Apple Q3 earnings preview: a closer look at earnings forecasts and China market strategy

When is Apple reporting?

Apple is scheduled to report its third-quarter earnings on Thursday, 2 August at 6.30am (AEST), after the US markets close.

Key financial metrics

Last quarter, the board authorised $110 billion in share repurchases, a 22% increase from last year's $90 billion. In addition to a dividend of 25 cents, which led to a 7% rise in the share price in after-hours trading.

The company reported the following key numbers:

• iPhone revenue: fell nearly 10% to $45.96 billion versus $46.00 billion expected
• Mac revenue: increased 4% to $7.5 billion versus $6.86 billion expected
• iPad revenue: of $5.6 billion versus $5.91 billion expected. Apple has not released a new iPad since 2022
• Services revenue: increased 14.2% to $23.9 billion versus the $23.37 billion expected. The services segment includes subscriptions like iCloud Storage, App Store, and Apple Music
• Wearables: which includes AirPods and Apple Watches, fell over 10% to $7.9 billion.

Q2 net sales by category chart

Market performance in greater China

Sales in Greater China, Apple's third-largest market, dropped by 8% to $16.37 billion but still exceeded analysts' estimates of $15.25 billion, mitigating concerns about iPhone losing market share to local competitors like Huawei.

Net sales by reportable segment chart

Stock performance

Apple did not provide formal guidance for Q3. However, CEO Tim Cook hinted at overall sales growth in the "low single digits during the June quarter."

Q3 2024 forecast

• Revenue: $84.3 billion
• EPS: $1.34
• Estimated EPS: $1.53

Comparison to Q2 2024

• Revenue: $90.75 billion
• EPS: $1.53
• Estimated EPS: $1.50

Apple sales revenue chart

Key metrics and insights to watch for

• iPhone performance: challenges in China persist, with expected sales to drop to $37.7 billion from $45.96 billion in Q2
• Mac sales: expected to outperform the broader PC market with a 20.8% year-over-year increase
• Services growth: anticipated to continue strong performance, driven by increased App Store sales and subscriptions
• Gross margins: expected to rise due to a favourable sales mix of premium products and higher service sales
• AI developments: updates on Apple's generative AI software, Apple Intelligence, which could trigger a significant device upgrade cycle
• China market: performance in this key market will be closely monitored
• Guidance for Q4: insights into projections for the upcoming quarter, particularly around new technologies like Apple Intelligence.

Apple technical analysis

Apple's share price enjoyed a 60% gain from its early January 2023 low of $124.17 to its high of $199.62 in December 2023 before spending the next five months consolidating gains in a range between $200 and $165.00.

Apple's Q2 earnings update in early May, followed by its Worldwide Developers Conference (WWDC) on 10 June, was the catalyst for the break above $200 to its mid-July high of $237.23. Since that point, Apple's share price has corrected 8.50% lower. If the pullback deepens, we expect share price to be well supported by buyers between $210 and $200 looking for a push towards $250/$270 in due course.

If Apple's share price were to see a sustained break below $200/$190, it would negate the bullish outlook and warn that a deeper pullback is underway.

Apple daily chart

• _{Source: TradingView. The figures stated are as of 25 July, 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}