-year increase for the September quarter. Analysts further pointed out that this corresponds to about a 20 basis point (approximately $45 million) downward risk regarding Morgan Stanley's forecast of a 9.5% year-on-year growth in service revenue for the September quarter (the market consensus expects a 10.7% year-on-year increase). Looking ahead, analysts believe that service business growth is unlikely to rebound significantly in the short term due to multiple pressures facing the App Store, such as reduced revenue sharing ratios, external link redirects, weak gaming demand, and foreign exchange headwinds. However, adjustments in AppleCare pricing are expected to create a certain degree of positive offset. Additionally, Woodring and his team stated that the iPhone production plan for the third calendar quarter remains at 54 million units, supporting an expected shipment of about 58 million units for the September quarter; the iPad production has been cut by 1 million units, reflecting expectations of limited demand elasticity following price increases. Furthermore, analysts noted that, based on the latest forecasts from their Greater China technology hardware team, the July shipments of notebook original design manufacturers (ODMs) have declined by 24% year-on-year, marking the poorest year-on-year performance in 40 months, and are 4% lower than Morgan Stanleys estimate, primarily due to weak demand and supply constraints. Analysts indicated that this suggests a rapid contraction of demand in the PC market. The Woodring team also mentioned, Our cloud capital expenditure tracking indicator shows that the growth rate for capital expenditures in the calendar year 2027 is +38%, while the market consensus expects it to be $1.39 trillion, and Morgan Stanley expects it to be $1.61 trillion, indicating that there is further room for upward adjustments in the market consensus. Analysts noted that, following the latest consensus expectation updates, the companies with the largest upward adjustments in their capital expenditure forecasts for the calendar year 2027 are: Alphabet (GOOGL.US, +$17.8 billion), Meta (META.US, +$8.8 billion), Microsoft Corporation (MSFT.US, +$7.5 billion), Amazon.com, Inc. (AMZN.US, +$6.0 billion), and Nebius (NBIS.US, +$5.0 billion). Analysts also mentioned that they have included SpaceX (SPCX.US) in their cloud capital expenditure tracking, projecting its incremental capital expenditure contribution to be $120.9 billion in 2027 (an increase of $62 billion year-on-year). The Woodring team concluded that, overall, the current market consensus for cash cloud capital expenditures in 2027 stands at $1.39 trillion, suggesting that the capital intensity (i.e., capital expenditure as a percentage of revenue) of the top 15 cloud companies averages 38.6%, having increased by 380 basis points since the beginning of this month.