Apple reports fiscal first-quarter earnings after the bell. The quarter, which ends in December, is Apple’s biggest of the year by sales and the first full sales period for the iPhone 15, which launched in September.
Apple faces significant challenges, coming off four straight quarters with revenue declines. Investors will be closely watching to see if Apple guides to growth again in the current quarter.
Concerns about demand in China, Apple’s third-largest region by sales, will weigh on the company. Its iPad and Mac units could also have a tough quarter, since demand for computers remains muted.
On the other hand, Apple could give strong updates to the number of active devices in use, a metric that analysts use to forecast the company’s lucrative services business. Management could also offer some perspective on how it sees the first few weeks of preorders for Apple’s virtual reality headset, the Vision Pro, as a bright spot.
Some analysts believe Apple’s iPhone revenue may look good in a soft market quarter, outperforming rivals that are also seeing weak demand. But a strong quarter of iPhone sales over the holiday season could mean a seasonally weak March quarter.
“With the robust sell-in volumes in F1Q24, current expectations from investors have moved to a modest beat led by robust iPhone numbers, even though accompanied on the flip-side by above-seasonal iPhone decline into F2Q,” JPMorgan analyst Samik Chatterjee wrote in a note Wednesday.
Apple hasn’t given official guidance since 2020, but management usually provides data points on a call that signal how it sees the quarter shaking out.
For example, the company signaled to investors in November that the December quarter may not show a significant return to growth after four straight quarters of declining sales, signaling that it would be “similar” to last year’s December total of $117.15 billion.
Apple said in November that the iPhone would do well but that it expects iPads and Wearables, including Apple Watch and AirPods, to decline from last year. It said that the Mac unit would do better than a 34% year-over-year decline.
China demand will be closely watched. Apple faces renewed competition from Huawei in the region, and some surveys have shown sagging sales.
“iPhone purchase intentions in China fell to a 5 year low this year, with iPhone loyalty/retention rates falling to the lowest levels since 2013, indicating both economic pressures on high-end iPhone purchases and greater competition within the China market,” Morgan Stanley analyst Erik Woodring wrote in a note Wednesday.
IPhones were discounted in China during a shopping holiday called Singles Day, similar to the U.S. Amazon Prime Day, which may signal weak demand. But discounts can also drive sales.
“Apples revenue in China in F4Q declined -2.5% y/y and with limited drivers of growth in the region in F1Q (CounterPoint research indicating -9% y/y decline in units in China in C4Q for Apple), we expect investors will be focused on iPhone momentum following the recent price cuts,” Chatterjee wrote.
Beyond the nuts and bolts of Apple’s profit and loss during the December quarter, Thursday’s earnings report will be the first opportunity to hear from Apple management on how it sees the recent launch of its virtual reality headset, the Vision Pro.
The $3,500 device is expected to sell in small quantities this year, which means it won’t be material in terms of Apple’s business versus its mature product lines. The Vision Pro wasn’t sold in the December quarter — it only went up for preorder earlier this month and releases on Feb. 2. But many investors see Apple’s Vision Pro as a potential new major computing platform, with the ability to drive sales growth once future versions of the headset get cheaper. Any enthusiastic comments from Apple CEO Tim Cook about the device could stoke excitement.
“We remain comfortable with our current assumption of muted uptake for the device under 1% of Apple sales this year and next,” Rosenblatt analyst Barton Crockett wrote in a note Wednesday.
Here’s what Wall Street is expecting for first-quarter revenue and earnings, and second-quarter outlook, according to LSEG consensus estimates:
- Earnings per share: $2.10
- Revenue: $117.91 billion
- March quarter outlook: $1.57 earnings per share on $95.95 billion in revenue
Here’s what to expect from Apple’s product lines, according to StreetAccount consensus estimates:
- iPhone revenue: $67.96 billion
- Mac revenue: $7.80 billion
- iPad revenue: $7.31 billion
- Wearables revenue: $11.39 billion
- Services revenue: $23.31 billion
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