When you think of Apple, you probably think of the iPhone. Or perhaps the Mac. When you think about Apple’s bank account, bursting at more than $179 billion in cash and marketable securities, you probably imagine a pile of money larger than anything you’ve seen in a cartoon or at the movies. On Thursday, Apple will likely take on a new role too, as a bellwether for our shaky economy.
The Cupertino, California, tech giant is set to release a financial report for its fourth fiscal quarter this Thursday, releasing details about at its revenue and profit between July and September. It’s not the months that cover the all-important holiday shopping season, during which Apple typically rings up more sales than the entire economic output of many countries. But it will include a couple weeks of sales for its newly released iPhone 14, newest Apple Watches and upgraded AirPods Pro as well.
The report may also serve as sign of health for the worldwide economy. Surveys show that many people are increasingly convinced the world’s entered into a painful recession that may linger for a long time. Meanwhile, lawmakers and business leaders are struggling to combat nagging inflation, now above 8%, amid Russia’s ongoing war on Ukraine, which has helped spark artificially higher energy prices.
The tech industry, once a bright spot of the economy, is starting to feel the pinch. Google parent Alphabet posted weaker than expected third-quarter earnings Tuesday, driven in part by problems like foreign exchange rates and lower spending from advertisers. Last week, Snapchat maker Snap told investors of similar struggles, posting a slowdown in sales growth that spooked investors.
Hardware makers may not fare any better. Smartphone shipments around the globe are expected to drop more than 6% this year, down to 1.27 billion units due to what market researcher IDC said is “record-breaking inflation, geopolitical tensions, and other macroeconomic challenges that have significantly dampened consumer demand.”
Analysts on average seem convinced Apple may beat that trend, though. The company’s expected to report $1.27 per share in profits, up about 2% from the same time a year earlier, according to an average of analyst surveys published by Yahoo Finance. That would translate to $88.9 billion in sales, up nearly 7% from a year ago.
Even then, analysts warn, quirks of the financial calendar mixed with worrying early holiday shopping trends, raise more questions than answers.
“We worry that Apple may have been a Covid beneficiary, amid work/learn from home and strong consumer spending, which could reverse, particularly as consumers’ spending priorities change,” Bernstein Research analyst Toni Sacconaghi wrote in a message to investors last week.
The key, he said, is what Apple will say about its iPhone 14 sales so far. “Investors should expect Apple to be upbeat about iPhone 14, but it may or may not necessarily reflect the ultimate success of the cycle.”
An Apple spokesman didn’t respond to a request for comment ahead of the company’s earnings.
All about the iPhone
Investors and industry watchers always seem jittery about Apple’s iPhone sales. After all, that singular product line did represent more than half the company’s $365 billion in sales last year. It’s no surprise, then, that industry watchers obsessively follow any possible signs of how it’s selling.
On any given week, there seems to be new word of rising or falling demand, and changing manufacturing plans in response. This time around, rumors suggest the more expensive iPhone 14 Pro, starting at $999, is faring better than its cheaper cousins, the $799 iPhone 14 and $899 iPhone 14 Plus.
“We continue to expect strong iPhone results despite concerns around iPhone production cuts,” Evercore ISI analyst Amit Daryanani wrote in a note on Monday, adding that his team’s research and surveys indicate strong demand.
Part of why some industry watchers are more upbeat about Apple is that, as Cowen Equity Research analysts said, more expensive “premium” smartphones haven’t seen demand fall as much as other, cheaper products.
Though Apple may end up a datapoint in the ongoing debate about the health of the world economy, Morgan Stanley analysts said they don’t expect much of anything Apple says Thursday will “put to rest” any concerns of spending downturns among consumers.
Apple executives will answer questions from analysts on a publicly streamed conference call shortly after releasing the company’s earnings Thursday afternoon.