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Apple (NASDAQ:AAPL) will deliver its fourth quarter (Q4) 2018 results on Thursday, with the company offering guidance for revenues between $60-62 billion, representing an increase of 14-16% when compared to the same period a year ago, with gross margins projected between 38% and 38.5%.
The company looks on track to report a strong set of results, with the business recently releasing a new line of smartphones ahead of the Christmas holidays that help increase sales, but Apple must contend with growing US-China trade tensions that may impact Chinese demand.
Slowdown in China
Apple posted revenue growth from its Chinese business of around 19% year-over-year in its third quarter 2018 results and will be hoping to replicate its performance in Q4.
But ‘there are multiple signs of rapidly slowing consumer demand in China’ that could ‘affect Apple’s demand there this fall’, according to an investor note by Goldman Sachs analysts in mid-October.
The investment bank forecast smartphone sales in China to slide by as much as 15% over the last quarter, with Apple hoping that their new range of devices that includes the iPhone Xs and Xr will prompt consumers to part with their hard-earned cash.
Apple’s management were critical about trade tariffs, as they will impact demand for its new products in China, with the company’s Apple Watch narrowly dodging duties implemented by the US government in late-September.
"Much of Apple's upside potential in our thinking was centred on Chinese demand for larger screen sizes," Goldman Sachs analysts wrote in the note.
‘Should weak consumer demand persist and impact the higher end of the market Apple's potential to beat and raise in FQ4'18 earnings is likely reduced.’
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