Apple Inc AAPL shares moved higher ahead of its fiscal-fourth-quarter earnings report due after the closing bell, with investors likely focused on the tech giant's outlook for holiday sales of its signature iPhone amid suggestions of muted demand.
Apple is expected to post its fourth consecutive quarterly revenue decline after the close of trading. Analysts are looking for an overall sales tally of $89.284 billion, with stronger high-margin services sales powering a 7.7% increase in its bottom line, which is forecast to come in at $1.39 per share.
Key to the update, however, will be Apple's holiday-quarter outlook for sales of the iPhone 15, which launched in late September and thus will have only a minimal impact on the group's fiscal-fourth-quarter sales.
Analysts see September-quarter iPhone revenue rising 2.8% to $43.81 billion, before accelerating to around $69.76 billion over the three months ending in December.
Softer-than-expected updates from the three major U.S. wireless carriers, however, suggest early takeup of the new iPhone model remains muted.
AT&T T, Verizon VZ and T-Mobile US TMUS all reported year-on-year declines in new postpaid subscriber additions for the September quarter. This could limit offers to existing customers looking to upgrade as part of a broader effort to protect crucial free cash flows.
Sales in China may also be affected by reports that Beijing has banned the use of iPhones by government employees and state-backed enterprises. That order came just days after the launch of China-based tech group Huawei's new Mate 60 handset.
China-based subsidiaries of Foxconn, the world's biggest assembler of Apple iPhones, are also now reportedly being probed by tax authorities following Founder Terry Gou's decision to run for president in Taiwan.
"The elephant in the room this quarter is clearly China demand around iPhone 15 units, which appears to have slowed the last month after coming out of the gates strong with preorder activity," said Wedbush analyst Dan Ives. He carries an outperform rating with a $300 price target on Apple stock.
"To this point, we believe [Chief Executive Tim] Cook will have a generally positive tone on the call around China iPhone demand for the December quarter despite massively negative Street sentiment building around the Cupertino story," he added.
"In a nutshell, we believe over 100 million iPhones in China alone are in the window of an upgrade opportunity and that remains the golden goose on this cycle for Apple."
Related: Apple iPhone 15 launch day lifts stock, but demand questions remain
On the upside, an improved outlook for chipmaker Qualcomm QCOM, which noted an uptick in new orders from smartphone makers, suggests the global supply glut is starting to ease and demand is set to return over the coming quarters. Qualcomm signed a multiyear deal to supply 5G smartphone chips to Apple in early September.
Investors will also be looking for a boost in Apple sales from the late-October launch of new MacBook computers, powered by newly designed chips.
The new lineup of MacBooks, priced between $1,299 and $2,499, is expected to launch over the coming weeks. Investors hope they'll provide some support for Apple's product sales over the holiday quarter, following a disappointing spring and uncertain demand over the summer months.
Headwinds for the group include the strength of the U.S. dollar, which is up more than 6.4% from July levels against a basket of its global currency peers, making it more expensive for Apple to repatriate profits from its international markets.
Any move by Apple to close the gap on its rivals in the AI technologies race may also pressure cash flows and boost near-term spending plans.
"We believe Apple has a solid foundation of A.I. within its products and services, although it has very little room for incremental capital investment in 2024 while also growing free-cash flow," said KeyBanc Capital Markets analyst Bradon Nispel, who carries a sector-weight rating on the stock.
"We believe an A.I.-driven capital spending cycle is therefore negative, and likely would result in free-cash flow declining in FY24."
Apple shares at last check were 1.9% higher in late Thursday trading to change hands at $177.26, a move that nudges the stock into a 5% gain for the past six months.
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