As the chatter questioning iPhone X demand grows ever louder, Apple gets a chance to set the record straight.
Apple on Thursday will report its financial results for its fiscal first quarter that ended in December. The period is typically the company’s biggest of the year as it benefits from the newest iPhones. This time around, the first quarter will include not only three months of iPhone 8 and 8 Plus sales but also two months of the iPhone X, Apple’s ultra high-end device.
The results will come amid several reports that Apple is halving the production order of the iPhone X to 20 million units, amid weaker-than-expected demand. The Wall Street Journal is the latest to weigh in on its sales. It’s an unusual position for Apple. The holiday period is typically a strong one for the company, and it has posted all-time record iPhone unit sales during the fiscal first quarter for six years in a row.
Analysts believe Apple sold 79.2 million iPhones in the December quarter, according to Bernstein analyst Toni Sacconaghi, versus last year’s all-time record of 78.3 million.
But what’s getting even more interest is how many iPhones the company will sell in the current quarter now that the excitement over the radically redesigned iPhone X has faded.
“All eyes will be on March guidance with fears running rampant on the Street that Apple will guide significantly below expectations for this upcoming quarter,” GBH Insights analyst Daniel Ives said.
Analysts overall expect Apple to report first-quarter revenue of $86.75 billion, according to Yahoo Finance. For the March quarter, they expect $67.68 billion.
Apple didn’t have a comment ahead of its earnings report.
Supercycle ahead?
It’s important that Apple wows buyers with its flashy new iPhone. More than two-thirds of its revenue comes from its popular smartphone, but iPhone sales dropped for the first time last year. People are holding onto their devices longer as phone companies make fewer major alterations to their products.
The iPhone X, which saw the first dramatic changes to the iPhone in years, is supposed to drive a “supercycle,” a huge increase in demand for Apple’s smartphone. The last time the company saw such a surge was 2014’s launch of the iPhone 6 and 6 Plus, Apple’s first bigger-screen phones.
Working against the iPhone X is its price tag — $999, versus $699 for the iPhone 8 and $799 for the iPhone 8 Plus. Another wildcard: Many people may now opt to replace their old iPhone batteries instead of buying new phones. After news broke that Apple slows down older iPhones to offset battery issues, the company started offering battery replacements for $29 instead of the usual $79.
Apple never breaks out individual iPhone model sales figures, but it sometimes makes comments about how well particular versions are selling, such as saying the Plus models have seen high demand.
Analysts do make such estimates, though. Apple likely shipped 29 million iPhone X units in the last quarter of the calendar year, according to Canalys. It was the best-selling smartphone over the holiday season, the tech research firm said.
The bigger question on everyone’s mind, though, is whether iPhone sales have stayed strong in the current March quarter or if they’ve fizzled.
Misgivings about Q2?
It typically takes a few months for Apple to start making enough of its new iPhones to meet demand. Most analysts had expected iPhone X supplies to be tight in 2018, but you can walk into an Apple store today and walk out with an iPhone X. There weren’t even long waits mere weeks after the phone launched.
If Apple made enough iPhones to meet demand so quickly, it either improved production issues to make devices quicker, or not as many people want the iPhone X as expected.
“We had anticipated iPhone X supply would not meet demand until well into the March quarter, leading to our expectations for a stronger than normal March quarter,” Canaccord Genuity analyst T. Michael Walkley noted. But because Apple now can supply enough iPhone X units to customers, he and other analysts have lowered their forecasts for March quarter iPhone sales.
Analysts believe Apple will sell 62.1 million iPhones in the March quarter (compared with 50.8 million a year earlier), but they’ll be closely watching the company’s forecast for second-quarter revenue to see if they should adjust their estimates further.
Sacconaghi, for one, believes Apple may sell up to 18 percent fewer iPhones in the March period than analysts on average expect.
“Over the past several weeks, many of Apple’s supply chain partners have provided updates on their businesses, and data points have generally been mixed to negative,” he noted. Because of that, he said Apple may actually only sell 51 million to 57 million iPhones in the second quarter.
Tune back in to CNET for full coverage of Apple’s quarterly earnings report.
The Smartest Stuff: Innovators are thinking up new ways to make you, and the things around you, smarter.
Tech Enabled: CNET chronicles tech’s role in providing new kinds of accessibility.
