When the most valuable business in the world, Apple, releases its earnings on Thursday, investors’ main concern will be whether Huawei’s comeback in China will lower its forecasts for the holiday quarter.
The business, which will release its July–September results, is battling an uneven recovery in the second-biggest economy in the world as well as increased competition from Huawei following the Chinese company’s successful early sales of its new Mate 60 Pro series phones.
In the vital outside market, Apple’s (AAPL.O) iPhone 15 lineup has not had a great start. According to Counterpoint, in the first 17 days following release, China sales of the newest series were over 5% lower than those of the iPhone 14.
A lack of new features, constrained consumer spending, and competition from Huawei, according to Bernstein analysts, are likely to result in “muted” sales of the iPhone 15. “Strength of the iPhone 15 cycle is the key question heading into the December quarter,” they said.
Huawei sold 1.6 million Mate 60 Pro smartphones in six weeks, and brokerages like Jefferies have predicted that the company will regain a significant portion of the market share that it lost to Apple in the years that followed the U.S. sanctions that severely damaged its operations in 2019.
Apple shares fell by about 14% in the three months leading up to October 31st, compared to the tech-heavy Nasdaq’s (.IXIC) 11% loss during the same period. A broader sell-off in tech equities compounded these anxieties due to rising interest rates.
Yet, there are indications that China’s economy is improving. According to data released last month, the economy expanded in the third quarter at a faster-than-expected rate of 4.9%, but it was still less than the 6.3% increase in the second quarter. September’s gains in consumption and industrial activity were also unexpected.
Apple’s fiscal fourth quarter runs from July to September. The firm is anticipated to announce a percentage target for sales growth for its fiscal first quarter, which encompasses the holiday shopping season, which runs from October to December.
LSEG data indicates that Wall Street analysts anticipate a 6% increase in iPhone sales for the October–December quarter. That is much less than previous highs; in the last four years, the average holiday quarter sales increase for the device has been 9.2%, except for the holiday season quarter in 2022, when COVID-19 stopped manufacturing high-end iPhones.
Though the expected 2.8% growth for the three months ended in September was the highest increase in iPhone sales since the year’s beginning, the fiscal first-quarter predictions point to an improvement.
It is anticipated that overall revenue will decrease by over 1%, primarily because of the persistent decline in iPad and Mac sales, which are predicted to drop by 15% and 25%, respectively.
Apple earlier this week announced three new CPUs as well as new MacBook Pro and iMac PCs. The computers targeted at business users were released when the PC industry began recovering from a downturn that lasted more than two years.
According to research company IDC, the drop in worldwide PC sales declined for a third consecutive quarter from July to September, indicating that the industry has bottomed out.
During this time, the worldwide smartphone market shrank by 8%, claims Counterpoint.
The company’s services division, expected to increase by 11.3%, will probably be a shining star. Now making up about a quarter of Apple’s total sales, the segment has frequently surpassed the company’s hardware business growth in recent years.