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Wednesday, February 5, 2025

Apple’s iPhone Q3: A Glimpse into the AI Future or Just a Blip on the Growth Radar?

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Apple’s Q3 Results: A Look At The Numbers And What To Expect

Tech giant Apple, Inc. (AAPL) is set to report its fiscal year 2024 third-quarter earnings after the market closes on Thursday. Despite a recent period of slowing growth, investors have remained optimistic about the company’s prospects. This quarter is particularly interesting as Apple prepares for a potential AI-driven supercycle with the launch of the iPhone 16 later this year.

Key Takeaways:

  • June Quarter Is Seasonally Slow: The June quarter typically sees lower sales for Apple, as consumers often hold off on purchases in anticipation of new product launches in the fall.
  • Analysts Expect Modest Growth: The consensus estimate for revenue is $84.53 billion, representing a slight increase from the previous year. Earnings per share are expected to be $1.35.
  • iPhone Sales Are Under Scrutiny: While Apple is expected to see some growth in iPhone shipments, market share has slipped compared to previous years. The product mix will be a crucial factor in determining revenue contribution.
  • Services Business Expected To Shine: Wedbush analysts believe Apple’s Services segment will exceed expectations, indicating strong demand for its subscription-based offerings.

A Closer Look At The Numbers:

Apple’s Q3 2024 Key Metrics (Consensus Estimates):

  • Revenue: $84.53 Billion
  • Non-GAAP EPS: $1.35

Key Q3 2024 Data Points:

  • Revenue:
    • Consensus estimate: $84.53 billion
    • Prior-year Q3: $81.80 billion
    • Prior-quarter Q2: $90.75 billion
  • EPS:
    • Consensus estimate: $1.35
    • Prior-year Q3: $1.26
    • Prior-quarter Q2: $1.53

Analysts weigh in: Wedbush’s Daniel Ives expects mostly in-line headline numbers for the June quarter, but he believes the real story lies in the potential AI-driven supercycle starting with the iPhone 16 launch in September.

A Breakdown Of Apple’s Key Businesses:

iPhone: The flagship iPhone remains Apple’s most significant revenue driver, contributing over 50% of total sales. While Canalys estimates show a 6% year-over-year growth in iPhone shipments for the June quarter, this growth rate is one of the slowest among major smartphone manufacturers. The product mix will be a critical factor in determining the revenue contribution from the iPhone.

Mac: The PC market appears to be a bright spot for Apple. The company reported the fastest year-over-year growth among major manufacturers in the June quarter, shipping 4.4 million units. This strong performance suggests a positive trend for Apple’s Mac business.

Services: Wedbush is optimistic about the performance of Apple’s Services segment, which includes subscriptions to products like Apple Music, Apple TV+, and iCloud. This segment continues to demonstrate strong traction and plays a crucial role in Apple’s long-term growth strategy.

The Future Is Bright: Apple’s Projected Growth:

Consensus Estimates for Apple’s September Quarter and Full Year:

  • Q4 EPS: $1.56 (6.85% year-over-year growth)
  • Q4 Revenue: $93.39 billion (4.4% year-over-year growth)
  • FY24 EPS: $6.62 (8.00% year-over-year growth)
  • FY24 Revenue: $387.96 billion (1.22% year-over-year growth)

Analysts are bullish about Apple’s long-term prospects, with Ives predicting a $4 trillion market cap for the company by 2025. Morgan Stanley’s Erik Woodring has also named Apple as the firm’s top pick, raising the price target from $216 to $273, citing the potential for Apple Intelligence to drive growth beyond iPhone sales.

Apple Stock Performance:

Year-to-date, Apple (AAPL) stock has gained over 15.50%, in line with the S&P 500’s 16.62% advance and slightly behind the Nasdaq 100’s 15.37% gain.

The company’s upcoming earnings call will be crucial for investors looking for insights into Apple’s future strategy, particularly as it navigates the evolving landscape of AI and the competitive smartphone market. Analysts and investors will be closely watching the company’s performance, its outlook for the rest of the fiscal year, and any potential updates on its AI initiatives.

Article Reference

Lisa Morgan
Lisa Morgan
Lisa Morgan covers the latest developments in technology, from groundbreaking innovations to industry trends.

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