Apple is gearing up to release its fiscal fourth-quarter earnings on Monday. This is a big moment for the new CEO, John Ternus. He'll be speaking to Wall Street for the first time in his new role. Analysts are expecting a revenue boost of 11% compared to last year's $102.5 billion. iPhone sales are projected to reach $56.59 billion.
The earnings report will include initial sales figures for the new iPhone 18 Pro. This model had eight days of sales before the quarter wrapped up. However, the iPhone Duo, Apple's latest high-end device, missed the cutoff for this quarter as it became available only after the period ended. The lack of a new entry-level iPhone 18 and a $100 price hike on iPhones could also have influenced demand.
Investors are eager to hear about Ternus' strategies for Apple's operations, especially as the company deals with global shortages of memory and flash storage, which are affecting the entire smartphone and PC industry. Bank of America analyst Wamsi Mohan has taken a cautious stance on Apple's earnings, pointing to concerns over gross margins and the impact of price hikes.
Apple reported a gross margin of 49.3% in the June quarter. However, the company warned it might fall to between 47.5% and 48% for the September period. Mohan noted that tariff refunds could provide a short-term boost to margins, but rising component costs and the sustainability of services revenue growth remain key issues for investors.
The wider market for smartphones and PCs is facing severe challenges. Conditions have deteriorated, with consumer electronics companies battling soaring prices for key components. Intel recently suffered a staggering 29% drop in its stock value, blaming weakness in the PC market as a major factor.
Apple, like many others, has responded to these component shortages by raising prices across its product lines. The smartphone market is expected to shrink by nearly 17% this year, while PC shipments could decline by 11%. Despite these headwinds, Apple has maintained a strong performance in the stock market, with shares up 27% this year, outpacing its megacap tech rivals.
The iPhone Duo, with a $2,000 price tag, didn't contribute to the quarter's sales as it launched on October 23, after the quarter closed. Some analysts believe Apple loyalists might have postponed their purchases waiting for the Duo's release. Meanwhile, the iPhone 18 Pro and Pro Max, which hit the shelves on September 18, did contribute to this quarter's sales figures.
Since taking over from Tim Cook on September 1, Ternus has been actively engaging with the public and the media. Monday's earnings call will give investors their first comprehensive look at Ternus' leadership style, as he previously let Cook take the lead during earnings calls.
As Apple gears up to release its earnings, it stands as Wall Street's top pick among megacap tech stocks. The company has managed to avoid the high capital expenditures that have burdened other tech giants, choosing a more cautious path with AI investments. This strategy has enabled Apple to maintain its leading position in the tech industry, even as others face increased scrutiny over expenses and cash flow.
