Photo Credit: Kārlis Dambrāns

Apple Inc (AAPL) Information Technology - Computers & Peripherals | Reports July 26, After Market Closes

The Estimize consensus is calling for earnings per share of $1.41 on $42.03 billion, 2 cents higher than Wall Street on the bottom line and about $180 million on the top.

iPhone Sales

The iPhone continues to be Apple’s biggest catalyst, accounting for two thirds of its revenue in any given quarter. Concerns have been raised over the past few quarters that iPhone sales are beginning to deteriorate. After the runaway success of the iPhone 6, demand for the 6-month-old S version has fallen flat. Last quarter revenue growth turned negative for the first time in 13 years largely due to declining phone sales. Sales were down 16% from the 61 million units sold a year earlier, with early indications pointing to further declines throughout 2016 and perhaps 2017. New rumors have also appeared that Apple will move to a three year phone cycle, adding an additional year to the previous cycle. If these rumors hold true, the phone market might be more saturated than it was initially thought to be.

Suppliers

More often than not, earnings from Apple’s suppliers are a great indicator of iPhone sales. Last quarter major iphone started to feel the pain. Semiconductors including Cirrus, Qorvo and Skywork Solutions, all of which produce chips or wireless solutions in the iPhone, fell short of the expectations this past quarter with negative year over year comparisons. Many blamed the iPhone and the broader pullback in the semiconductor industry for their misfortunes. Well into earnings season, each of these companies have seen both top and bottom-line expectations feverishly cut.

Other Products

Excluding iPhones, the rest of Apple’s portfolio which consists of tablets, computers, watches and other electronic devices, constitutes one third of revenue in any given quarter. These products have struggled lately primarily driven by weakness in China, currency headwinds and low upgrade demand. Last quarter, Apple sold 10.3 million iPads, compared to 12.6 million a year earlier. Upgrade demand for these tablets have been abysmal, so it makes sense that the iPad 2 is still the most widely owned iPad to date . Meanwhile, the Apple Watch has come with mixed reviews. Most tech savvy consumers know the second iteration is always better than the first, so the next version of the watch might be the spark that Apple needs. Mac sales have also been disappointing, declining 13% in the second quarter. Unless Apple makes a major acquisition or begins to pursue moonshot investments, like Google, then we might be in for more revenue weakness.