Apple Earnings Preview: All Eyes on Next Quarter's Guidance Ahead of New iPhones, Apple Card, and Apple TV+
Apple is set to report its earnings results for the third quarter of its 2019 fiscal year at 1:30 p.m. Pacific Time today.
The quarter began March 31, 2019 and ran through June 29, 2019, according to Apple's fiscal year accounting calendar.
Apple's guidance for the quarter from April 30:
- revenue: $52.5 billion-$54.5 billion
- gross margin: 37-38 percent
- op. ex.: $8.7 billion-$8.8 billion
- other income/expense: $250 million
- tax rate: approximately 16.5 percent
Apple's guidance suggests it will report its second-best third quarter ever by revenue:
- 2014: $37.4 billion
- 2015: $49.6 billion
- 2016: $42.4 billion
- 2017: $45.4 billion
- 2018: $53.3 billion
- 2019: $52.5+ billion
Wall Street's revenue estimates average out to $53.39 billion, slightly below the midpoint of Apple's guidance, based on 33 analysts tracked by Yahoo Finance. Earnings per share is estimated to be $2.10.
Key Facts and What to Look For
- iPhone revenue of $26.5 billion, according to a Bloomberg average.
- Product launches in the third quarter: 13-inch and 15-inch MacBook Pro refresh on May 21 (excluding entry-level 13-inch model, which was updated in July) and seventh-generation iPod touch on May 28.
- Apple's guidance for its fourth fiscal quarter, which typically encompasses the launch of at least some new iPhone models in mid-to-late September. Wall Street expects fourth quarter revenue to be $61 billion, down around three percent year-over-year, according to Bloomberg.
- Apple's revenue in Greater China and any potential commentary regarding the U.S.-China trade war. Apple reported revenue of $9.5 billion in Greater China in the year-ago quarter, which was 19 percent growth.
- Apple's services revenue reached an all-time high of $11.45 billion in the second quarter, and investors will be looking for continued growth from the launch of Apple News+ six days before the third quarter began. The upcoming launches of the Apple Card later this summer and Apple Arcade and Apple TV+ in the fall could also be at least partially baked into Apple's fourth quarter guidance depending on exact launch dates.
- Apple's "Wearables, Home, and Accessories" category also remains key. Last quarter, Apple said the category was the size of a Fortune 200 company, buoyed by the success of the Apple Watch and AirPods.
Apple's CEO Tim Cook and CFO Luca Maestri will discuss the company's earnings results on a conference call at 2:00 p.m. Pacific Time today. MacRumors will highlight key points from the one-hour call as it occurs live.
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Top Rated Comments
You think they will earn under $52.5B in sales and less than $2.10/share?
I expect record services revenue, solid top line revenue within their guidance, and more than $2.10/share.
But they don't depend on new (and increasing) iPhone sales. They depend on iPhone ownership and use. iPhone install base continues to grow, and that's what matters more when it comes to those products and services. (Though they could grow for quite a while even if iPhone install base stopped growing.)
Apple doesn't have a problem with losing iPhone customers or users. The issue is elongating purchase cycles. That issue has been anticipated - even in effect - for quite some time. And Apple has been taking steps - fairly effective ones - to deal with that anticipated reality. The reality is that iPhones remain effective for most people's use needs for a long time. There's less need to upgrade. And Apple has embraced that reality. It, e.g., offers updates for iPhones which are many years old. Rather than that reality being a negative, it's a positive - and Apple has worked on turning it into a positive. iPhones represent even better values because, more often, newly purchased iPhones are going to be used for 3 or 4 or 5 years.
iPhone unit sales peaked in CY 2015 and they've dropped every year since then. That isn't something new and it isn't, for the most part, because of things which Apple has done wrong. It's the reality of a product market that is maturing (or has matured) in many important geographic markets. And it's because iPhones have gotten better and remain useful (relative to what's new) longer.
As for why net income fell: Gross margin was nearly flat - $20.2 billion as compared to $20.4 billion in the year-ago quarter. It may even have been up if we back out the one-time item (from the year-ago quarter) relating to the resolution of lawsuits. So profit didn't fall because Apple made less money selling products and services. It fell mostly for other reasons. For instance, R&D spending increased by 15%, non-operating income fell by 45%, and Apple's effective income tax rate increased from 13.3% to 15.7%.