Apple Q1 2025 earnings preview

Apple Q1 2025 earnings outlook

Apple is set to report its first quarter (Q1) 2025 earnings after the US market closes on Friday, 31 January 2025 at 8.00am AEDT.

Apple is part of the 'magnificent seven,' alongside other major technology leaders such as Tesla, Microsoft, Nvidia, Amazon, Meta, and Alphabet.

Q1 expectations

• Revenue: $124.2 billion
• Earnings per share (EPS): $2.35

Key highlights in the upcoming results are expected to include continued growth in services revenue, which now accounts for about 20% of total revenue. There is also an anticipated 0.6% improvement in gross margins. However, challenges such as weaker growth trends in products like iPads, wearables, and the iPhone, Apple's primary revenue source, may impact overall performance.

Apple year-on-year growth chart

iPhone demand in other regions eyed to offset China weakness

The upcoming reporting quarter will offer insights into year-end holiday spending and the initial sales performance of the iPhone 16 series. Despite inflationary pressures, US consumer spending has been resilient, with retail sales averaging 0.5% month-on-month growth in the fourth quarter.

A Mastercard SpendingPulse report further highlighted a 6.7% year-on-year increase in online spending during the holiday shopping period (1 November to 24 December), exceeding forecasts and suggesting continued momentum in US demand.

Concerns, however, have centred on potential challenges in iPhone sales in China. According to Counterpoint Research, Apple iPhone sales in China are estimated to have declined by 18.2% during the December quarter, triggering a wave of analyst downgrades.

Nevertheless, with these concerns potentially priced into the recent share price dip, investors will be looking out for any positive surprises. While iPhone sales in Greater China have been contracting over the past four quarters, growth in other key markets such as the US, Europe, and Asia may help to offset the weakness and could still support overall outperformance.

Growth momentum in Apple’s services segment to continue

While slowing growth in iPhone sales could directly impact Apple’s installed base of active devices, its user ecosystem has proven to be resilient thus far. The services segment has posted its fifth consecutive quarter of double-digit growth despite stagnating iPhone sales. We may expect growth momentum for this segment to continue into the first quarter of 2025, with the resilience likely to be driven by user stickiness, which supports a steady recurring revenue stream, along with higher monetisation of existing users.

Focus remains on Apple’s initiatives in AI

The first wave of Apple Intelligence features debuted in late October last year, and the upcoming results may offer early insights into whether the integration of generative artificial intelligence (AI) models into Apple's ecosystem can resonate with its customers. The advancements aim to enhance the user experience and improve operational efficiencies, with market participants closely watching to see if they can encourage upgrades across Apple's product lineup and drive higher-than-expected revenue growth.

Apple's progress in AI includes the Neural Engine embedded in its chips, which powers key features such as Face ID, Siri, and real-time image processing in its cameras. Additionally, AI is also deeply integrated into Apple's services, from personalised recommendations in Apple Music and Apple TV+ to features like Focus and Siri Suggestions in iOS.

Apple has been the key laggard among the Magnificent Seven

Year-to-date, Apple has been the laggard among the Magnificent Seven, posting a -11.1% return and standing as the only one in negative territory. Despite its underperformance, the company's valuation still stands relatively fair compared to its peers. This underscores the pressure on Apple to enhance its earnings prospects in order to regain investor confidence and drive renewed interest.

Apple technical analysis

Apple’s share price slipped into correction territory last week, retracing 15% from its December 2024 peak and returning to a previous consolidation range between the $214 - $237 levels. A near-term bounce could still be on the horizon, as previous instances of the daily relative strength index (RSI) reaching oversold conditions have often triggered short-term recoveries.

The recent decline in share price stems from a series of negative developments, including reports of weak iPhone sales in China and multiple analysts' downgrades. These setbacks may have already been priced into investors' expectations, potentially leaving room for positive surprises in the upcoming earnings report.

Include its 200-day moving average (MA) and the horizontal support at $214. In the event of a short-term rebound, the resistance confluence at $238 - $242 could present a key hurdle to overcome.

Apple daily chart