Apple reports its fiscal Q3 (calendar Q2) earnings tomorrow, and we already know the key numbers analysts are expecting to hear in terms of iPhone sales and total revenue. The Wall Street consensus is that the company will report iPhone sales up 2.4% year-on-year, with earnings somewhere in the middle of Apple’s guidance.
But alongside those metrics, analysts will be paying close attention to lower-profile numbers, alongside Apple’s commentary, to see what clues it holds for the future …
Business Insider cited a couple of analysts pointing to the increasingly important Services business.
“Services is an increasingly important piece of the AAPL story and a major driver of gross margins,” RBC analyst Amit Daryanani wrote in a recent note. “The segment currently accounts for ~15% of revenues and is on track to become a ~$50B business by 2020.”
Morgan Stanley’s Katy Huberty thinks Services may have grown as much as 32% year-on-year, a number significantly higher than the consensus.
On China, supply chain rumors seem to point to slowing growth, with analysts waiting to find out whether Apple really is having as much trouble from flagship Android smartphones as those reports suggest.
But one number that may not reveal too much is Apple’s guidance for the September quarter. Because it only includes around a week of new iPhone sales, and because the LCD model is rumored to have been delayed into October, forecast revenue may not be the best indicator of Apple’s expectations from the 2018 iPhone line-up.
“While all eyes will be on Apple’s will FQ4 guidance, we note that historically, revenue guidance for FY Q4 has *not* been a helpful predictor of the strength of the forthcoming cycle,” Bernstein analyst Toni Sacconaghi wrote.
Some of the things analysts would like to hear more about from Apple include …
There has been long-standing speculation about Apple making some kind of smart glasses product, but some analysts think this isn’t key.
“In our opinion, revenue contribution can be significant even without Apple introducing any dedicated AR hardware,” Bank of America Merrill Lynch analyst Wamsi Mohan wrote in a note. “Specifically, we estimate that AR can add $1 billion revenue by end of fiscal 2020 from App Store downloads alone.”
As well as a core value for Apple, the steps it takes to protect customer data are believed to have increasing financial value in light of the Facebook scandal and the media attention that has generated.
So some analysts, like D.A. Davidston analyst Tom Forte, are looking for “comments by management on the importance of data privacy and its efforts to address that in the updated versions of its operating systems.”
US trade war
Cook’s attempts to dissuade the Trump administration from starting a trade war with China have not been notably successful, and analysts will want to hear Apple’s take on the likely impact, especially on margins or product prices.
“If there were any incremental tariffs invoked, we believe Apple would pass that cost to consumers and our view is any price increase is not a positive for demand,” Citi’s Suva wrote.
Siri is widely considered to be the dumbest of the main intelligent assistants, in significant part due to Apple’s strong stance on privacy, minimizing its use of customer data. But does Apple have any plans to play catch-up?
“While we still see Apple playing catch up with Amazon’s Alexa and Google’s digital assistant, we are encouraged by the April 2018 addition of John Giannandrea (Google’s former chief of search and AI) to bolster Siri,” Forte, the Davidson analyst, wrote.
iPhone replacement rates
Will Apple reveal any numbers on iPhone upgrade cycles? The average time consumers keep an iPhone is now some 2.5 years, with some speculating that it could climb even higher.
We’ll of course bring you full coverage of both the numbers and the earnings call tomorrow.