Wednesday, December 6, 2023

Apple (AAPL) Q4 2023 Earnings: What to Expect

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Since mid June, Apple (AAPL) shares have not performed as well as investors would have liked. Its shares have fallen more than 14% over the past three months, including a 3% decline in the past thirty days. Apple has fallen victim to the market’s bearishness towards mega-cap tech amid rising interest rates.
Despite that, the tech giant is doing a solid job navigating through the various headwinds that have impacted its business, namely rising inflation, hurdles in China, and a potential recession. As such, ahead of its fourth quarter fiscal 2023 earnings results which are due after the closing bell Thursday, there are still tons of reasons to stay bullish on the company’s growth potential.

The sales prospects for the new iPhone 15, which was launched in September, is one of these reasons. According to Wedbush Securities, iPhone 15 unit sales are significantly stronger compared to the iPhone 14, with the iPhone 15 Pro Max standing out. Estimates suggests iPhone 15 sales will surpass iPhone 14 sales by 10 to 12%. But it’s not just about the iPhones: Apple’s Services segment generated $21.2 billion in Q3, up 8.2% year over year.
Service revenue should continue to generate higher-digit revenue growth this quarter and well into 2024 which will help offset the macro weakness impacting iPhone sales. Notably, its management had already noted that they expect the “September quarter Y/Y revenue performance to be similar to the June quarter.” The market will look for details about the state the iPhone, along with more clues about its long-awaited mixed reality headset, dubbed Vision Pro, which was unveiled at the company’s Worldwide Developers Conference.
In the three months that ended September, Wall Street expect the Cupertino, Calif.-based tech giant to earn $1.31 per share on revenue of $84.18 billion. This compares to the year-ago quarter when earnings came to $1.29 per share on revenue of $90.15 billion. For the full year, earnings are expected to decline 6.38% year over year to $5.72 per share, while full-year revenue of $360.83 billion will decline 8.5% year over year.
The projected year-over-year declines for the revenue and profits for the fiscal year are part of the reasons Apple stock has struggled. While Apple stock is still up close to 30% year to date, besting the 7% rise in the S&P 500 index, investors are less excited given the stock was up close to 50% year to date at one point, pushing Apple past a $3 trillion valuation. But Apple can still regain that benchmark if it can answer a few key questions on Thursday.

First, how many new phones has Apple sold since the launch on September 12, and how will it guide for the holiday quarter? Still, for this quarter, it’s not going to be just about the iPhones. As noted, Apple’s Services revenue, which has hit all-time highs for two quarters in a row, will be a key focus. In the most recent quarter, the Services segment, which includes Apple TV+, iCloud storage and Apple Music, surpassed 1 billion subscribers, helping Apple to beat on both the top and bottom lines.
In Q3, the company reported $1.26 per share on $81.8 billion in revenue, topping estimates of $1.19 per share on revenue of $81.65 billion. iPhone-related revenue were $39.7 billion, while iPad and Services came in at $5.8 billion. Notably, China revenue came in $15.75 billion, rising 7.8% year over year. On Thursday investors will be watching closely to see if Apple can improve on these numbers and whether (or how) inflation might have impacted the company’s guidance for the holiday quarter.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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