Will Apple Report Revenue Decline Again?

The slowing iPhone sales are likely to negatively affect on the tech giant's revenue

For the first time since the launch of the iPhone, Apple Inc. will be reporting its year-over-year revenue decline after the bells ring at Tuesday market. Since 2003 –the time when the tech giant’s released third generation iPod along with iTunes music store –the tech titan has only been reporting growth. This make up 51 consecutive quarters of growth.

But, after a sudden fall in the sales of the company’s core product –iPhone –the second quarter revenue is expected to decrease by a substantial 10%. The sales of the iPhone make up around two-thirds of the Cupertino, Calif. business.

According to the poll taken by Thomson Reuters, the analysts have projected a decline in revenue from year-ago period’s $58 billion to $52 billion for the current quarter. The EPS is also expected to fall from $2.33 to $1.99.

This decline in the revenue is mainly because of slow upgrade observed in the current year. Back in 2014 when the tech giant released iPhone 6 and later the wider 6 Plus made up the Silicon Valley’s tech giant’s best-selling smartphone line. Piper Jaffray analyst, Gene Munster, had expected iPhone 6 to achieve a 15% sales increase over iPhone 5 line but the phone generated 30% increase.

Munster acknowledged that the iPhone 6 had been the greatest release and that the slowing sales is also natural after having a period of high demand. Munster recommends buying Apple stock and has set a price target of $172. He added that the consecutive second quarter revenue decline shouldn’t be taken as a basis for considering the revenue drop a trend. The iPhones are released in two-year cycles and for the year, the device sales is likely to increase in mid-to high single digits.

The latest  iPhone SE was launched at the end of March so the figures pertaining to its sales are likely to be highlighted in this quarter’s results. The next generation iPhone is expected to be released sometime later this year. According to FactSet, the analysts have projected that in the fiscal 2017 the iPhone sales are likely to jump 4.3% after declining by 7.1%.

The smartphone’s market maturity has raised skepticism and doubt for the Apple’s growth. Many analysts are concerned whether the tech giant will be able to release a product which outshines among its rivals’. This skepticism has resulted in the company’s stock to decline by 18% over the past year.

Moreover, the tech giant may also face another hurdle in its sales –longer upgrade cycles, according to Pacific Crest Securities. In a report forwarded on April 19, the firm told that the consumers had been holding on to their devices longer as to upgrade new features becomes challenging for the consumers.

Although iPhones are the core product of the tech giants however there are signs for the company to perform better in its segments including iCloud, iTunes, and app store business along with the revenue generated through subscriptions.

Last week, Munster had stated in a report that the tech giant’s service business is “underappreciated” whereas Credit Suisse published a note stating that by 2020, the tech giant’s service unit is likely to double its profit contribution.

Last year, the revenue from services jumped up to $19.9 billion which accounts for 8.5% of the total sales. Munster added that after the introduction of TV subscription product and Apple Music, the investors are likely to consider the company’s software business too.