Apple Inc. was saved in its last earnings report by an unlikely hero, and the same dynamic may show up in the tech giant’s holiday earnings.
Macs posted record revenue of $11.5 billion that was more than $2 billion ahead of expectations in the September quarter, making up for a shortfall in Apple’s
iPhone sales. Apple may be looking for a boost from its white knight yet again when it reports holiday-quarter results Thursday afternoon, since its iPhone business has faced supply disruptions amid COVID-19 shutdowns in China.
Apple has made Mac refreshes a key priority, infusing its lineup with its own custom chips that bring improvements in speed, battery life, and more. While makers of personal computers generally saw surging sales at the beginning of the pandemic thanks to the remote-work craze, Apple’s improvements have kept the Mac business roaring even as peers like HP Inc.
have seen big slowdowns.
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Another record quarter may not be in the cards for Apple this time. Management’s own outlook called for Mac revenue “to decline substantially” from a year before, and analysts tracked by FactSet expect the company to post $9.4 billion in Mac revenue for the December quarter, 13.5% below its sales from a year earlier. That year-ago period benefited from a MacBook Pro launch.
Still, revenue of that magnitude would be Apple’s fourth highest on record for the category, despite the lack of a big product refresh, and there could be room for upside on Macs again this quarter. Morgan Stanley analyst Erik Woodring recently boosted his expectations for Mac revenue to $9.8 billion, up 12% from his prior forecast due to “stronger-than-expected Mac shipments.”
Apple held up the best in a period when the global PC industry suffered its worst quarterly decline on record, according to third-party data from IDC. As global PC shipments fell 28.1% in the fourth quarter, by IDC’s calculations, Apple was the only major manufacturer not to register a double-digit decline: Its shipments fell 2.1% to 7.5 million units.
The future of Apple’s Mac momentum will also be a key question heading into the report. Apple refreshed the MacBook Pro lineup with an upgraded custom chip earlier in January, a factor that “should help” in the March quarter and beyond, despite a tough industry backdrop, according to Jefferies analyst Kyle McNealy. He acknowledged that Apple was “not immune” to general PC weakness in the holiday quarter.
Wells Fargo analyst Aaron Rakers was cautious looking forward.
“While we believe that weaker consumer confidence & spending will both weigh on demand for Macs over the next few [quarters], we continue to believe Apple will be an outperformer/market-share taker in the PC industry due to the performance advantages delivered by its M-series Arm-based processors,” he wrote in a note to clients.
Mac performance is never the main event for Apple, but it could be a source of stability coming out of a quarter when analysts had a lot questions about iPhone sales. Apple executives warned in November that iPhone 14 Pro and Pro Max shipments would be lower than expected due to pandemic-related production constraints at a major Foxconn facility in China, and analysts weren’t sure how deeply that would impact iPhone revenue in the December quarter and beyond.
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The FactSet consensus calls for iPhone revenue to decline 5.1% in the latest period, to $67.9 billion, though estimates span a wide range, from $59.9 billion to $74.8 billion.
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Overall revenue could see a smaller drop. The consensus forecast is for $121.5 billion, down 2%, but helped by expected record performances for the services and wearables, home, and accessories categories.