Apple (AAPL) is scheduled to report its fiscal third quarter earnings after the bell on Thursday, and unlike the rest of its tech peers, the main story won’t be about AI growth.
Instead, analysts and investors will be keeping an eye on iPhone sales out of China and whether Apple has managed to stem the tide of users flocking to that country’s homegrown rivals including Huawei.
For the quarter, analysts are expecting Apple to report earnings per share (EPS) of $1.35 and revenue of $84.4 billion, according to estimates compiled by Bloomberg. Apple saw EPS of $1.26 and revenue of $81.7 billion in the same period last year.
Shares of Apple are up some 18.6% year-to-date, despite a difficult start to the year, thanks, in part, to the impact of the company’s Worldwide Developer Conference (WWDC) in May where it showed off its Apple Intelligence software.
But the big question on investors’ minds is whether iPhone sales rose or fell in China. Apple has been contending with slowing phone sales in the region, with the company noting an 8% decline in sales in the second quarter, as homegrown competitors including Huawei and Xiaomi gain market share.
And while some analysts, like JPMorgan’s Samik Chatterjee, believe sales in Greater China, which includes mainland China, Hong Kong, Singapore, and Taiwan, rose in Q3, others including UBS Global Research’s David Vogt say sales likely fell some 6%.
Analysts surveyed by Bloomberg say Apple will report Greater China revenue of $15.2 billion, down 3.1% versus the same quarter last year when Apple reported China revenue of $15.7 billion. Overall iPhone sales are expected to top out at $38.9 billion, down 1.8% year-over-year from the $39.6 billion Apple saw in Q3 2023.
But Apple is expected to make up for those declines in other areas including Services and iPad sales. Services revenue is set to hit $23.9 billion in the quarter, up from $21.2 billion in Q3 2023, while iPad sales are anticipated to reach $6.6 billion versus the $5.7 billion the segment pulled in during the same period last year. Those iPad sales projections come after Apple introduced its latest iPad models this year, including a new iPad Pro lineup running the company’s M4 chip.
Mac revenue should also grow modestly in the quarter, versus a decline of 7.3% last year. Wearables sales, which include the Apple Watch and AirPods, however, are expected to fall 5.9% year-over-year.
Beyond Apple’s revenue numbers, analysts and investors will be on the lookout for any commentary on the rollout of the company’s Apple Intelligence beta to developers earlier this week.
The software, which is powered by Apple’s generative AI technology, is set to hit iPhones, iPads, and Macs later this fall, though according to Bloomberg’s Marc Gurman, it won’t land alongside the new iPhone in September. Instead, it should hit Apple devices sometime in October.
Analysts are torn on the potential impact of Apple Intelligence on iPhone sales in the year ahead, with some saying the software will kick off a fresh iPhone sales supercycle and others laying out more bearish expectations for the technology’s effect on Apple’s bottom line.
Importantly, Apple Intelligence is only compatible with iPhone 15 Pro and newer phones, which all buy guarantees that any users desperate the get their hands on the technology will have upgrade to a new, more powerful phone as soon as it’s available.
Either way, if Apple is going to turn Apple Intelligence into a hit, it’s going to need to ensure it has the capabilities that get customers excited to dive into the offering.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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