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Can Continued Services Growth Aid Apple's (AAPL) Q2 Earnings?

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Apple’s (AAPL - Free Report) second-quarter fiscal 2022 results, to be reported on Apr 28, are expected to have benefited from continued momentum in the Services business.

The segment, which includes revenues from the App Store, Apple Music, iCloud, Apple Arcade, Apple TV+, Apple News+ and Apple Card, accounted for 15.7% of sales in first-quarter fiscal 2022.

Apple currently has more than 785 million paid subscribers across its Services portfolio. The App Store continues to draw the attention of prominent developers from around the world, helping the company offer appealing new apps that drive App Store traffic, thereby expanding subscriber base.

Apple expects Services revenue growth to be in strong double digits. However, the growth rate is expected to be lower than in the December quarter.

Apple Inc. Revenue (TTM)

Apple Inc. Revenue (TTM)

Apple Inc. revenue-ttm | Apple Inc. Quote


Click here to know how Apple’s overall second-quarter results are likely to be.

Apple’s Non-iPhone Portfolio to Boost Revenues

Apple’s non-iPhone portfolio, which comprises Mac, iPad and Wearables, is expected to have aided its top-line growth in the fiscal second quarter.

This Zacks Rank #3 (Hold) company’s Mac sales are expected to have remained strong. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Markedly, per Gartner’s latest report, 77.9 million PCs were shipped during the first quarter of 2022, down 6.8% from the year-ago period. Lenovo (LNVGY - Free Report) and HP (HPQ - Free Report) witnessed 11.1% and 17.8% declines, respectively.

Overall, Lenovo remained the top vendor with a market share of 23.8%. However, its market share shrunk 120 basis points. HP holds the second spot with a market share of 20.4% in worldwide PC shipments.

However, Dell Technologies (DELL - Free Report) , Apple and ASUS were the PC manufacturers that registered year-over-year growth.

Dell’s market share increased from 15.6% in the year-ago quarter to 17.7% in first-quarter 2022.

Apple’s market share, on the other hand, grew from 7.7% to 9%. The company is expected to have benefited from the introduction of Mac Studio, an M1-based premium desktop model, in the to-be-reported quarter.

Apple’s all-new Mac Studio is a high-performance desktop system with a reimagined compact design consuming up to 1,000 kilowatt-hours less energy than that of a high-end PC desktop over the course of 12 months. The newly released desktop helps clients render massive 3D environments and playback 18 streams of ProRes video with the M1 Ultra chip. It remains quiet even under the heaviest workloads.

Mac Studio features unified memory of up to 64 GB on M1 Max systems and up to 128 GB on M1 Ultra systems.

The Zacks Consensus Estimate for Mac revenues stands at $9.187 billion, implying 0.9% growth from the figure reported in the year-ago quarter.

Apple is also riding on its strong market share in the wearables space. The company’s endeavor to add healthcare features to its smartwatch has been a game changer for the device that faces significant competition from the likes of Google, Xiaomi, Samsung Electronics and Huawei Technologies.

However, iPad sales are expected to decline in the to-be-reported quarter. The Zacks Consensus Estimate for the same stands at $7.035 billion, suggesting 9.9% decline from the figure reported in the year-ago quarter.

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