Apple set to report earnings amid wave of tech layoffs

A preview of Apple's quarterly earnings report as investors watch closely for signs of life from the tech sector.

Video transcript

DAN HOWLEY: All eyes are on Apple this week as the $2-trillion company releases its first-quarter earnings report. Investors and analysts will be looking to see just how much the recent COVID lockdowns in China's iPhone City have disrupted production.

Layoffs across the tech sector have rocked an already jittery Wall Street. And while Apple has so far managed to avoid eliminating jobs this year, investors are bracing for a tough report. Wall Street isn't anticipating much to celebrate as it expects Apple to post lower earnings and revenue than it did a year ago.

Apple's stock price has outperformed much of its big tech competitors over the past year. As of January 27, it's down about 8% in the past 12 months, while Microsoft's share price is down 17% and Google parent Alphabet is down 23%. But despite Apple's performance relative to the broader tech sector, shareholders voted to cut CEO Tim Cook's pay by more than 40% to $49 million this year, a move quickly followed by Google CEO Sundar Pichai, who also announced a pay cut following his company's decision to lay off 12,000 of its employees.

And to its credit, Apple has managed to avoid large-scale layoffs, unlike its peers, partly because Apple's headcount grew at a slower pace than other tech giants over the course of the pandemic. According to the "Wall Street Journal," Apple's workforce grew by 20% between September 2019 and September 2022. During that same period, Microsoft's headcount increased 53%, Meta's 94%, and Amazon's workforce more than doubled. And that rapid growth, experts say, is what's driving cutbacks across the industry.

DAN IVES: We're seeing it across tech. These companies are spending like 1980s rock stars at a pace that was unsustainable.

DAN HOWLEY: But the iPhone maker isn't without its own issues. Throughout November and December of 2022, Apple faced significant headwinds from COVID lockdowns and worker protests at manufacturer Foxconn's facility in Zhengzhou, China. The plant, which employs 200,000 workers, produces the bulk of Apple's iPhone 14 Pro and iPhone 14 Pro Max handsets. The iPhone 14 Pro and Pro Max, which start at $999 and $1,099, are two of Apple's most important devices. Their steeper prices help boost the average iPhone selling price, driving higher revenue and margins for the tech giant.

According to IDC's worldwide quarterly mobile-phone tracker, shipments of Apple's iPhone fell 14.9% in the fourth quarter of 2022, down from 85 million units in Q4 2021 to 72.3 million units.

But it's not just the iPhone that's faced trouble. During Apple's Q4 earnings call, Apple's CFO Luca Maestri said that Apple expects nearly 10 percentage points of negative year-over-year impact from the strong dollar. What's more, Maestri said he expects Mac revenue to decline substantially year over year and expects services revenue to grow but face those currency challenges as well.

And while many investors sense trouble for Apple and others in the tech sector, some analysts are seeing signs of optimism in the months ahead.