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Will Strong Services Offset Weak iPhone Sales for AAPL's Q1 Earnings?
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Apple’s (AAPL - Free Report) first-quarter fiscal 2025 results, to be reported on Jan. 30, are expected to reflect stiff competition for iPhone in China. However, will continued strong growth in the Services business offset this headwind?
iPhone sales are likely to have suffered from stiff competition in China from Chinese vendors, including Huawei and Xiaomi. A delay in the launch of Apple Intelligence to a major part of Apple’s installed base, including Mainland China, has been a concern.
Although Apple’s business primarily revolves around its flagship iPhone, the Services portfolio has emerged as the company’s new cash cow. For the Services segment, Apple expects a double-digit growth rate similar to fiscal 2024 in the to-be-reported quarter.
The Zacks Consensus Estimate for fiscal first-quarter iPhone net sales is pegged at $69.189 billion, suggesting 0.7% year-over-year decline. The consensus mark for Services is currently pegged at $26.176 billion, suggesting 13.2% growth on a year-over-year basis.
Click here to learn how Apple’s overall fiscal fourth-quarter earnings results are likely to be.
Services Growth to Ride on Apple TV+, Strong Install Base
Apple’s Services business is expected to benefit from increasing users of the App Store, Apple Pay, Apple Arcade and growing viewership of Apple TV+. The growing install base of active devices has been a key catalyst.
Apple had more than 1 billion paid subscribers across its Services portfolio at the end of the fiscal fourth quarter. Paid subscriptions grew double-digits, a trend expected to have continued in the to-be-reported quarter.
Apple to Benefit From Y/Y Growth in Mac Sales
The PC segment climbed in the fourth quarter of calendar 2024. Per IDC’s latest report, 68.9 million PCs were shipped, up 1.8% from the year-ago period. In contrast, Gartner estimates shipment of 64.4 million units, up 1.4% year over year.
In IDC’s list, Apple is the best-performing PC vendor, with Mac shipments increasing a whopping 17.3% year over year. However, Gartner estimates Mac shipments increase 4.6% year over year, trailing only ASUS.
The Zacks Consensus Estimate for fiscal first-quarter Mac net sales is pegged at $8.326 billion, suggesting 7% year-over-year growth.
Apple’s iPad Sales to Increase Y/Y
iPad accounted for roughly 7.3% of fiscal fourth-quarter net sales. Strong demand for iPad Pro and the launch of 11-inch and 13-inch iPad Air benefited sales, which increased 7.9% year over year to $6.95 billion. The momentum is expected to have continued in the to-be-reported quarter.
The Zacks Consensus Estimate for fiscal first-quarter iPad net sales is pegged at $7.387 billion, suggesting 5.2% year-over-year growth.
What Our Model Says
According to the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here.
Apple currently has an Earnings ESP of -1.51% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Stocks to Consider
Here are some companies worth considering, as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:
Image: Bigstock
Will Strong Services Offset Weak iPhone Sales for AAPL's Q1 Earnings?
Apple’s (AAPL - Free Report) first-quarter fiscal 2025 results, to be reported on Jan. 30, are expected to reflect stiff competition for iPhone in China. However, will continued strong growth in the Services business offset this headwind?
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
iPhone sales are likely to have suffered from stiff competition in China from Chinese vendors, including Huawei and Xiaomi. A delay in the launch of Apple Intelligence to a major part of Apple’s installed base, including Mainland China, has been a concern.
Although Apple’s business primarily revolves around its flagship iPhone, the Services portfolio has emerged as the company’s new cash cow. For the Services segment, Apple expects a double-digit growth rate similar to fiscal 2024 in the to-be-reported quarter.
The Zacks Consensus Estimate for fiscal first-quarter iPhone net sales is pegged at $69.189 billion, suggesting 0.7% year-over-year decline. The consensus mark for Services is currently pegged at $26.176 billion, suggesting 13.2% growth on a year-over-year basis.
Apple Inc. Revenue (TTM)
Apple Inc. revenue-ttm | Apple Inc. Quote
Click here to learn how Apple’s overall fiscal fourth-quarter earnings results are likely to be.
Services Growth to Ride on Apple TV+, Strong Install Base
Apple’s Services business is expected to benefit from increasing users of the App Store, Apple Pay, Apple Arcade and growing viewership of Apple TV+. The growing install base of active devices has been a key catalyst.
Apple had more than 1 billion paid subscribers across its Services portfolio at the end of the fiscal fourth quarter. Paid subscriptions grew double-digits, a trend expected to have continued in the to-be-reported quarter.
Apple to Benefit From Y/Y Growth in Mac Sales
The PC segment climbed in the fourth quarter of calendar 2024. Per IDC’s latest report, 68.9 million PCs were shipped, up 1.8% from the year-ago period. In contrast, Gartner estimates shipment of 64.4 million units, up 1.4% year over year.
In IDC’s list, Apple is the best-performing PC vendor, with Mac shipments increasing a whopping 17.3% year over year. However, Gartner estimates Mac shipments increase 4.6% year over year, trailing only ASUS.
The Zacks Consensus Estimate for fiscal first-quarter Mac net sales is pegged at $8.326 billion, suggesting 7% year-over-year growth.
Apple’s iPad Sales to Increase Y/Y
iPad accounted for roughly 7.3% of fiscal fourth-quarter net sales. Strong demand for iPad Pro and the launch of 11-inch and 13-inch iPad Air benefited sales, which increased 7.9% year over year to $6.95 billion. The momentum is expected to have continued in the to-be-reported quarter.
The Zacks Consensus Estimate for fiscal first-quarter iPad net sales is pegged at $7.387 billion, suggesting 5.2% year-over-year growth.
What Our Model Says
According to the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here.
Apple currently has an Earnings ESP of -1.51% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Stocks to Consider
Here are some companies worth considering, as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases:
BILL Holdings (BILL - Free Report) presently has an Earnings ESP of +29.71% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
BILL Holdings’ shares have returned 21.4% in the trailing 12-month period. BILL is set to report its second-quarter fiscal 2025 results on Feb. 6.
AMETEK (AME - Free Report) has an Earnings ESP of +0.54% and a Zacks Rank of 2 at present.
AMETEK shares have gained 10.6% in the trailing 12-month period. AME is set to report its fourth-quarter 2024 results on Feb. 4.
DoorDash (DASH - Free Report) currently has an Earnings ESP of +35.67% and a Zacks Rank #2.
DASH shares have surged 67% in the trailing 12-month period. DASH is set to report its fourth-quarter 2024 results on Feb. 11.