Apple - what to expect from the 1Q24/25 results? 📌

Apple (AAPL.US)  will release its earnings for the first quarter of fiscal year 2024/25 today after the market closes. Let’s take a look at the key topics to watch in the report and what the market expects from the American tech giant.

Recent Declines in the Tech Sector

Apple has had a strong first half of the week. The company posted relatively the best performance among the so-called "Magnificent Seven," even surpassing Meta in gains, whose earnings were positively received by the market today.

Apple’s resilience to market panic triggered by DeepSeek-related news may be due to its still-unclear AI strategy and the lack of a definitive entry into the AI arms race. Because of this, Apple has not fully benefited from the enormous popularity of artificial intelligence, but Monday’s sell-off made Apple a "safe haven" for some investors amid the volatility in tech stocks.

The Chinese Market

However, it's important to remember that while Apple is not as exposed to the DeepSeek risk as companies more deeply involved in AI, it still faces significant challenges in China. The company has been experiencing a sharp decline in sales growth there for several quarters, prompting unexpectedly fast discounts on its products to maintain its market position.

As a result, Apple's performance in China during Q1 2024/25 will be a key focus for investors. Recent estimates on Apple's smartphone sales in China suggest the steepest year-over-year decline since Q1 2024 (which corresponds to Apple’s Q2 2023/24 due to its shifted fiscal year). These figures mean investors will be paying close attention to Apple's revenue from China, which is expected to fall to $17.97 billion (-14% YoY), according to consensus estimates.

Source: XTB Research, Counterpoint, Bloomberg Finanial L.P.

Estimated results 

Aside from weakness in the Chinese market, Apple is expected to deliver record results for Q1 2024/25. The consensus forecasts a 3.8% year-over-year revenue increase, driven by growth in the services segment and the launch of the latest iPhone 16.

Regarding AI, investors will be looking for further updates on the development of Apple Intelligence. So far, Apple’s offerings in this area remain less advanced than those of competitors (such as Samsung). However, paradoxically, this slight delay could actually benefit Apple. If the company finds a way to implement more efficient solutions and enhance these technologies to better suit its customers, it could return to its usual cycle of delivering refined services and products—not as a pioneer, but as a company that perfects existing solutions.

Over the past four weeks, market sentiment toward Apple has slightly declined, and expectations have been adjusted downward.

Est. results for 1Q24/25. Source: Bloomberg Finance L.P. 

Estimated financial results 1Q24/25:

• Revenue: $124.1 billion
  • Product revenue: $98.02 billion
    • iPhone revenue: $71.04 billion
    • Mac revenue: $7.94 billion
    • iPad revenue: $7.35 billion
    • Wearables, home, and accessories revenue: $11.95 billion
  • Services revenue: $26.1 billion
• Revenue from China: $17.97 billion
• EPS: $2.35
• Adjusted EPS: $2.35
• Operating cash flow: $39.03 billion
• Total operating expenses: $15.34 billion
• Gross profit: $57.98 billion

Balance Sheet:

• Cash and cash equivalents: $36.45 billion
• Cost of sales: $65.98 billion
• Current assets: $165.17 billion
• Current liabilities: $167.07 billion