Apple earnings: Slowing smartphone demand expected to weigh on results

Yahoo Finance’s Daniel Howley joins the Live show to discuss the expectations for Apple earnings.

Video transcript

- Right, biting into the Apple, a global revenue slowdown expected at the tech giant as its contemporaries continue shedding jobs. But the company hasn't reported any layoffs yet. The answer in Apple's earnings call after the close. We'll be taking a listen.

Here's what to watch with Yahoo Finance's Dan Howley. So, Dan, obviously this will be a big one to watch for investors.

DANIEL HOWLEY: Yeah, this is going to be very big for Apple. And I just, I want to point out some of the numbers that we're expecting from the company in this report. Revenue is expected to be down year-over-year for the first time since 2019.

Through 2020 and 2021, 2022, Apple essentially revenue for each quarter. And now we're seeing them kind of fall back. We're expecting $121.1 billion versus $123.9 billion.

Earnings per share also supposed to be down over year to $1.94 versus $2.10 last year. And the big contributor that-- well, two of the big contributors to that here are really Mac and iPhone revenue. Now, iPhone revenue, obviously, the bigger share, as Brad pointed out in that incredible preview there. The revenue is expected to come in at $68.3 billion. That's versus the $71.6 billion we saw last year. Then Mac revenue, $9.72 billion versus the $10.8 billion.

So as far as the iPhone revenue, there's two stories going on here. One is availability and two is demand during. Q1, which encompasses the December time frame, November, as well as the general holiday season, we saw issues with Apple's supplier, Foxconn, in China, where there were lockdowns at the factory. We saw worker protests there. That's one of the factories or the factory that makes the bulk of Apple's iPhone 14 Pro and iPhone 14 Pro Max.

That is important because the Pro and Pro Max are two of Apple's more expensive iPhones. And so those naturally mean that Apple gets better margins on those. They're also seemingly selling better, at least from anecdotal evidence, than Apple's iPhone 14 Plus. We had heard that they were cutting back on Plus orders because they just weren't selling as well versus the Pro and Pro Max. So you can imagine that there were a lot of people who weren't able to get their hands on those.

The other is the demand story. And so IDC had said that we're seeing a slowdown in smartphone demand, one of the biggest slowdowns that we've seen in quite some time, actually. And so that also could be impacting Apple, though according to that same report, Apple also managed to gain market share. So we have to look at those two stories.

And then on the Mac side of things, look, they didn't introduce a new Mac in the quarter. So we had seen the jump from when they had put out the M1 Mac and the M2 Mac. And now we have an announcement from them from last week of the new MacBook Pro with the M2 Pro and M2 Mac chip and the Mac Mini with the new chip as well.

But those aren't going to be included in this quarter. They're going for the next quarter. So Q2 would be when those would show up.

So I think those are the big things to look at. When they had reported last time, Apple's CFO had pointed out the substantial decline in Mac sales. So it's not as though that's something that they weren't expecting. I think the bigger question is, obviously, on the iPhone and what this means for Apple's health overall.

This isn't the first time we will see iPhone sales decline year-over-year. We've seen it before. As I said, in 2019 we saw it. And the issue there was just the general malaise in the smartphone market. The conversation was about how the market was saturated. Nobody wanted to buy smartphones. And then Apple went out and started picking up sales again.

So it doesn't appear as though something like this will last long. Don't forget, they're having these tough comparisons to the same time last year. And this is all still from the COVID hangover as well as that shutdown that we had seen in China. So what it means for the overall health of the company, it's hard really to distinguish at this point.

- I mean, a lot to digest there, even before we get into the actual earnings call itself. Great stuff there. Dan Howley there for us. And, of course, everyone be sure to watch our special this evening following the Apple earnings call, as Brad Smith and Brian Sozzi and our special guest Dan Howley break down the need to knows for the tech giant. That's ahead on Yahoo Finance's "After the Call."