Apple is expected to report its Q1 FY’24 results earnings on 02/01/2024 after market close. The report will be for the fiscal Quarter ending Dec 2023. Apple's recent run of earnings calls have been mixed. Ahead of their next earning call, what could we expect from the $3tn market cap giant?
Previous Quarter Review
Apple reported fiscal fourth-quarter earnings on Nov. 2 that beat analyst expectations for sales and earnings per share, but revealed that overall sales fell for the fourth quarter in a row. Every hardware business outside of the iPhone declined year over year, with big drops in the iPad and Mac segments.
Apple shares fell after executives signaled the company may not return to growth in the holiday quarter.
Here’s how Apple did, versus LSEG (formerly Refinitiv) consensus expectations:
EPS: $1.46 per share vs. $1.39 per share expected
Revenue: $89.5 billion vs. $89.28 billion expected
iPhone revenue: $43.81 billion vs. $43.81 billion expected
Mac revenue: $7.61 billion vs. $8.63 billion expected
iPad revenue: $6.44 billion vs. $6.07 billion expected
Wearables revenue: $9.32 billion vs. $9.43 billion expected
Services revenue: $22.31 billion vs $21.35 billion expected
Gross margin: 45.2% vs. 44.5% expected
FY 24 First Quarter Results Outlook
Analysts expect Apple's revenue to be $118.051 billion, adjusted net income to be $32.320 billion, and adjusted EPS to be $2.107, according to Bloomberg's unanimous expectations.
iPhone sales could prove a bit more resilient
Sales of the iPhone could prove a bit more resilient, given that this will be the first full quarter since the launch of the new iPhone 15 devices. Moreover, Apple is seeing traction in markets such as India, Indonesia, and Turkey where smartphone installment plans and trade-in programs are helping drive demand.
Mac and iPad sales decline
Sales of products such as the Mac and iPad are expected to decline year-over-year, as the remote working trend eases and the broader PC and tablet markets remains muted. For example, IDC indicated that global PC shipments fell by close to 3% in Q4, with Apple’s Mac shipments declining by an estimated 18.4%.
Chinese market concerns
Apple's smartphone shipments in China shrank 2.1% in the final quarter of 2023 from the same year-ago period, hurt by intensifying competition from local rivals led by Huawei, data from research firm IDC showed. The drop underscores the challenges facing the U.S. firm in its third biggest market.
With intense competition in the Chinese smartphone market, Apple's activation volume in China in the fourth quarter of 2023 fell by 10% year-on-year. Despite maintaining the top position, Huawei's new 5G Mate 60 saw a 79% year-on-year increase in activation, ranking third. Xiaomi, with a 38% year-on-year growth in activation, secured the second position. Considering these figures, Apple's leading position in China seems to be gradually weakening.
In this context, Apple's reduced the price of iPhone 15, and the company received downgrades from several institutions in January, such as Barclays, Piper Sandler, and Redburn, causing the stock price to fall to $180 at one point. However, with Bank of America upgrading Apple to a buy rating, citing Vision Pro as bringing performance growth to Apple, the market seems to have regained confidence in Apple's future growth, and the market value has returned to $3 trillion.
Others
Apple’s digital services business should also partly help Apple ride out the lull in its hardware business driven by higher sales at the AppStore and improving the uptake of other subscription services. Over Q4 FY’23, services sales grew 16% to $22.3 billion, returning to double-digit growth, after growing by single-digit levels in the previous two quarters. It is expected that Apple’s gross margins will hold up, driven by a higher mix of service sales, a more favorable sales mix skewed toward premium products, and also due to some cost savings.