Apple (AAPL) to Report Q2 Earnings: What's in the Offing?
Apple AAPL is set to report its second-quarter fiscal 2023 results on May 4.
The company expects the March quarter’s year-over-year revenue growth to be similar to that of the December quarter due to unfavorable forex.
The Zacks Consensus Estimate for revenues is currently pegged at $93.32 billion, indicating a decline of 4.07% from the year-ago quarter’s reported figure.
The consensus mark for earnings is currently pegged at $1.44 per share, unchanged over the past 30 days and indicating a 5.26% decrease from the figure reported in the year-ago quarter.
Apple’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the earnings surprise being 2.84% on average.
Apple Inc. Price and EPS Surprise
Apple Inc. price-eps-surprise | Apple Inc. Quote
Let’s see how things have shaped up for the upcoming announcement.
iPhone Revenues to Suffer From Low Demand
Apple’s fortunes are heavily reliant on the iPhone, which is by far its biggest revenue contributor. The device accounted for 56.1% of net sales in the last reported quarter, wherein sales decreased 8.2% year over year to $65.78 billion.
The Zacks Consensus Estimate for fiscal second-quarter iPhone net sales is pegged at $49.61 billion, down 1.9% year over year.
We expect Apple to have shipped roughly 65 million iPhones in the second quarter of fiscal 2023. It is expected to have suffered from low smartphone demand.
Per the latest Canalys report on worldwide smartphone shipments, Apple’s market share contracted to 21% in first-quarter 2022 from 25% in fourth-quarter 2022, lagging Samsung’s 24%.
Services Growth to Slow Down in Q2
For the fiscal second quarter, Services revenues are expected to grow year over year despite challenging macroeconomic conditions, as well as weakness in digital advertising and gaming.
In the fiscal first quarter, Services revenues grew 6.4% from the year-ago quarter to $20.77 billion and accounted for 17.7% of sales.
Nevertheless, an expanding paid subscriber base has been a key catalyst for the Services business, which is riding on the increasing popularity of the App Store.
Apple has more than 935 million paid subscribers across its Services portfolio. App Store continues to grab the attention of prominent developers from around the world, helping the company to offer exciting new apps that drive traffic.
Services like Apple TV+, Apple Arcade, Apple News+, Apple Card, Apple Fitness+ and Apple One bundle are expected to have contributed to overall growth.
Apple TV+ has been gaining recognition due to award-winning shows. The company’s animation movie The Boy, the Mole, the Fox and the Horse won an Oscar for Best Animated Short Film.
Apple’s impressive run at the Oscars has been instrumental in driving recognition of Apple TV+ in the saturated streaming market currently dominated by the likes of Amazon AMZN Prime Video, Netflix NFLX and Disney’s DIS Disney+.
Apple shares have outperformed Amazon, Netflix and Disney year to date. AAPL returned 30.6% while AMZN, NFLX and DIS returned 25.5%, 18% and 11.9%, respectively.
The company has been keeping no stone unturned to make the TV+ service a success. At a much more affordable price of $4.99, Apple TV+ has been benefiting from quality content with its strong portfolio of original shows and movies.
Our estimate for fiscal second-quarter Services net sales is pegged at $20.85 billion, up 5.2% year over year, lower than the 6.4% growth reported in the previous quarter and 23.8% in the year-ago quarter.
Wearables’ Growth to Remain Strong
Apple has been dominating the wearables market, thanks to the strong adoption of the Apple Watch.
This Zacks Rank #3 (Hold) company’s Fitness+ subscription service, built on Apple Watch, has been a game changer. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Notably, Fitness+ tracks health and workout-related data from Apple Watch that users can view on their iPhones, iPads or Apple TVs.
Apple Watch’s adoption rate has been growing rapidly. More than two-thirds of customers, who purchased it in the first quarter of fiscal 2023, were first-time customers.
The Zacks Consensus Estimate for Wearables, Home and Accessories is currently pegged at $8.25 billion, down 38.8% sequentially.
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