When you think of Apple, you probably think of the iPhone. Or maybe the Mac. When you think of Apple’s bank account, bursting with… over $179 billion in cash and tradable securities, you probably imagine a pile of money bigger than anything you’ve seen in a cartoon or the cinema. On Thursday, Apple is also likely to take on a new role as a whistleblower for our shaky economy.
The Cupertino, California-based tech giant will release a financial report for its fourth fiscal quarter this Thursday, detailing sales and earnings between July and September. It’s not the months that span the all-important Christmas shopping season, when Apple typically generates more sales than the entire economic output of many countries. But it will have a few weeks of sales for its newly released iPhone 14newest Apple Watches and upgraded AirPods Pro also.
The report can also serve as a sign of health for the global economy. Surveys show that many people are increasingly convinced that the world is a painful recession that can last for a long time. Meanwhile, lawmakers and business leaders struggle to combat nagging inflation, now above 8%in the middle of Russia ongoing war against Ukrainewhich contributed to artificially higher energy prices.
The tech industry, once a bright spot in the economy, is starting to take a beating. Google parent alphabet posted weaker-than-expected third-quarter earnings Tuesday, driven in part by issues such as exchange rates and lower advertiser spend. Last week, Snapchat creator Snap told investors about similar issues, reporting a slowdown in revenue growth that scared off investors.
Hardware makers may not do a better job. Smartphone shipments around the world are expected to fall more than 6% this year to 1.27 billion units as a result of what market researcher IDC said: “record-breaking inflation, geopolitical tensions and other macroeconomic challenges that are driving demand. of consumers have been significantly dampened.”
The shaky global economy could mean weak holiday buying.
Sarah Tew/CNET
However, analysts seem to be moderately confident that Apple can beat that trend. According to an average of analyst surveys published by Yahoo Finance, the company is expected to report $1.27 earnings per share, up about 2% from the same time a year earlier. That would translate to $88.9 billion in revenue, up nearly 7% from a year ago.
Even then, analysts are warning that financial calendar quirks mixed with troubling early holiday shopping trends raise more questions than answers.
“We are concerned that Apple may have been a Covid beneficiary, amid work/home learning and strong consumer spending, which could reverse, especially if consumers’ spending priorities change,” Bernstein Research analyst Toni Sacconaghi wrote in a message to investors last week.
The key, he said, is what Apple will say about iPhone 14 sales so far. “Investors should expect Apple to be optimistic about iPhone 14, but it may or may not necessarily reflect the ultimate success of the cycle.”
An Apple spokesperson did not respond to a request for comment ahead of the company’s earnings.
Analysts will listen closely to what Apple CEO Tim Cook (right) says about how iPhone demand is developing.
James Martin/CNET
Everything about the iPhone
Investors and industry watchers always seem nervous about Apple’s iPhone sales. Finally, that one product line accounted for more than half of the company’s $365 billion in revenue last year. It’s no surprise then that industry watchers are obsessively tracking all possible signs of how it’s selling.
Every week there seems to be a new word about rising or falling demand, and changing production plans in answer. This time, rumors suggest that the more expensive iPhone 14 Prostarting at $999, outperforms its cheaper cousins, the $799 iPhone 14″ and $899 iPhone 14 Plus.
“We continue to expect strong iPhone results despite concerns about iPhone production cuts,” Evercore ISI analyst Amit Daryanani wrote in a note Monday, adding that his team’s research and surveys indicate strong demand.
Part of the reason some industry watchers are more optimistic about Apple is that, as analysts at Cowen Equity Research said, more expensive “premium” smartphones have not seen demand fall as much as other cheaper products.
While Apple may become a data point in the ongoing debate over the health of the global economy, Morgan Stanley analysts said they don’t expect much from anything Apple says Thursday will “eliminate” any consumer spending cuts concerns.
Apple executives will answer questions from analysts during a publicly-streamed conference call shortly after the company’s earnings release Thursday afternoon.