Apple’s App Store growth is slowing down

Every January, Apple releases the total amount of money that App Store developers have earned since 2008, a data point that allows analysts and Apple investors to get an idea of how much money the App Store makes.

This year’s disclosure suggests that Apple’s App Store growth has plateaued.

On Tuesday, Apple said it has paid $320 billion to developers, up from $260 billion as of last year, a jump of $60 billion. Developers receive between 70% and 85% of gross sales, depending on if they qualify for Apple’s reduced rate.

If all developers paid a 30% cut to Apple, Apple’s App Store grossed more than $85 billion in 2022, based on a CNBC analysis. If Apple’s commissions were all 15%, the App Store’s estimated gross would come in lower, around $70 billion.

It’s the same amount of sales as Apple suggested with its data point last year, when the company said it had paid developers $60 billion in 2021.

This is a rough estimation that could vary because it’s unclear how many developers pay the lower 15% cut, versus the 30% cut, and because the stats Apple shares are rounded.

Attempts to extrapolate the size of the App Store business from developer earnings are inaccurate, Apple said, because the commission ranges from 15% to 30%, and the vast majority of developers pay the lower commission under the App Store Small Business Program that gives a lower cut to app makers who gross under $1 million per year.

Apple said in its release that 2022 was a “record” year for the App Store, and revealed 900 million subscriptions, up from 745 million subscriptions last year. Apple’s stat includes anyone who subscribes to a service through Apple’s App store, not just its own first-party services like Apple TV+ and Music.

But Tuesday’s data point underscores that App Store growth slowed last year, which is important for investors because the App Store is a major part of Apple’s services business, and is a profit engine for the company.

Apple’s services business grew 14% in fiscal 2022 to $78.1 billion, a 14% increase. But that was a significant slowdown from the 27% growth rate the division posted in fiscal 2021.

Apple is dealing with tough comparisons to elevated 2021 and 2020 app use and sales as people bought games and software while riding out the Covid pandemic. Apple is also facing consumer uncertainty around the world as interest rates rise and economists worry about a possible recession.

Morgan Stanley analyst Erik Woodring has been following slowing App Store growth. App Store net revenue decreased for six straight months from June to November, according to his data, before growing again in December.

Woodring wrote in a note this month that app sales will grow in 2023 because the year-over-year comparisons will be easier and as some app price increases in international markets late last year will start to benefit Apple.

“While App Store growth remains near its lowest levels in history, and we acknowledge the global consumer remains challenged, we are encouraged to see growth trajectory continue to improve after bottoming in September,” Woodring wrote.