Apple Inc. is gearing up to break free from a concerning trend of declining revenue as it prepares to share its earnings report this Thursday. The tech giant has experienced a decrease in revenue for the past four consecutive quarters, and there are doubts as to whether this streak will continue for a fifth quarter.
Analysts are cautiously optimistic, predicting that Apple will have achieved positive growth during the crucial holiday period. The average forecast suggests $118 billion in sales, a modest 0.7% increase from the $117.2 billion recorded the previous year.
However, despite these expectations, Apple will be cutting it close. The December quarter posed challenges due to ongoing consumer-spending pressures in China and a patent dispute that caused a temporary disruption in Apple Watch sales. Although most analysts anticipate some level of revenue growth for the company, there are a few forecasts that suggest a decline.
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It’s worth noting that since 1998, when FactSet began keeping quarterly data, Apple has never endured five consecutive quarters of year-over-year revenue declines. Therefore, all eyes are on Wall Street as they closely monitor the health of Apple’s iPhone business during the upcoming earnings call. Of particular interest are iPhone trends in China.
Citi Research analyst Atif Malik recently expressed confidence in the iPhone’s performance in China. While concerns surrounding iPhone sales in China have existed since Huawei’s resurgence, recent supply chain checks have not indicated any immediate production cuts for the December and March quarters. Despite a slight slip in market share during the fourth quarter, third-party estimates confirm that Apple emerged as the top smartphone vendor in China for the entire year.
Nonetheless, Malik acknowledges that the surge in patriotism for local brands like China’s Technologies Co. could pose a temporary hindrance to iPhone sales in China.
UBS Predicts Upside Potential for Apple’s Overall Revenue
UBS’s David Vogt believes that Apple’s revenue in the December quarter could see an increase, thanks to an inventory build of 2-3 million iPhone units in China. While this could provide a modest relief in iPhone performance, there is some concern about the potential risks it may create for the March quarter.
Evercore ISI Suggests Modest Upside for Apple’s Results
Amit Daryanani from Evercore ISI also expects Apple to deliver modest upside for overall results in the December quarter. Considering the pressure on the company’s stock this year, this forecast, along with its March-quarter forecast, could help boost investor sentiment. Despite Apple’s stock decline of about 3% year-to-date, the S&P 500 has experienced the same percentage increase.
According to Daryanani, although China poses a risk, he believes that Apple’s share gains in emerging markets and the uplift in developed markets’ average selling price will help stabilize iPhone sales in December and potentially in March as well.
Focus on iPhones, but Curiosity Surrounds Apple’s Vision Pro
During the call, iPhones will undoubtedly be the main topic of discussion. However, investors would likely also be interested in learning more about Apple’s newest device, the Vision Pro mixed-reality headset retailing at $3,499. Unfortunately, it is uncertain how much information will be shared during the call.
The Vision Pro started accepting preorders earlier this month and did not have any impact on the just-completed quarter. It is worth noting that Apple generally does not provide specific numerical details about certain newer hardware products like the Apple Watch and AirPods. Even after being on the market for over eight years, the Apple Watch still does not have its own line item on Apple’s financial statements. Therefore, Wall Street should not expect substantial insights about the Vision Pro either.
