By Nividita Balu and Akash Sriram
(Reuters) – Apple is expected to report its first quarterly revenue decline in nearly four years after strict COVID-19 restrictions in China hit the economy and sparked protests over iPhone production at its biggest supplier Foxconn. stopped, to report.
Investors are looking for details on how Chief Executive Officer Tim Cook is trying to bolster demand in a weak economy that has prompted widespread layoffs in the tech industry, a move Apple has so far avoided thanks to frugal hiring during the pandemic. .
As supply chain challenges normalize, we now believe Apple has entered a period of slower demand due to macro factors, Cowen analyst Krish Sankar said, adding that he expects 2% fewer iPhone units to be sold in 2023.
The world’s largest publicly traded company is expected to report Thursday that iPhone sales fell about 5 percent in the key holiday quarter, according to Refinitiv. The last time iPhone sales declined was in August-October 2020, a few months after the Covid-19 pandemic.
Graphic: Apple iPhone revenue drops for first time since pandemic Apple iPhone revenue drops for first time since pandemic (https://www.reuters.com/graphics/APPLE-RESULTS/xmvjkrkgxpr/chart .png)
UBS analysts expect iPhone sales to do better in the United States than in China and Europe, as economies are reeling from the impact of COVID-19 and the Russia-Ukraine war.
BofA analyst Vamsi Mohan said some iPhone demand is likely to carry over into the current quarter after supply constraints in the first quarter, and some demand will be dampened by product unavailability during the holiday period.
The services business, a key growth engine for the company and home of Apple’s music and video streaming services, is set to post its slowest revenue growth for the holiday quarter — another fallout from consumers curbing spending.
Graphics: Apple’s revenue is down for the first time in nearly 4 years Apple’s revenue is down for the first time in nearly 4 years. png)
Background
The disruption at the world’s largest iPhone factory in Zhengzhou, China, prompted a rare warning from Apple in November to limit stocks of its higher-end iPhone 14 models during what is normally its biggest sales quarter due to product launches and holidays.
Greater China, including Hong Kong, is key to Apple’s fortunes, accounting for nearly a fifth of annual revenue. The Cupertino, Calif.-based tech giant had cut its 2019 total sales forecast due to an economic slowdown in the country following the Sino-US trade war.
However, analysts expect a much faster recovery this time as it restarts factories in China and expands its manufacturing footprint with plants in India.
“Explanation from luxury goods companies suggests China is rebounding quickly, suggesting Mar-qtr Chinese iPhone sales should be better than expected,” analysts at Evercore ISI said in a note.
the basics
** Revenue is estimated to decline 2% in the final quarter of 2022, Apple’s first fiscal quarter.
** iPhone sales likely fell for the first time since 2020, while service business rose 6%.
** Analysts expect net income to decline by 10.4%. Earnings per share $1.94
** Apple shares have fallen about 27% in 2022 and rallied nearly 10% in January.
Wall Street Sensation
** Since October, analysts have lowered some of Apple’s forecasts for the first quarter
The last estimate of the metric was in October
Earnings of $1.94 per $2.13
share
Revenue $127.88 billion $121.20 billion
Gross margin 42.80% 42.95%
iPhone revenue $73.07 billion $68.29 billion
Mac revenue $10.28 billion $9.63 billion
Services $21.95 billion $20.67 billion
Income
Free cash flow $41.50 billion $32.7 billion
(Reporting by Nivedita Balu and Akash Sriram in Bengaluru; Editing by Sayantani Ghosh and Sriraj Kaluvilla)