What to expect from Apple's Q3 2020 earnings report on July 30
Apple will announce its latest financial results, covering the third fiscal quarter of 2020, later today. With no guidance from Apple on the quarter, all eyes will be on how well Apple has weathered coronavirus.
Tim Cook (left) and Luca Maestri (right)
For the first time in over two decades, Apple did not issue any guidance for its forthcoming Q3 results. Traditionally, it issues such guidance for the next quarter during its call announcing the current ones, but this changed in 2020 and did so entirely because of COVID-19.
Apple's decision to not issue guidance does not mean, though, that analysts haven't tried to predict the figures. On average, analysts tracking Apple sales expect the company to report $51.47 billion in this call. That compares to $58.3 billion in the second fiscal quarter of 2020, although traditionally Apple's third fiscal quarter is the company's weakest time in the year.
For comparison in the third fiscal quarter of 2019, Apple reported revenues of $53.8 billion, slightly more than analysts had predicted. Over half of that revenue came from the iPhone, but Services were increasingly significant.
Following that 2019 quarter, Apple launched more such as Apple Arcade, and Apple TV+, leading to a 2019 Q2 of $11.5 billion. In Q2 2020, Services rose again to $13.3 billion.
Of the many analysts advising investors ahead of the earnings call -- see below for details -- Services are continually seen as a key part of Apple's fortunes. However, Bloomberg has suggested that the growth in this sector may be off to a slower start than anticipated.
While the impact of COVID-19 and Apple's efforts to reopen its Stores will the major factor affecting results overall, some of this is expected to be positive. What had been thought to be a temporary rise in MacBook Pro sales due to people beginning to work from home, has reportedly continued.
This quarter is also the first where there could be an indication of the success of the new iPhone SE. The phone does appear to have been a hit, to the extent that there were shortages. And even though its release fell outside the Q2 earnings period, it was repeatedly mentioned during that call.
The iPhone SE
"I have seen a strong customer response to iPhone SE, which is our most affordable iPhone," said Tim Cook, while answering analysts' questions. "[It] appears that those customers are primarily coming from wanting a smaller form factor with the lates technology, or coming over for it from Android."
It's too soon, however, to see any visible impact from the announcement of Apple Silicon. Apple may well see a slight decline in Mac sales as potential buyers choose instead to wait for Apple Silicon-based models, but given that there is only about a month or so that could be impacted, it will likely be lost in the "noise" of other factors.
These earnings calls are legally required and Apple has certain obligations, but those do not include even speculating about future sales. Analysts are likely to ask anyway, but Apple will not give any details beyond current figures, and even those have omitted sales volumes since late 2018.
"Investors are coming to realize that Apple may not be as dependent on significant iPhone cycles to sustain growth as they once thought," wrote Huberty, "and that the ecosystem Apple has created is differentiated and worthy of a platform valuation multiple."
Huberty expects that Services growth to be 16.7% year on year and result in revenue of $13.4 billion. She sees iPhone representing $24.1 billion, with iPad at $4.9 billion, and Wearables, Home and Accessories to bring $6.1 billion.
According to Munster, the current earnings will be lower because of the various impacts of the coronavirus outbreak. However, he thinks the same issues that will have affected the company at present will also show investors just how well-positioned Apple is for the next many years.
Wearables are expected to continue to grow more profitable in the next years
Apple's managing of its cash reserves, in particular, means that the company will be able to "retain and acquire talent and technologies" in the aftermath of the COVID-19 situation.
In the shorter term, he also expects the 5G upgrade cycle to benefit the company. Then "software services [will continue] to penetrate new industries," while Apple TV+ original programming will increase Apple's "share of media consumption."
That includes $21 billion from the iPhone, and $13.2 billion from services. Sankar thinks Apple's iPhone sales will be down 12% from the same quarter last year. However, he also predicts that taken as a whole, 2021's results will show a 20% increase over 2020's, specifically because of the "iPhone 12."
Chatterjee says Apple will report revenue of $49 billion. Of that, he's expecting $16.9 billion from iPhone sales, and $6.3 billion from the iPad. Then Wearables are estimated to account for $6.1 billion, and Services could be $12.9 billion.
"We do not rule out the likelihood of earnings exceeding consensus led by greater than expected offset from WFH benefits; although, we do not expect investors to be surprised as much following the outperformance to lowered expectations in F2Q," he wrote.
Ives's note for investors concentrates more on Apple's future, however, with a particular focus on the forthcoming 5G "iPhone 12." He says Wedbush's sources back up reports that the new phone won't include either a charger or wired EarPods, and consequently Ives expects sales of AirPods to benefit.
He estimates that of the existing iPhone user base, between 60 and 70 million are at the stage where they are likely to upgrade. Ives also thinks that at least one of the "iPhone 12" range will cost under $1,000. He says that "massive" demand for 5G plus this comparatively aggressive pricing will help Apple.
https://appleinsider.com/articles/20/07/28/apple-q3-financial-results-will-impress-iphone-12-super-cycle-coming-says-wedbush
AppleInsider will bring full coverage of the earnings call on Thursday, July 30, starting at 14:00 Pacific (17:00 ET). Between now and then, though, we'll be adding to this piece as details emerge, and guesses are made.
Tim Cook (left) and Luca Maestri (right)
For the first time in over two decades, Apple did not issue any guidance for its forthcoming Q3 results. Traditionally, it issues such guidance for the next quarter during its call announcing the current ones, but this changed in 2020 and did so entirely because of COVID-19.
Apple's decision to not issue guidance does not mean, though, that analysts haven't tried to predict the figures. On average, analysts tracking Apple sales expect the company to report $51.47 billion in this call. That compares to $58.3 billion in the second fiscal quarter of 2020, although traditionally Apple's third fiscal quarter is the company's weakest time in the year.
For comparison in the third fiscal quarter of 2019, Apple reported revenues of $53.8 billion, slightly more than analysts had predicted. Over half of that revenue came from the iPhone, but Services were increasingly significant.
Following that 2019 quarter, Apple launched more such as Apple Arcade, and Apple TV+, leading to a 2019 Q2 of $11.5 billion. In Q2 2020, Services rose again to $13.3 billion.
Of the many analysts advising investors ahead of the earnings call -- see below for details -- Services are continually seen as a key part of Apple's fortunes. However, Bloomberg has suggested that the growth in this sector may be off to a slower start than anticipated.
While the impact of COVID-19 and Apple's efforts to reopen its Stores will the major factor affecting results overall, some of this is expected to be positive. What had been thought to be a temporary rise in MacBook Pro sales due to people beginning to work from home, has reportedly continued.
This quarter is also the first where there could be an indication of the success of the new iPhone SE. The phone does appear to have been a hit, to the extent that there were shortages. And even though its release fell outside the Q2 earnings period, it was repeatedly mentioned during that call.
The iPhone SE
"I have seen a strong customer response to iPhone SE, which is our most affordable iPhone," said Tim Cook, while answering analysts' questions. "[It] appears that those customers are primarily coming from wanting a smaller form factor with the lates technology, or coming over for it from Android."
It's too soon, however, to see any visible impact from the announcement of Apple Silicon. Apple may well see a slight decline in Mac sales as potential buyers choose instead to wait for Apple Silicon-based models, but given that there is only about a month or so that could be impacted, it will likely be lost in the "noise" of other factors.
These earnings calls are legally required and Apple has certain obligations, but those do not include even speculating about future sales. Analysts are likely to ask anyway, but Apple will not give any details beyond current figures, and even those have omitted sales volumes since late 2018.
Morgan Stanley
Analyst Katy Huberty of investment bank Morgan Stanley is expecting that Apple will beat expectations and post Q3 revenues of $55.1 billion. She says that's based on the forthcoming "iPhone 12" 5G launch, continually growing Services, and also what she describes as outperforming product revenues overall."Investors are coming to realize that Apple may not be as dependent on significant iPhone cycles to sustain growth as they once thought," wrote Huberty, "and that the ecosystem Apple has created is differentiated and worthy of a platform valuation multiple."
Huberty expects that Services growth to be 16.7% year on year and result in revenue of $13.4 billion. She sees iPhone representing $24.1 billion, with iPad at $4.9 billion, and Wearables, Home and Accessories to bring $6.1 billion.
Loop Ventures
Loop Ventures analyst Gene Munster is also optimistic about Apple, but more about its long term future than its current results. He expects Apple to report $49.5 billion, below analysts average and significantly below Morgan Stanley's $55.1 billion.According to Munster, the current earnings will be lower because of the various impacts of the coronavirus outbreak. However, he thinks the same issues that will have affected the company at present will also show investors just how well-positioned Apple is for the next many years.
Wearables are expected to continue to grow more profitable in the next years
Apple's managing of its cash reserves, in particular, means that the company will be able to "retain and acquire talent and technologies" in the aftermath of the COVID-19 situation.
In the shorter term, he also expects the 5G upgrade cycle to benefit the company. Then "software services [will continue] to penetrate new industries," while Apple TV+ original programming will increase Apple's "share of media consumption."
Cowen
Investment bank Cowen also believes that Apple is going to report revenues under expectations, but not by as much as Loop Ventures predicts. According to Cowen's Krish Sankar, Apple is set to demonstrate that it is resilient by reporting revenue of $50.18 billion.That includes $21 billion from the iPhone, and $13.2 billion from services. Sankar thinks Apple's iPhone sales will be down 12% from the same quarter last year. However, he also predicts that taken as a whole, 2021's results will show a 20% increase over 2020's, specifically because of the "iPhone 12."
JP Morgan
Investment bank JP Morgan's Samik Chatterjee is another analyst who believes there are positive signs for Apple's longterm future, but he is also expecting the June results to be lower than others are predicting.Chatterjee says Apple will report revenue of $49 billion. Of that, he's expecting $16.9 billion from iPhone sales, and $6.3 billion from the iPad. Then Wearables are estimated to account for $6.1 billion, and Services could be $12.9 billion.
"We do not rule out the likelihood of earnings exceeding consensus led by greater than expected offset from WFH benefits; although, we do not expect investors to be surprised as much following the outperformance to lowered expectations in F2Q," he wrote.
Wedbush
Daniel Ives from investment bank Wedbush is another analyst expecting Apple's results to come in above expectations. He predicts the June quarter revenues will be $52.1 billionIves's note for investors concentrates more on Apple's future, however, with a particular focus on the forthcoming 5G "iPhone 12." He says Wedbush's sources back up reports that the new phone won't include either a charger or wired EarPods, and consequently Ives expects sales of AirPods to benefit.
He estimates that of the existing iPhone user base, between 60 and 70 million are at the stage where they are likely to upgrade. Ives also thinks that at least one of the "iPhone 12" range will cost under $1,000. He says that "massive" demand for 5G plus this comparatively aggressive pricing will help Apple.
https://appleinsider.com/articles/20/07/28/apple-q3-financial-results-will-impress-iphone-12-super-cycle-coming-says-wedbush
AppleInsider will bring full coverage of the earnings call on Thursday, July 30, starting at 14:00 Pacific (17:00 ET). Between now and then, though, we'll be adding to this piece as details emerge, and guesses are made.
Comments
"Well, sure these are great numbers, BUT WHAT ABOUT THE DUCK-BILLED PLATYPUSS! Have any of you Apple sycophants realised that when Apple sells a watch, a platypuss might die on the same day! Coincidence?? I don't think so!"
On top of that, my observations over the last four years have been a faithful reflection of reality.
Would you care to point out anything that I said that that far off the mark?
America still has a economic and virus crisis (both of which are being studiously ignored by leadership), but the rest of the world is nearly back to normal thanks to aggressive application of the sort of common sense America no longer possesses in sufficient quantities. Thus, foreign sales will actually be up year-over-year from last year (again, my opinion), while US sales will probably just be on par (at best) with last year — which could have been worse but for the home-office-refit boom.
I expect the iPhone will have lost some ground generally (only partially made up by the SE) in the US as well, but wearables and services growth will more than make up for that ... just as it contributed significantly to the surprise street-beat last quarter. But of course I could be wrong. In any event, I think Apple’s rise to a $2T company is fairly unstoppable now, barring a partial but serious collapse of the US economy — which I do in fact expect, but not till later in the year.
The only thing that you have gotten right, is that Apple has produced, again, a mid-range model in the SE, and that Apple has increased the number of new models in those four years.
BFD.
You still deny ASP, Margin, and Profit, as being important, "but, but, not to the consumer!" and "units sold!", yet Apple's ability to innovate is based on having the revenue and profits to continue to staff up, and increase R&D, over those same four years. You deny that Apple is in fact its own market, has a superior ecosystem, and that it has little actual competition from Android OS OEM's.
You've been denying all along that the performance advantages of the A Series processor as important to the customer, and yet, the halo feature of the SE, according to reviewers, is that it has the A13 Bionic SoC, same as the iPhone 11 models, so of course, it it superior to all of the so called Android OS competitors in real world performance.
The funniest thing, is that you have been a huge proponent of 5G, berating Apple for being late, and yet, not only has this not hurt Apple, at all, but one of us is likely to have the very latest 5G modem before the other has 5G at all, and so far, odds are that it will be myself, with the iPhone 12 Pro Max, all because I put off purchase of the iPhone 11 so I could gain LIDAR.
Have a nice day!
ASP is irrevelant to consumers. At last, you seem to accept that.
I have never ever said margins and profit are not important. Please quote me. I'd love to see that!
Your view on R&D is distorted from what I actually said, and of course, there lies your biggest problem. Your inability to take in and comprehend what I said. Again if you quote me in this area you will see - probably in the exact same post - that you are distorting what I actually said.
Apple definitely does NOT have a superior ecosystem IMO, nor a superior mobile OS. This latest WWDC saw a whole raft of Android 'features' planned for future release.
I have never denied the pure performance advantage of A series chips. What I have said is that the SoC is not superior. People confuse raw CPU/GPU with an entire system on a chip. So, go ahead and quote me. Let's see what I actually said!
I have stated the obvious on 5G and Apple is behind. That is a fact. The slowdown caused by COVID-19 and geopolitical events was largely unforeseeable. As is what will happen over the coming months. That said, China is pushing ahead with its accelerated 5G plans and 5G phones, as completely expected, are selling in greater and greater numbers. And new services are coming online every day. In 55 days HarmonyOS 2.0 will be revealed for more areas (Harmony already runs on TVs/smart screens and parts of its core are on watches within LiteOS). And the first 5G connected cars are basically already here.
http://www.ecns.cn/m/news/sci-tech/2020-07-13/detail-ifzyahzt5331654.shtml
Those who develop and implement these kinds of solutions first stand a greater chance of gaining a foothold, and in China (to give a good example) solutions are being deployed all over the place (science, education, health, business, manufacturing and of course the CE field) .
I was probably the very first person here to suggest Apple might be in the running for QC's latest 5G modem. It isn't really a suprise option. The possibility existed. Why do you think Apple ceased years of lawsuits worldwide to agree a deal with QC? 5G (its importance being what it is) was very much part of the reasoning in all of that.
Stay healthy!
Both Nokia and Ericsson really have no front facing technology to speak of.
Perhaps more humorous is how you didn't actually quote me on anything I mentioned. You just went straight to the Huawei part which itself was simply a very valid example of what's actually going on now or in the very near future. A simple example. And you didn't even challenge that. If Nokia or Ericsson were offering similar solutions now, I would have referenced them too. AFAIK, they don't.
Didn't read it but I'm sure Huawei is buried somewhere in there.
I've been waiting too fu**ing long for this. I want an AppleTV With motion compatibility. Maybe a new Siri remote with an M-chip and finally "Find My" feature.
We need to keep in mind that nothing Apple reports is going to be easy to understand. This past quarter will reflect more than ever before the nonlinear nature of supply chain, pandemic, customer and business economic insecurity, Apple store closures, Apple online, work-at-home, back-to-school, health insecurity, global trade, global economic aggression. And, this non-linear nature will be even more apparent next quarter.
Before the pandemic and economic aggressions being the modus operandi, we could almost view Apple results as a simple sum of their various parts -- the feedback loops being stable and under control. That is not going to be true now or going forward.
I just want a real freaking remote. Why is it so god damn hard for Apple to make a remote? The design of their input devices really sucks most of the time.