Over the past couple of weeks, practically all we’ve heard is how the tech industry is under pressure from lawmakers and regulators. The Department of Justice is opening an antitrust investigation into tech giants, reportedly including Google, Facebook, Amazon and Apple. Then there’s the Federal Trade Commission investigation into Facebook. The scrutiny is just ramping up.
That’s despite the fact that the rumor mill has sussed out quite a bit already. Supposed designs of the next iPhone, presumably called the iPhone 11, have leaked on the internet, suggesting most of the phone will look pretty similar to the iPhone XS and iPhone X. The biggest change, however, will be the addition of a third camera on the back, seemingly for ultra-wide photo shots. It’s also unlikely the iPhone will support next-generation 5G wireless until at least 2020.
But people will still be hanging on every word Apple’s famously tight-lipped CEO, Tim Cook, says during a conference call with analysts Tuesday afternoon. Typically, he’ll say stuff like Apple’s expecting an “exciting fall,” which will be parroted by financial analysts who rush tea leaf-reading reports out to investors.
That doesn’t mean people will be ignoring Apple’s financials in the typically quiet summer months. Even though Apple’s biggest sales tend to happen during the holidays, analysts on average are expecting the tech giant to report $53.4 billion in revenue for the three months ended June 30. That would be an increase of less than a quarter of a percent from the same time last year.
Profits, meanwhile, are expected to drop to $9.6 billion, or $2.10 per share, down more than 16% from the same time last year. The estimate comes after a quarter in which Apple released disappointing iPhone sales figures. Some analysts blame this on people’s reluctance to upgrade to pricier devices as often as they did in the past. But Apple’s profits could now come under even more pressure following President Donald Trump’s announcement that he won’t give the tech giant a tariff waiver for its upcoming Mac Pro parts made in China.
And with Apple having just said last Thursday that it bought Intel’s wireless modem making business and the 2,200 engineers who work there for $1 billion, there are likely to be a lot of questions about what that means for the company.
Apple didn’t immediately respond to a request for comment.
Shining the Apple
Apple’s so big that it’s hard to look at any part of its business and call it “troubled.”
The Apple Watch, for example, is the most popular smartwatch on the market and it’s sold more than Rolex, Swatch and many others — combined. But its sales are dwarfed by the iPhone. No surprise, Apple hasn’t broken the Apple Watch out in its quarterly financial statements to investors. (Nowadays, with iPhone revenue dropping, Apple’s stopped reporting unit sales for its headsets, iPads and Macs to Wall Street anyway.)
Still, as iPhone sales plateau, Apple’s set about refashioning itself. It’s no longer just a device maker. Now Apple says it’s becoming a services company too, with subscription offerings like Apple TV Plus with series and documentaries, Apple Arcade for games, Apple News Plus with magazines and some newspapers, and Apple Card to buy it all with.
“For decades, Apple’s been creating world-class hardware and world-class software,” Cook said when announcing these initiatives in March. Now it’s going to tackle streaming and gaming services too. “It’s unlike anything that’s been done before.”
We still don’t know much about how this will all play out. Apple hasn’t shared its pricing structure for Apple TV Plus or Apple Arcade, both of which are expected in the fall. Apple News Plus, which is publicly available for $9.99 a month, was estimated to have netted 200,000 subscribers in its first two days. But Apple hasn’t discussed numbers publicly.
Apple Card has yet to come out either, although it’s expected this summer.
Until we hear more, we’ll be left to gaze even harder into the tea leaves to figure out how Apple will fare.
But Evercore ISI analyst Amit Daryanani said in a note to investors that people are too focused on how many phones Apple sells, rather than all the things it can sell us alongside the phone. “The narrative has and continues to shift towards services and a higher mix of recurring revenue.”