As smartphone sales growth has stalled and iPhone revenue is falling, Apple (NASDAQ:AAPL) has shifted its focus from hardware to selling services. That’s the push behind its Apple TV+ video streaming service announced this week. AAPL stock popped 2.5% on the news before falling back.

Yet, while the iPhone is no longer the big contributor it once was, one of the company’s oldest sources of revenue — and the star of its Services division — is on track for explosive growth. A new report on the App Store says that thanks to consumer spending on mobile apps, it’s on track to more than double sales in the next five years, hitting $96 billion by 2023.

With Apple stock feeling the effects of sliding iPhone revenue, having an existing and proven source of service revenue that’s projected to see big growth is good news for AAPL stock investors.

$96 Billion App Store By 2023

The App Store has become a jewel in the Apple’s crown. The billion or so iOS devices out there download apps, many of which either cost a small fee upfront or have in-app purchase options, including subscriptions. The money spent by consumers on these apps is astounding. In 2018, Apple started the year with a press release touting the $300 million spent on apps on New Year’s Day alone.

And AAPL collects 30% of that spending.

According to market intelligence firm Sensor Tower, total spending at the App Store hit $47 billion in 2018. That’s impressive but in a report just released by the firm, Sensor Tower says growth in consumer spending on mobile apps is on pace to more than double over the next five years.

“Our projections call for global revenue on Apple’s platform to reach $96 billion in the next five years, an increase of 104 percent over 2018’s total of $47 billion at a CAGR of 15.6%. Google Play, by comparison, is projected to reach $60 billion in worldwide spending, up 140 percent over 2018 at a CAGR of 19%.”

In comparison, AAPL’s entire Services division revenue for 2018 — including the App Store, Apple Pay, iTunes, Apple Music, AppleCare and other sources — was $37.2 billion. 

The Sensor Tower numbers are good news for Apple stock, suggesting that App Store revenue will grow at a rate that will help that Services division make up for declining iPhone revenue.

Google Play Growing Faster, But #2

Projected App Store revenue growth is the big takeaway from the Sensor Tower report, but it also predicts Apple will continue to lead Alphabet (NASDAQ:GOOGL) when it comes to monetizing apps. Alphabet’s expected to see a higher growth rate in Google Play app revenue, but won’t come anywhere near catching Apple’s App Store in total consumer spending. We focused a few months back on why the App Store dominates Google Play — despite the massive numbers advantage of Android over iOS.

There Are Still Risks for AAPL Stock 

Overall, the Sensor Tower report is good news for for Apple stock. Yet, there is one trend that is somewhat worrying. The big growth rates in app store spending over the next five years is expected to be in emerging markets, while the largest overall spender on mobile apps will be China. These are Android strongholds, where Apple struggles to sell its premium-priced iPhones.

In the long term, AAPL may have a challenge keeping developers focused on iOS if Android app spending ever hits the point where it begins to outpace the App Store.

There’s also the double-edged sword of subscription-based App Store revenue. It’s great for AAPL’s bottom line, but companies that offer subscriptions are beginning to balk at Apple taking 30% of their revenue (dropping to 15% after one year). The highest grossing app on the App Store in 2018 was Netflix (NASDAQ:NFLX), but to avoid losing a cut to Apple, consumers can no longer pay for their Netflix subscription through the app.

There have also been rumblings of anti-monopoly sentiment against Apple that could impact the way it operates the App Store. And Spotify Technology (NYSE:SPOT) has complained to the EU regulator that the 30% fee is aimed at killing their business.

But for now, AAPL stock investors can celebrate the fact that the App Store is on pace to notch impressive sales and revenue growth over the next five years.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.