What to Expect From Apple's Q4 2023 Earnings Report

Apple's fortunes are heavily reliant on the iPhone, which is by far its biggest revenue contributor. The device accounted for 48.5% of net sales in the last reported quarter, wherein sales decreased 2.4% year over year to $39.67 billion.

Apple's CFO Luca Maestri said the company's current quarter would report a similar year-over-year decline in revenue as the June quarter. But Maestri expects iPhone and services year-over-year performance to accelerate from the last reported quarter. However, the company anticipates the revenue for Mac and iPad to decrease by double digits year-over-year. Apple's gross margin is expected to be between 44% and 45%.

The tech giant's third-quarter earnings and revenue topped analysts' estimates, driven by solid services sales that rose 8% on an annual basis.

On October 4, KeyBanc Capital Markets analyst Brandon Nispel downgraded AAPL stock to sector weight or neutral from overweight or buy. Nispel expects a slowdown in the company's U.S. sales growth through the first quarter of fiscal 2024 amid weakened consumer spending.

He also said that relatively high estimates of AAPL's top and bottom lines might leave little room for upside surprise when it posts its earnings report.

The quarter, which runs from the start of July until the end of September, is usually a great time for Apple to introduce the products that it will be releasing to take advantage of holiday season sales. Although fewer products were launched than in the previous quarter, Apple introduced several key items such as the iPhone 15 series, AirPods Pro update, Apple Watch Series 9, and Apple Watch Ultra 2. These products were introduced on September 22, so their impact on revenue would be minimal for FYQ4. It is unlikely that investors will see much benefit from these launches in FYQ4, but they should keep an eye on FYQ1 2024 sales during the holiday season.

For the fiscal fourth quarter, Services revenues are expected to have accelerated on a year-over-year basis compared with the June quarter. An expanding paid subscriber base has been a key catalyst for the Services business, which is riding on the increasing popularity of the App Store and an expanding installed base of devices. Apple has more than 1 billion paid subscribers across its Services portfolio. App Store continues to grab the attention of prominent developers from around the world, helping the company to offer exciting new apps that drive traffic. Services like Apple TV+, Apple Arcade, Apple News+, Apple Card, Apple Fitness+ and Apple One bundle are expected to have contributed to overall growth.