Tim Cook arrives at Sun Valley’s Allen & Company meeting in Sun Valley, Idaho.
David A. Grogan | CNBC
Apple is predicted to post its third consecutive quarterly revenue decline when it reports earnings after the bell Thursday. Wall Street expects $81.7 billion in sales, which could be down about 2.3% from last 12 months.
Apple’s stock is up over 51% up to now in 2023, hitting all-time highs. Investors see it as a refuge with strong money flow, despite worries about slowing demand for consumer goods, including PCs and smartphones.
Analysts can even need to hear about how the present quarter, which ends in September, is shaking out. Apple hasn’t given guidance since 2020, citing uncertainty, but it surely provides investors with some data points that they will use to find out whether Apple sees overall sales growing or shrinking.
The corporate’s forecast shall be more vital. It might give clues as as to whether global economies are arrange for a “soft landing” after two years of rate of interest hikes.
The June period is usually Apple’s slowest quarter of the 12 months, while its fourth fiscal quarter often captures back-to-school laptop spending, just a few days of latest iPhone model sales — which normally come out in September — and shows Apple’s momentum heading into the vacation season.
“What’s going to matter most shall be management’s September quarter,” wrote Morgan Stanley analyst Erik Woodring in July, adding that he expects Apple to guide to year-over-year revenue growth again.
Emerging markets and China
Some analysts are desirous to see Apple give data points on India sales. Apple CEO Tim Cook traveled to the country in April and spoke about hopes for significant growth within the region. India became certainly one of Apple’s top five iPhone markets in the course of the quarter, in response to analyst estimates.
“On the decision, we glance for additional details on its expansion in India, including its retail and manufacturing presence,” D.A. Davidson analyst Tom Forte wrote this week.
But Apple’s older growth driver, China, is prone to be closely watched as well. Greater China — including Hong Kong and Taiwan — is Apple’s third-largest sales region, and it has reported two straight quarters of revenue decline, whilst the region reopened after years of strict Covid lockdowns.
“In our conversations, most investors feel that a soft China could pose a risk to the numbers and further commentary, but we feel that Apple’s position in China is on a solid footing and that the corporate is prone to see only a small if any decline in its iPhone sales,” wrote Piper Sandler analyst Harsh Kumar.
Kumar said if China finally ends up being weak, it could possibly be offset by strong sales momentum in India.
Apple mainly manufactures in China and investors will need to hear that the corporate has overcome lots of the provision chain snags which have hampered sales over the past two years. If Apple stockpiled parts and has enough to make what it needs to provide, it could help margins, analysts say.
Services growth and A.I. acceleration
Apple’s profitable services division includes monthly subscriptions resembling Apple Music, warranties under AppleCare, fees from the App Store, promoting revenue from search licensing agreements with Google, payments from Apple Pay and other products.
Wall Street likes to see Apple’s services business grow commonly and easily, since the margins on services are a lot higher than when Apple sells hardware. Specifically, many analysts need to see services reaccelerate after just a few quarters of weak growth due to lagging App Store software sales.
Apple suggested a 5% year-over-year increase in services, and FactSet’s estimates greater than $20.7 billion in revenue. But analysts will need to see Apple signal more growth than that.
“For the Services business, we expect year-over-year revenue growth to speed up from the +5% level expected in [fiscal third quarter,] with our checks suggesting internet advertising has improved,” Deutsche Bank analyst Sidney Ho wrote.
Analysts can even likely ask about artificial intelligence, given the industrywide obsession with the technology and a recent Bloomberg report that Apple is developing a ChatGPT-like AI model internally. Don’t expect Apple to gush about what it’s working on internally, though.
“With the official intro of Vision Pro, we expect Apple’s updated comments on its AI aspirations to be a spotlight (albeit likely very high-level),” wrote Wells Fargo analyst Aaron Rakers.
Estimates
Apple reports its results by product line, which may give investors a glance into which businesses are thriving and which of them are in a down cycle.
IPhone, iPad and Mac sales are all expected to be down on an annual basis, with iPad sales projected to drop nearly 11%, in response to FactSet estimates. Wearables, the product category with headphones and Apple Watch — and what’s going to likely be the reporting category for Vision Pro when it goes on sale — is projected to say no lower than 1%.
Nevertheless, analysts expect Apple’s services business to grow 5.2% on an annual basis, which could be a vivid spot for the report.
Here’s what Wall Street is expecting, per FactSet estimates:
- Revenue: $81.7 billion
- EPS: $1.19 per share
Here’s what to anticipate from the corporate’s product lines, per FactSet estimates:
- iPhone revenue: $40.2 billion
- iPad revenue: $6.4 billion
- Mac revenue: $6.3 billion
- Other products: $8.3 billion
- Services: $20.7 billion