Apple Inc. is set to release its December-quarter earnings on Thursday after the bell, amidst weakening sales in China. Supply chain data points suggest a slowdown in demand for Apple's products in the Chinese market. Despite this, analysts remain optimistic about Apple’s performance during the December quarter, which is traditionally the company's largest due to holiday shopping and new iPhone sales.
A significant factor affecting Apple's sales in China is the growing preference for domestic brands.
"We believe that a major driver of growing competition within the smartphone market is due to growing preference for domestic brands within China." – Goldman Sachs analyst Michael Ng
Furthermore, Apple's suite of artificial intelligence features, Apple Intelligence, is yet to be made available in Chinese, potentially impacting its market penetration. The demand for the iPhone 16 has not been bolstered by the introduction of iOS 18 and its generative AI features, as expected.
"Specifically, iPhone 16 demand is not amplified by the introduction of iOS 18 and its Gen AI features. In fact, paradoxically, somehow demand is actually softer." – Loop Capital analyst Ananda Baruah
Despite these challenges, Apple's revenue is projected to grow by approximately 3.8% on an annual basis, reaching $124.13 billion for the December quarter. Analysts expect Apple’s earnings per share for this period to be $2.35. Though Apple does not publish its unit sales or provide traditional guidance, expectations for the March quarter include an earnings per share of $1.66 and $95.46 billion in revenue.
Apple's services business is anticipated to experience a substantial growth of up to 14% annually, according to Barclays analysts. This growth could play a vital role in offsetting the weakened demand for hardware like the iPhone 16. As Apple prepares to report its earnings, it is likely to face questions regarding its strategy on tariffs proposed by former President Trump and its overall approach to artificial intelligence.