Apple Inc. (AAPL) is set to reveal its fourth quarter earnings after the closing bell tonight, with the tech world and investors keenly watching for any signs that the newly launched Apple Intelligence platform is influencing iPhone sales. The introduction of this AI platform, which was rolled out through software updates for the iPhone, iPad, and Mac just this Monday, has been a focal point of Apple’s marketing strategy, particularly for the iPhone.
However, Apple Intelligence currently caters to a niche audience; it’s initially available only in US English, with plans to expand to localized English versions in December and additional languages in April. More importantly, this cutting-edge software is exclusive to newer models like the iPhone 15 Pro, iPhone 15 Pro Max, and the latest iPhone 16 series, necessitating an upgrade for users with older devices. This strategy could potentially catalyze a new wave of iPhone sales, often referred to as a ‘supercycle’.
Bloomberg analysts are forecasting Apple to report an earnings per share of $1.59 with revenues hitting $94.3 billion. This would mark an uptick from last year’s $1.46 EPS on $89.4 billion in revenue.
Apple has refrained from offering quantitative guidance since the onset of the COVID-19 pandemic, though it still provides directional insights. On the last earnings call, Cupertino indicated that it expects revenue growth for the September quarter to be “similar” to that of the June quarter, where revenue had increased by nearly 5% year-over-year.
Meanwhile, iPhone sales are projected to climb to $45 billion, a 2.8% increase from the previous year. Meanwhile, Apple’s Services segment is expected to surge by 13%, reaching $25.2 billion, reflecting a robust growth trend.
Other product lines show mixed expectations: the iPad is anticipated to see a 9.7% revenue increase to $7 billion, whereas the wearables segment might experience a slight downturn of 1.6%, with forecasted revenue at $9.1 billion. In terms of geographical performance, Greater China’s revenue is expected to grow by 4.7% to $15.8 billion, reversing last year’s decline.
Despite these projections, there’s a palpable concern regarding the demand for the iPhone 16. Analyst Ming-Chi Kuo highlighted a reduction in order forecasts for the iPhone 16 by about 10 million units, signaling potential weaker demand. Moreover, the lack of transparency in Apple’s sales figures since they stopped reporting unit sales adds to the speculative nature of these estimates.
However, optimism persists in some quarters. Barclays’ Tim Long suggests that despite potential declines, strong late-cycle sales of the iPhone 15 and a robust Services sector could still lead to a positive earnings surprise. On a different note, BofA’s Wamsi Mohan believes that the expansion of Apple Intelligence features, including the integration of ChatGPT and the introduction of Visual Intelligence, could eventually spur demand for Apple’s latest devices.
The immediate impact of Apple Intelligence on sales might be minimal due to its limited rollout, but the anticipation around its future features could play a significant role in shaping consumer behavior.
As Apple continues to innovate with AI, the tech community and investors alike remain eager to see if these technological advancements will translate into sustained sales growth or if other market dynamics will overshadow these efforts.
Price Action
Apple shares were trading down by 0.44% at $229.08 at the time of publication Thursday. The $3.5 trillion market cap name is up 19% year-to-date and 29% year-over-year.
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