Apples plan to add generative AI to its iPhones and revive sagging sales in the crucial Chinese market will be in focus on Thursday, when the tech giant is expected to report its biggest quarterly revenue decline in more than a year.
Long considered a must-own stock on Wall Street, Apple shares have underperformed other Big Tech companies in recent months, falling more than 10% this year as fears mount about its slow roll-out of artificial intelligence services and as a resurgent Huawei takes market share in China.
Analysts on average see iPhone sales, which account for about half of Apples revenue, falling 10.4% in the first three months of 2024, according to LSEG. That drop would be the steepest in more than three years.
The year-ago iPhone revenue that the 10.4% iPhone sales drop is measured against was unusually high as Apple satisfied pent-up demand after the Covid pandemic, company executives previously noted.
At least US$5-billion of the $51.3-billion in iPhone sales a year ago was essentially catching up from disruptions in the December 2022 quarter when Covid lockdowns in China hampered iPhone production, executives said.
Even with that factored in, Wall Street expects a slight decline in iPhone sales, and analysts estimate Apples total revenue declined 5% in its fiscal second quarter ended in March. That would be Apples biggest revenue decline since the December 2022 quarter, when revenue fell 5.5%.
Apple earlier this year lost the crown of the worlds most valuable company to Microsoft. Its market value stands at $2.68-trillion after the share price declined 11.2% so far this year.
Weak revenue and falling shares have pressured Apple to spruce up its flagship device after years without major upgrades.
OpenAI, Google talks ' READ: Apple on verge of major football deal with Fifa: reportReplacement cycle tailwinds and incremental generative AI features set up Apple well for a strong iPhone 16 cycle, Bernstein analyst Toni Sacconaghi said this week as he upgraded the companys shares to outperform from market perform.
We believe prevailing weakness in China is more cyclical than structural, and note historically Apples China business has exhibited much higher volatility than Apple overall, given its very feature-sensitive installed base.
Thursdays earnings will also be watched closely for updates on the companys stock buyback plan and the Vision Pro, Apples first major product in years that hit the shelves in February.
After initial enthusiasm, there have been signs that demand slowed for the $3 500 device, with an analyst saying this month that Apple has pulled back its production estimates for the mixed-reality headset.
The rest of the companys hardware business is also reeling from soft demand, with iPads and Mac sales expected to fall 11.4% and 4.3%, respectively, in the March quarter. Apple has signalled it is sharpening its focus on the devices, which have also been hobbled by a lack of major upgrades.
' READ: DRC warns Apple may be using conflict minerals in its productsAt an Apple event this month, a revamped iPad line-up is expected to be unveiled and media reports have said that it plans to update every Mac model with faster, AI-focused M4 processors.
The services business, which includes App Store and subscription services such as Apple TV, is expected to remain a bright spot with revenue growth of 7.7%. Yuvraj Malik in Bengaluru, (c) 2024 Reuters
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