Apple Q4 Earnings: Why I'll Be Watching Guidance

While fiscal Q4 is important, the first quarter usually accounts for about a third of the company's annual revenue.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Investors will be watching a number of metrics when Apple (NASDAQ: AAPL) reports its fiscal fourth-quarter results later this month. iPhone, services, and wearables revenue for the period will be particularly insightful, giving investors a good pulse on some of the company's most important segments. Of course, investors will also be looking to see if Apple's earnings per share can end its recent downward trend.

While the quarterly results themselves will certainly be interesting, investors should pay special attention to management's revenue guidance for its first quarter of fiscal 2020. Fiscal Q1 is Apple's biggest quarter every year. Not only does the period include the holidays, but it is always the company's first full quarter of new iPhone sales, as the company releases new iPhones a few weeks before the quarter starts.

Apple's guidance for its holiday quarter, therefore, provides the first look at what management expects from the important period.

Will Apple guide for growth?

As a result of underwhelming sales from iPhone XR and XS and tough year-ago revenue comparisons, Apple's fiscal 2019 top line has seen a headwind. Revenue fell 5% year over year in both fiscal Q1 and Q2. Fortunately, however, Apple returned to growth in fiscal Q3. But growth was only slight, with total revenue rising just 1% year over year.

Going into Apple's fiscal fourth quarter, the high end of management's guidance range suggests the company could report modest growth once again.

While it would be encouraging to see Apple report another quarter of growth in fiscal Q4, investors are likely more interested in the tech giant growing its revenue in its fiscal first quarter. The seasonality of Apple's business means that the period often accounts for around a third of the company's total revenue during the year. And the quarter's impact on profitability is usually even more pronounced.

The number to beat when Apple provides guidance for its first quarter of fiscal 2020 will be $84.3 billion. This was Apple's first-quarter revenue in fiscal 2019.

Most analysts certainly expect Apple to guide for growth in fiscal Q1. The consensus forecast for its fiscal first-quarter currently calls for revenue of $87.2 billion, or 3% year-over-year growth.

Understanding Apple's revenue drivers

The big drag on Apple's top line recently has been its iPhone business. In fiscal Q3, iPhone revenue fell 12% year over year. To report consolidated top-line growth in the holiday quarter, the company will likely need a smaller year-over-year decline in this important segment.

But other segments can help pick up the slack if weakness in iPhone persists. Apple's second-largest segment, services, is seeing strong double-digit revenue growth -- and there's no reason this won't continue throughout the holidays. Furthermore, revenue from the wearables, home, and accessories segment is soaring, rising 48% year over year in fiscal Q3.

If Apple's newest iPhones are faring well and if services and wearables, home, and accessories continue on their current trajectories, the tech giant's fiscal first-quarter revenue could not only grow but even accelerate.

Investors will get to see what management expects from its holiday quarter by looking at the company's guidance when it reports its fiscal fourth-quarter results on Wednesday, Oct. 30.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Apple. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has the following options: short January 2020 $155 calls on Apple, long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, and long January 2020 $150 calls on Apple. The Motley Fool Australia has recommended Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

Person using a remote to flick through Netflix.
International Stock News

Can Netflix stock double by 2028?

The stock has skyrocketed, gaining more than 500% over the last three years.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
International Stock News

Up 1,590%, should you buy Nvidia at its all-time high?

The demand for Nvidia's GPUs isn't letting up, which is driving strong revenue and profit growth.

Read more »

Woman and man calculating a dividend yield.
International Stock News

Prediction: This could be Meta's next big move (and it may happen on July 30)

My prediction is this could be the tech giant's next major move.

Read more »

A tech worker wearing a mask holds a computer chip.
International Stock News

Nvidia chips are flowing to China again — what that means for AI adoption trends

The U.S. government just changed its rules to allow Nvidia to ship its H2O chips to China.

Read more »

Green apple with US hundred dollar bill printed on it.
International Stock News

Should you buy or sell Apple stock before July 31? The answer may surprise you

The technology giant now has a market cap of $3.1 trillion.

Read more »

Woman and man calculating a dividend yield.
International Stock News

Is Nvidia stock a buy now?

Here's a look at whether it's too late to buy the first $4 trillion company.

Read more »

Man holding fifty Australian Dollar banknote in his hands, symbolising dividends, symbolising dividends.
International Stock News

This trillion-dollar artificial intelligence (AI) stock could double your money in 5 years

The tech leader is making moves, and if enough things go right, these initiatives could lead to superior returns in…

Read more »

A young woman sits with her hand to her chin staring off to the side thinking about her investments.
International Stock News

Should you buy Nvidia before Aug. 27?

Nvidia reached a record high recently, and its market value soared to $4 trillion.

Read more »