The market holds its breath as Apple prepares to release its latest report, which is seen as a possible indicator of the broader economic climate.
Apple is slated to announce its third-quarter earnings this Thursday. Currently, Wall Street analysts are predicting a significant drop in its quarterly revenue. However, there is increased interest in Apple's forecasts and its advances in artificial intelligence (AI).
Refinitiv data suggests that the market generally expects a 1.6% decrease in Apple's quarterly total revenue, marking the largest drop in three quarters' revenue since 2016.
Visible Alpha surveyed 24 analysts, who suggest iPhone sales may have decreased by more than 2% during this period. This is in contrast to an approximate 3% increase during the same period last year and a 1.5% increase in the quarter ending in March.
Analysts propose that the decline in iPhone sales could be attributed to consumers holding off on purchasing new models in a slowing economy.
The third quarter is traditionally Apple's slowest growth quarter, as many demands are likely postponed until the back-to-school promotions in the fourth quarter.
Thus, analysts are more focused on Apple's expectations for the next quarter and the whole year. These figures can help them determine whether Apple's overall sales are growing or contracting and if the global economy is prepared for a "soft landing."
Bob O'Donnell, the founder of TECHnalysis Research, opined that Apple couldn't avoid the impacts of macroeconomic trends, although it would continue to lead the smartphone industry for a considerable time.
Analysts predict the details of the new iPhone 15 will be revealed next month. They believe that the iPhone 15 might include the more universally accepted USB-C interface in some models, and iPhone sales might receive a slight boost during the July to September quarter. Their predictions for this period's performance are mixed.
Erik Woodring, an analyst at Morgan Stanley, wrote in a report that the most important factor would be the management's forecast for the quarter ending in September.
Focusing on Artificial Intelligence
However, Apple traditionally does not provide quarterly guidance. Analysts predict that Apple may detail how it plans to leverage artificial intelligence to enhance its upcoming products.
In sharp contrast to tech giants like Alphabet and Microsoft, Apple has historically avoided using the term "artificial intelligence" in its events, opting instead for "machine learning."
This month, reports have emerged that Apple has quietly built its framework to create a large language model called "Ajax," intended to unify Apple's machine learning development. With Ajax, Apple developed a chat tool service similar to ChatGPT, referred to internally as AppleGPT.
Reports suggest that propelling AI development has been a significant focus for Apple in recent months, with multiple teams collaborating on related projects. These efforts include trying to address privacy concerns brought about by AI technology. However, Apple's executives have not yet established a clear strategy on how to introduce AI tools to consumers.
Nevertheless, this news helped push Apple's stock to a new historical high.
Aaron Rakers, an analyst at Wells Fargo, wrote in a report:
With the formal launch of Vision Pro, we expect Apple's latest comments about its AI ambitions to become a focal point of interest. Any commentary about the technology could potentially boost Apple's stock.
So far this year, Apple's stock has risen by over 56%, while the tech-heavy Nasdaq Composite Index has risen about 37% during the same period.
