Apple’s search engine deal with Google is expected to drive service revenue growth through 2022

Morgan Stanley analyst Katy Huberty today raised her service-related revenue forecast for Apple through fiscal 2022.


In a research note shared with MacRumors, Huberty said stronger license revenue is the main driver of the elevated estimates, including an acceleration in payments related to search traffic that Apple receives from Google. The New York Times last year it reported that Apple receives an estimated $ 8-12 billion per year in exchange for making Google the default search engine on devices like the iPhone and iPad.

“Following strong App Store results for the March quarter and analysis of Apple’s licensing and other key drivers, we increased our FY21 and FY22 service revenue estimates, which are already above the street, by 3% and 5%, respectively, and we are increasingly convinced that consensus services forecasts for the next 2 years or more are too low, “wrote Huberty.

Despite the positive outlook on Apple services, Huberty lowered his 12-month price target for Apple to $ 155 from $ 164 a share.

“However, multiple compression over the past 2 months, primarily across Apple’s fastest growing service pairs, more than offsets our higher revenue and earnings estimates, driving our new sum-of-the-parts target price. at $ 156, or 33x FY22 EPS, down from $ 164 previously, “wrote Huberty.

Apple’s portfolio of services includes the App Store, Apple Music, Apple TV +, Apple News +, Apple Fitness +, Apple Arcade, iCloud, and more.


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