AAPL Q2 earnings are set to be announced tomorrow, and the company had already warned that we should expect a year-on-year revenue drop of around $5B.
Analysts expect the same thing, and the outlook for Q3 isn’t expected to be any better, so investors will be listening carefully to any more clues Apple gives about what to expect further ahead …
AAPL Q2 earnings will be a tough compare
Apple’s financial year begins in October, so its fiscal Q2 comprises calendar year Q1 – January to March.
The pandemic feels like a long time ago now, but it still needs to be taken into account when making year-on-year comparisons. Apple doesn’t give specific guidance these days, but after announcing Q1 earnings back in February, CFO Luca Maestri was careful to temper expectations for Q2.
As a reminder, in the December quarter a year ago, we faced significant supply constraints on the iPhone 14 Pro and 14 Pro Max due to COVID-19 factory shutdowns. And in the March quarter a year ago, we were able to replenish channel inventory and fulfill significant pent-up demand from the constraints. We estimate that this impact added close to $5 billion to the March quarter’s total revenue last year. When we remove this impact from last year’s revenue, we expect both our March quarter total company revenue and iPhone revenue to be similar to a year ago.
In other words, the $94.8B earnings recorded in the same quarter last year were artificially inflated to the tune of $5B, so we should probably expect this year’s revenue to be closer to $90B.
Analysts also expect $90B revenue
Analyst expectations are not always in line with clues given by Apple, but in this case they are forecasting the same $90B. A Yahoo roundup shows that the average analyst estimate is $90.01B. That would represent a drop of 5.1% year-on-year.
The hit to earnings per share (EPS) is expected to be smaller, in part thanks to continued Apple share buybacks reducing the total number of shares in circulation. Last year’s EPS was $1.52, and analysts expect it to be $1.50 this year.
Optimism around the future
Analysts are optimistic about Apple’s longer-term future. The average target price for AAPL stock is $198.90, significantly higher than the current $170.33.
This is expected to be the year when Apple’s move into generative AI transforms the capabilities of Siri, with the company reportedly viewing iOS 18 as one of its biggest and most exciting updates. Analysts and investors will be listening carefully for any further clues the company provides about what to expect.
One thing we probably won’t hear much about is Vision Pro. While sales will be reflected within the overall Wearables category, Apple is extremely unlikely to get into any specifics. The move is a long-term bet by the company, and we can expect some very general comments about a positive start.
We’ll of course be bringing you the numbers as soon as they are announced tomorrow.
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