Despite a noticeable deceleration in its service business growth, overall demand for Apple (AAPL.US) continues to demonstrate robust resilience. Recent data from Morgan Stanley and research firm Sensor Tower indicates that while revenue growth for the Apple App Store moderated in March, iPhone production surged year-over-year, signaling sustained strength in hardware demand. Analysts at Morgan Stanley noted that as of March 18, net revenue for the App Store increased by approximately 6% year-over-year for the month, reflecting a slowdown of about 3.1 percentage points compared to February. This moderation was also influenced by a higher base of comparison from the same period last year. On a quarterly basis, App Store revenue has grown by around 7% so far, slightly below the bank's previous expectation of 8% growth for the March quarter.

Regional performance of the App Store showed divergence. Revenue in China increased by about 4% year-over-year, while the U.S. and Japanese markets declined by 2% and 5%, respectively, indicating some pressure in certain mature markets. Despite the short-term slowdown in services, Apple's core hardware business delivered impressive results. Data revealed that iPhone production for the quarter reached approximately 52 million units, marking a 12% increase compared to the previous year. Analysts suggest that this production volume corresponds to shipments between 57 million and 58 million units, largely aligning with Morgan Stanley's projection of 58 million units and significantly surpassing the market's general expectation of 50 million units.

Analysts emphasized that the strong growth in iPhone production underscores resilient end-user demand, particularly noteworthy given constraints in 3-nanometer chip production capacity. Apple's earlier strategy of increasing wafer orders is expected to support shipment performance in the first two quarters of 2026, offering potential upside for future earnings. Overall, while App Store revenue growth faces near-term pressure, the sustained strength in iPhone demand provides crucial support for Apple's performance, highlighting the company's ability to balance its hardware and ecosystem strategies effectively.