The first quarter of its financial cycle is Apple’s most profitable of the cycle. Not only does it include the holiday period, but it also includes the iPhone release period, which makes it doubly important.
But with iPhone sales going soggy, and iPad sales not what they used to be, Apple is under pressure.
Here are five questions to keep in mind during next week’s earnings report and conference call.
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#1: Will the iPhone return to growth?
The iPhone is the engine that powers the Apple machine, and as such all eyes will be on how well this single product line is doing above all else.
Q1 2016 saw iPhone sales of 74.8 million, which while strong, weren’t as strong as had been hoped for. As far as Apple’s guidance for this quarter as issued back at the end of October, Apple is hedging its bets, with the revenue guidance of $76 billion to $78 billion allowing for either a small fall or gain in iPhone sales for the period.
If it’s been a strong quarter, driven by high demand for the iPhone 7 and the iPhone SE (the SE only represents a few million units, but it could still make the difference between growth and decline), then sales could be as high as 80 million units, but weak sales could see the numbers fall as low as 74 million. Yes, for most companies worrying about sales of “only” 74 million would be a champagne problem, but Apple is under pressure to boost sales of the iPhone back into growth territory, and anything over 75 million units would do that.
A benefit to Apple for Q1 2017 is that the quarter is a little over a week longer than Q1 2016, and this makes direct comparisons a bit harder, and could make it a little easier for Apple to push the iPhone into growth.
#2: Will iPad sales show signs of an upgrade cycle kicking into motion?
iOS 10 was a big turning point in the iPad lifecycle because for the first time it rendered a whole swathe of iPads — around 60 million based on estimates — obsolete. A question of Apple watcher’s minds is this: Will people spend money to upgrade their old hardware?
But the long-term fate of the iPad doesn’t solely rest with upgraders. Enterprise usage has also been increasing, and while consumer interest in the iPad may be fickle, enterprise may help soften the blow.
But everything is up in the air, especially when you throw into the equation that some schools are turning their backs on iPads in favor of Chromebooks.
It could be a very decisive quarter for the iPad.
#3: How are ASPs (Average Selling Prices) doing?
It’s easy to focus on units sold alone, but it’s also important to keep an eye on ASPs. This offers an easy way to see if lower-priced iPhones and iPads are cannibalizing sales of higher-priced units.
#4: Will Mac sales be hit as hard as PCs?
While Mac sales have their ups and downs, for the past three years we’ve seen them float around the lower 4 million and upper 5 million mark.
Now, given that PC sales are a mess, it’s easy to assume that this will be true for Macs, but the fact is that Mac sales appear to be resistant to the issues affecting their Windows counterparts.
With a MacBook Pro update landing a few days before the Q1 2017 quarter started, this could be a source of good news for Apple.
#5: How is the Apple Watch doing?
While we don’t get numbers directly from Apple, by keeping an eye on the “Other Products” category of the summary data (which includes sales of Apple TV, Apple Watch, Beats products, iPod, and Apple-branded and third-party accessories) we get a barometer of sorts.
There are also other pointers to it being a good quarter for the Apple Watch:
- It was a holiday quarter
- Target was selling the first-generation Apple Watch for $199
- The Nike+ version shakes up what was before quite a reserved lineup
- The bottom falling out of the wearables market for other players (Fitbit earnings will be interesting)
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