Apple is gearing up to announce its Q2 FY’24 results, with expectations of a mixed bag for the tech giant. The quarter is anticipated to showcase sluggish demand for Apple’s iPhones, with earnings projected at $1.52 per share, slightly above consensus estimates. Revenue is expected to hit around $90 billion, a 5% dip from the previous year.
One of the key challenges for Apple lies in China, a crucial market for the company. Reports indicate a 24% drop in iPhone sales in China during the first six weeks of 2024, while the overall Chinese smartphone market saw a 7% decline. To combat this, Apple has resorted to discounts to boost sales and compete with rivals like Huawei, which has been gaining traction in the high-end segment.
Despite the China setback, Apple’s Mac business is poised for a rebound after a tough 2023. Shipments of Apple’s Mac devices surged by 14.6% to 4.8 million units, outpacing the broader PC market’s growth of 1.5% during the same period. Additionally, Apple’s digital services segment is expected to perform well, driven by strong AppStore sales and increased adoption of subscription services. Service sales in Q1 FY’24 grew by 11.3% to $23.1 billion.
While Apple has witnessed an uptick in gross margins in recent years due to a favorable product mix and cost efficiencies, there are concerns over potential margin pressures amid softening iPhone demand and higher costs associated with the upcoming iPhone 15 models.
Apple’s stock (AAPL) has seen notable fluctuations, rising by 25% from $130 in early January 2021 to approximately $165. However, the stock’s performance has been volatile, with returns of 35% in 2021, -26% in 2022, and 49% in 2023. Comparatively, the S&P 500 posted returns of 27% in 2021, -19% in 2022, and 24% in 2023, indicating Apple’s underperformance against the index in 2022.
Beating the S&P 500 consistently has been a challenge for many tech stocks, including heavyweights like MSFT, NVDA, and AVGO. Apple’s upcoming earnings report will shed light on how the company navigates these challenges and its outlook for the future.
