Brace yourself for Apple’s next ugly earnings call

By

Apple earnings
Apple's Q2 earnings are expected to be a bit of a downer.
Photo: Ste Smith/Cult of Mac

Wall Street is anxiously awaiting Apple’s earnings report for the second quarter of 2019 that will be delivered on Tuesday, April 30. Apple’s stock value has risen about 30% this year even though iPhone sales are slowing.

Most analysts predict that nearly all of Apple’s numbers will be down compared to the same quarter last year, but there are few bright spots that could cause the company’s stock price to surge. After looking at the analysts’ numbers, we’ve found a couple of key areas to watch for.

Apple revenue down YoY?

Three of the four major surveys that average analysts’ expectations show that Wall Street thinks revenue will come in around $57 billion. That would be a 5.8% drop from the $61.1 billion Apple brought in during Q2 2018.

iPhone sales continue to slip

Apple busted out a number of discounts in Q1 2019 to help sagging sales. Most of those promotional discounts in China and Japan were extended past January, which may help boost sales in Q2. Apple does not release iPhone unit sales numbers anymore, but analysts can infer roughly how many units the company moved based on revenue figures.

The Zacks Consensus Estimate for iPhone sales in Q2 2019 is set at $31.22 billion. That would be an 18% decline from the year-ago quarter. China will likely take most of the blame for low iPhones sales, since Apple faced a hard time making a serious impact on the market the last few quarters.

Apple services continue to boom

Apple is in the process of directing investors’ attention away from iPhone sales and China, and toward its booming services business. We got a glimpse of Apple’s big push for services at its big “Show time” media event in March. An upcoming gaming service called Apple News+, Apple Arcade and an upgraded Apple TV+ streaming service will add to the company’s already impressive lineup of services like Apple Music, iCloud, Apple Pay and iTunes.

One analyst thinks the services division could be worth more than $400 billion if it were a standalone company. There’s still a lot of work to be done in order to make that happen, but last quarter will likely show another strong push toward that mark. The analyst consensus is that services revenues will come in at $11.16 billion, representing 21% growth from last year’s Q2.

Q3 2019 guidance

While investors will certainly be eager to hear about how Apple’s Q2 went, the company’s guidance for Q3 will probably be the biggest focus of the earnings call. Even though services are performing great, there’s some doom and gloom that iPhone sales might never surge again. They’re certainly not expected to start booming in the next quarter, which is traditionally quiet before the big holiday quarter. That’s also when Apple will release its new iPhone models.

Analysts predict that revenue guidance for Q3 2019 will come in between $51 billion and $54 billion. The high end of that would put revenue up by 1% to 2%. Apple hasn’t seen revenues go up YoY for the first two quarters of 2019. If Apple’s guidance comes in below that, it would be a discouraging sign that even services can’t make up for the iPhone’s slumping sales.

Apple’s Q2 2019 earnings report will be published at 1:30 p.m. Pacific on April 30. Tim Cook and Luca Maestri will have their usual call with investors at 2 p.m. Pacific. And, as usual, Cult of Mac will be keeping tabs on all the details. Come back and see if Apple’s Q2 was a boom or bust.