Apple (AAPL) to Report Q2 Earnings: What's in the Offing?

Apple AAPL is set to report second-quarter fiscal 2021 results on Apr 28.

The company did not provide any revenue guidance, given the uncertainty around the impact of the coronavirus pandemic. However, the company expects the top line to grow in the second quarter of fiscal 2021.

The Zacks Consensus Estimate for revenues is currently pegged at $77.62 billion, indicating growth of 33.1% from the year-ago quarter’s reported figure.

Moreover, the consensus mark for earnings is currently pegged at 99 cents per share, unchanged over the past 30 days and indicating 54.7% growth from the figure reported in the year-ago quarter.

Apple Inc. Price and EPS Surprise

Apple Inc. Price and EPS Surprise

Apple Inc. price-eps-surprise | Apple Inc. Quote

Notably, the company’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the earnings surprise being 18.5%, on average.

Let’s see how things are shaping up for the upcoming announcement.

Strong iPhone 12 Pro Demand to Drive Y/Y Sales Growth

Apple’s fortunes are heavily reliant on the iPhone, which is by far its biggest revenue contributor. The device accounted for 58.9% of net sales in the last-reported quarter, wherein sales increased 17.2% year over year to $65.59 billion.

Strong demand for the 5G-enabled iPhone 12 Pro is expected to have driven top-line growth in the to-be-reported quarter despite late shipment. Solid user adoption of high-end Pro and Pro Max devices is anticipated to have aided gross margin expansion.

Although Apple is late in bringing 5G to its flagship iPhone devices, improved availability of 5G network in the United States from all major carriers and rapid 5G deployment in China are expected to have been major growth drivers.

The Zacks Consensus Estimate for iPhone sales currently stand at $43.17 billion, indicating 49.1% growth from the year-ago quarter’s reported figure.

Services Momentum to Boost Top-Line Growth

The Services segment became the new cash cow for Apple, which currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The increasing popularity of the App Store has been a key catalyst. Apple currently has more than 620 million paid subscribers across its Services portfolio. App Store continues to grab the attention of prominent developers from around the world, helping the company offer exciting new apps that drive traffic.

Coronavirus-led social-distancing norms are expected to have further boosted App Store sales in the to-be-reported quarter. Apple TV+, Apple Arcade, Apple News+, Apple Card, Apple Fitness+ and Apple One bundle are also expected to have contributed to overall growth.

Additionally, Apple’s endeavor to broaden its ecosystem through partnerships with Amazon AMZN and Alphabet GOOGL is a positive for the Services segment.

Apple Music has been benefiting from solid content, with more than 70 million songs. Further, Apple Music’s availability on Amazon Echo and Fire TV, as well as on Google Nest Audio and Nest Mini, is helping it expand its footprint and compete better with Spotify SPOT and YouTube Music.

The Zacks Consensus Estimate for Services currently stands at $15.39 billion, indicating 15.3% growth from the year-ago quarter’s reported figure.

Wearables Y/Y Growth to Slowdown

Apple expects year-over-year growth in Wearables, Home and Accessories revenues to decline compared with first-quarter fiscal 2021.

The company is dominating the wearables market, thanks to strong adoption of Apple Watch. Moreover, the company’s Fitness+ subscription service, built on Apple Watch, is a game changer. Fitness+ tracks health- and workout-related data from Apple Watch that users can view on their iPhones, iPads or Apple TVs.

The consensus estimate for Wearables, Home and Accessories revenues currently stands at $7.41 billion, indicating 18% growth from the year-ago quarter’s reported figure.

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