Apple Q1 earnings: 3 things to watch for

Yahoo Finance’s Daniel Howley joins the Live show to discuss the expectations for Apple’s Q1 earnings.

Video transcript

BRIAN SOZZI: Yahoo Finance's tech editor Dan Howley is here. Dan, any good news on tap here from Apple?

DAN HOWLEY: Uh.

BRIAN SOZZI: Convincing.

DAN HOWLEY: No. Yeah. Yeah. There's a number of problems that they're actually facing. Chief among them is the iPhone sales, right? That's still their bread and butter. That's still where they make the vast majority of their revenue-- more than half of their revenue actually.

What we're talking about now is-- we kind of discussed this earlier this week-- is the drop in smartphone sales that we're expecting. IDC says around a 14.9% drop in iPhone shipments in Q4. That's the holiday quarter. That is not good for Apple.

So as far as the estimates for this coming quarter, we just had them on the screen there. They're not looking fantastic. We're expecting to see a year-over-year-- potentially a year-over-year decline from what Apple had previously posted.

Obviously, you know, this comes as there's this kind of pushback from consumers where they're not necessarily buying these kinds of tech products that they were during the pandemic. Outside of the iPhone, we had Luca Maestri-- he's the CFO at Apple-- basically saying, look, Mac sales are going to disappoint you this quarter. The issue is that too many people went out-- it's the same thing that Microsoft's dealing with, same thing that Intel is dealing with-- and bought computers during the pandemic. They just don't need them now.

Apple launched their new MacBooks with the M2 chips, the M2 Pro and M2 Max. Those only came out recently, so they're not going to help this quarterly report, but it could help in the coming quarters.

And then, oh yes, services. That also might be hit. Luca Maestri again pointing to FX headwinds, and that's going to be a big problem for them. You know, you can have as much "Ted Lasso" as you want. It's not going to do very much when you have to deal with headwinds. I'm going to throw this out there. "Ted Lasso," that's fine. "Severance," get at it.

JULIE HYMAN: I've heard that, actually, although I've not yet watched it.

There was a report, right, that Apple was getting a little bit of market share in China, right? Is that-- is that-- I mean, is that something? Is that good? Is that-- I mean, it's-- I don't know how good.

DAN HOWLEY: It's something. Their market share isn't terrible in China, but that's one of their larger markets, right? They'll never be able to do without China, and everything that happens in China for them is a big deal.

And, you know, you look at what's available there. Apple is still a luxury product there. We talk about how, sure, China is saturating the market. Yes, they gain market share, but it's not going to be these incredible gains that you once had.

The new market that people are talking about now is obviously India. The problem is iPhones are way too expensive for the average person there, like out of reach by a country mile. So it's not going to be easy for them to gain market share there. That's really the Samsungs, the Xiaomis, kind of the smaller players on the China side-- not necessarily Samsung being small, obviously. But I think that this is going to continue to be a problem for them just as far as the balancing act with market share in these other areas.

BRAD SMITH: We were looking at the IDC report earlier this week as well, just looking at the number of refurbished phones that are also going to be a part of the broader shipment equation over the course of this year and had been last year too. Typically in times of an economic downturn and internationally, a lot of consumers will shift to some of those refurbished phones as kind of a hedge against price. Is that something that we're anticipating once again this time?

DAN HOWLEY: I mean, it's interesting because there's a contingent, I think, of consumers who only want new. You know, you talk to my mom. If you buy something that's refurbished, you might as well be buying trash. It's crazy.

I think that it's fine. I think that if you can get a refurbished phone, you should, or just refurbish your old one. Don't tell Apple I said that.

BRAD SMITH: And is that something that Apple gets concerned about?

DAN HOWLEY: Well, that is something, right? So remember when they were replacing the batteries in phones?

BRAD SMITH: Right.

DAN HOWLEY: When you got a new battery, your phone's going to last a lot longer than it was, so why go out and buy a new iPhone? They build phones that, you know, the processors last years and years. Why buy a new one? So that was actually a problem that they ended up having to deal with. I believe they raised prices on the battery replacements that I think people now are going back to purchasing.

But, you know, the whole thing for a lot of these companies is we went away from that two-year cadence where every two years people bought a new phone because their contract was up. You know, T-Mobile pushed back against that. We started seeing the rest of the industry doing that, and now it's more difficult for companies to get their phones out there. Now there's, you know, OK, you can buy every year maybe, but you're still going to be paying for it.

So, you know, I think for most people, it's that smartphone sales, you think about it three, four, five years now. It's not necessarily something you're going to do every two years. That's why you start to see Apple really trying to push the idea of innovating each time they put out a new phone, whether that's on the camera front, the new Dynamic Island-- which, I mean, it's cool, but it doesn't really-- I'm not buying a phone for a Dynamic Island-- and the new display technology.

So, you know, we'll have to see what they have with the iPhone 15. Hopefully it's something that really gets people going. But, you know, I think we're going to continue to see these issues with sales for some time until at least, you know, the consumer starts to feel better about buying. You know, the explosive growth we saw during the pandemic, that was just unprecedented, though.