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Apple (AAPL) 4th Quarter Earnings: What to Expect

There’s little doubt that Apple’s (AAPL) latest-generation iPhone 12 — in all of its variants — has excited both consumers and investors. Reports suggests that the initial response on the device, which became officially available Oct. 23, has surpassed demand of prior launches.

Apple will report fourth quarter fiscal 2020 earnings results after the closing bell Thursday. Without question, this quarter will be all about expectations for the iPhone 12. Analysts have lauded the device, describing it as the most significant upgrade super-cycle of the iPhone since the iPhone 6 was launched, particularly given unlike prior models, there are fewer incremental upgrades. Deemed more revolutionary, the the iPhone 12 has struck a chord not only for its 5G capabilities, but also for features such as its world-facing LIDAR sensor which comes on the Pro models.

But will device sales meet expectations? Unlike previous years, early device sales will not be included in this quarter’s earnings results since the launch was delayed due to the pandemic. As such, investors will focus on the company’s guidance for any clues about how the device is performing. According to Apple analyst Ming-Chi Kuo, early estimates, pre-orders for the device have reached between 1.7 million to 2 million devices, crushing last year’s iPhone 11 launch where some 500,000 to 800,000 devices were pre-ordered.

These numbers bode well for Apple’s all-important holiday quarter, especially since Apple has pulled its guidance in the past two quarters citing pandemic-related uncertainties. But will Apple reinstate its guidance? The company is more than just a iPhone shop, however. Apple’s Services business, which now accounts for 22% of all revenue, surged last quarter to $13.2 billion, topping consensus of $13.1 billion. Can these impressive trends continue?

In the three months that ended September, Wall Street expects the Cupertino, Calif.-based tech giant to earn 71 cents per share on revenue of $64.16 billion. This compares to the year-ago quarter when earnings came to 76 cents per share on revenue of $64 billion. For the full year, earnings are expected to rise 9% year over year to $3.24 per share, while full-year revenue of $273.56 billion will rise 5.1% year over year.

As noted, unlike previous Q4 results, the pandemic prevented Apple from selling any of its new iPhones this quarter. Even then, analysts remain broadly positive about the company’s overall Q4 revenue projections. This is even with expected iPhone revenue of $28.8 billion, which represents a dip from $33.36 billion a year ago. Analysts expect Apple to offset the iPhone decline with strong growth in other parts of its business, including iPad and Mac revenue, which are expected to rise 30% and 50%, respectively.

Revenue from iPads and Macs continue to benefit from the rise in both remote work and remote learning caused by the pandemic. Elsewhere, the Street is project a strong showing in the wearables, home and accessories, where estimates suggest revenue to rise about 12% to $7.28 billion. Just as important, Apple’s Services revenue is expected to climb to $14.1 billion from $12.72 billion. Each quarter Apple is seemingly on trial to prove it is more than an iPhone shop. This quarter won’t be any different.

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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