Apple is expected to post its first revenue decline since 2019 this week

31st January, 2023 at 10:04 am by Flynn
Image credit: Apple Inc.

Apple is set to report its first year-over-year revenue decline since the March quarter of 2019 when it releases its earnings on Thursday. The smartphone giant is expected to report revenue of $121.19 billion and earnings per share of $1.94, according to Refinitiv consensus estimates. iPhone revenue is estimated to come in at $68.29 billion, iPad revenue at $7.76 billion, Mac revenue at $9.63 billion, other products revenue at $15.26 billion, and services revenue at $20.67 billion.

The company's financials have been impacted by a series of factors, including production issues that arose when its primary assembly facility in China was shut down for several weeks during Covid lockdowns. This led to a shortage of high-end iPhones and wait times of 34 days in the US and 36 days in China. The pandemic has also caused a slump in both the smartphone and PC markets, with the former seeing an 18% decline in shipments and the latter a 28% decline, according to IDC. Despite these headwinds, many investors believe that Apple is outperforming its competitors, with the company's underlying drivers, such as its growing installed base and spend per user, still intact. Additionally, the strength and stability of the company's ecosystem remain undervalued, according to Morgan Stanley analyst Erik Woodring.

Apple has not provided guidance since 2020 due to uncertainty caused by the pandemic. However, analysts are expecting $98 billion in sales in the March quarter, which would represent slight year-over-year growth. While the company's March quarter revenue is expected to decline at a less-than-seasonal rate due to the pushout of iPhone demand from the December quarter, the consumer electronics spending backdrop remains challenging, with products such as wearables facing continued demand headwinds, according to Woodring.

If consumer confidence erodes due to higher interest rates and shrinking savings, it could suggest that the company's March quarter will be slow. Investors will also be paying close attention to Apple's services business, which has been growing strongly in recent years and is expected to come in at $20.67 billion in the December quarter, representing a 5.9% growth rate. Finally, analysts will be watching to see if the strong dollar continues to hurt Apple, given that much of its sales are overseas, with the company previously stating that the strong dollar would be a 10 percentage point drag on sales growth.

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