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Apple (AAPL) to Report Q1 Earnings: What's in the Offing?

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Apple (AAPL - Free Report) is set to report first-quarter fiscal 2021 results on Jan 27.

The company did not provide any revenue guidance, given the uncertainty around the impact of the coronavirus pandemic. However, the company expects fiscal first-quarter iPhone revenues to grow despite late shipping of the latest iPhones.

Moreover, Apple expects all other products, in total, to grow in the double-digit range. Services are also expected to continue its double-digit growth rate in the to-be-reported quarter.

The Zacks Consensus Estimate for revenues is currently pegged at $102.61 billion, indicating growth of 11.8% from the year-ago quarter’s reported figure.

Moreover, the consensus mark for earnings is currently pegged at $1.39 per share, unchanged over the past 30 days and indicating 11.2% growth from the figure reported in the year-ago quarter.

Apple Inc. Price and EPS Surprise


Apple Inc. Price and EPS Surprise

Apple Inc. price-eps-surprise | Apple Inc. Quote


Notably, the company’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 16.2%.

Let’s see how things are shaping up for the upcoming announcement.

Strong iPhone 12 Demand to Drive Y/Y Sales Growth

Apple’s fortunes are heavily reliant on the  iPhone, which is by far its biggest revenue contributor. The device accounted for 40.9% of net sales in the last-reported quarter, wherein sales declined 20.7% year over year to $26.44 billion.

Strong demand for 5G-enabled iPhone 12 is expected to have driven top-line growth in the to-be-reported quarter despite late shipment. Solid user adoption of high-end Pro and Pro Max devices is anticipated to have aided gross margin expansion.

Although Apple is late in bringing 5G to its flagship iPhone devices, improved availability of 5G network in the United States from all major carriers and rapid 5G deployment in China are expected to have been major growth drivers.

The Zacks Consensus Estimate for iPhone sales currently stands at $59.91 billion, indicating 7.1% growth from the year-ago quarter’s reported figure.

Services Momentum to Boost Top-Line Growth

The Services segment became the new cash cow for Apple, which currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The increasing popularity of the App Store and an expanding subscriber base of Apple Music, Apple Podcasts and Arcade gaming are likely to have benefited the top line in first-quarter fiscal 2021.

Apple currently has more than 585 million paid subscribers across its Services portfolio. App Store continues to grab attention of prominent developers from around the world, helping the company offer exciting new apps that drive traffic.

Coronavirus-led social-distancing norms are expected to have further boosted App Store sales in the to-be-reported quarter.

Notably, App Store accounted for 68.4% of total sales, which came in at $276.6 million, up 35.2% year over year on Christmas Day 2020, compared with Alphabet (GOOGL - Free Report) -owned Google’s Play Store sales of $129 million, up 33% year over year and comprising 32% of the total, per Sensor Tower report.

Additionally, Apple’s endeavor to broaden its ecosystem through partnerships with Amazon (AMZN - Free Report) and Google is a positive for the Services segment.

Apple Music has been benefiting from solid content, with more than 70 million songs. Further, Apple Music’s availability on Amazon Echo devices and Fire TV, as well as on Google Nest Audio and Nest Mini, is helping it expand its footprint and compete better with Spotify (SPOT - Free Report) and YouTube Music.

Moreover, Apple Pay is expected to have witnessed surge in activity as quarantined customers used digital and contactless tools to handle their financial activities. Apple claims that more than 90% of stores in the United States, 85% of stores in the United Kingdom and 99% of stores in Australia accept Apple Pay.

Additionally, Apple rolled out Fitness+ subscription services built for Apple Watch on Dec 14. Fitness+ tracks health and workout-related data from Apple Watch that users can view on their iPhones, iPads or Apple TVs. This is expected to have further driven growth in the to-be-reported quarter.

The Zacks Consensus Estimate for Services currently stands at $14.78 billion, indicating 16.2% growth from the year-ago quarter’s reported figure.


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