Apple is approaching its third-quarter earnings report, traditionally the slowest sales period of the year for the tech giant. This quarter’s focus will be less on past performance and more on future prospects, particularly regarding the upcoming September quarter.
Key Financial Metrics (LSEG Consensus Estimates)
- Earnings per Share (EPS): $1.35
- Revenue: $84.53 billion
- Q4 Revenue Guidance: $93.39 billion
Product Line Estimates (StreetAccount)
- iPhone Revenue: $38.64 billion
- Mac Revenue: $7.04 billion
- iPad Revenue: $6.61 billion
- Wearables, Home, and Accessories Revenue: $7.83 billion
- Services Revenue: $24.05 billion
Focus on the September Quarter
While Apple’s third quarter ends in June and is typically quieter, Wall Street is particularly interested in the outlook for the September quarter. Analysts are keen to hear from CEO Tim Cook on several key topics:
- Apple Intelligence: Apple’s new AI initiative, Apple Intelligence, was revealed in June. This development uses Apple’s own chips rather than expensive Nvidia-based cloud systems. The early features were released this week. Although not expected to significantly impact earnings yet, this could drive late-cycle demand for high-end iPhone 15 models.
- Capital Expenditures: Compared to rivals who are investing heavily in AI server farms, Apple’s approach to using its own chips could be a more cost-effective strategy. Analysts believe this could lead to faster monetization through consumer hardware upgrades.
- Edge AI: “Edge AI is in its early stages, with lower capital expenditure needs and faster monetization potential through consumer hardware upgrades,” noted Raymond James analyst Srini Pajjuri.
Analysts’ Expectations
- JPMorgan’s Outlook: Analyst Samik Chatterjee expects Apple to reassure investors about strong revenue from the upcoming iPhone replacement cycle, boosted by AI. He raised his price target on Apple stock to $265 and maintains an overweight rating. Chatterjee anticipates that higher revenue could lead to consensus earnings revisions.
- Growth Predictions: Apple has previously indicated modest growth expectations for Q3, with a notable “double-digit” increase in iPad sales following new model releases in May. Services, including iCloud and hardware warranties, are also projected to grow by around 14%.
China Market Performance
- Sales Decline: Apple’s performance in China will be under scrutiny following an 8% sales drop in the second quarter due to increased competition from local companies like Huawei. Despite some recovery during the 618 shopping holiday, Apple’s sales have lagged compared to the growth in the Android market.
- Market Trends: Citi analyst Atif Malik observed that while aggressive promotions helped iPhone sales, Apple’s market share in China has been declining.
Overall, while the third-quarter results are anticipated to be modest, much of the focus will be on how Apple positions itself for the September quarter and the potential impact of new technologies and market conditions on future performance.
