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What to expect for Apple’s second-quarter results

TechCrunch TechCrunch 26/04/2016 Matthew Lynley

Apple will report its second-quarter earnings, and all eyes are going to be on the company’s iPhone sales.

That’s because the big question for Apple is going to be whether or not iPhone sales have hit a wall and that the company will see a year-over-year decline in revenue, marking a significant moment for the company which has traditionally been a company that’s steadily grown iPhone sales to generate tens of billions of dollars in revenue. Last quarter, Apple fell just under what industry watchers were expecting — and now we’re wondering if the company will do it again, and in how dramatic a fashion.

There are a number of factors that could go into this, but one important one will be whether or not growth in China has also started to stall as it faces steep competition with cheaper, yet still high-end feeling phones from companies like Xiaomi. The question there is whether Chinese consumers are will continue to tolerate the high prices of the iPhone — especially given macroeconomic turmoil. And, of course, the iPhone could have also hit a saturation point.

The iPhone is Apple’s cash cow. It’s historically continued to grow with each new model release, but critics are now questioning whether Apple will be able to create new phones that will become absolute blockbusters for the company as it continues to grow.

With that growth engine potentially stalling could come the first time that the company would see a decline in revenue rather than its consistent growth. That’s going to be a huge deal for Apple — as investors expected the company to continue growing its smartphone share. Apple has been one of the most consistent companies when it comes to revenue growth, even if things appear to have been slowing a bit.

With that, Apple’s going to have to figure out new ways to create value for shareholders and drive new growth for the company. There are a couple of ways to do that. It can create better services that can drive additional revenue for the company, for example. But those have largely been a blip on Apple’s radar relative to the rest of the business.

It can also create new devices that can re-ignite its growth — and there are new devices coming out for the company, for sure, like the Apple Watch, the new Apple TV and the iPhone SE that could provide new avenues for growth. There’s going to be a time lag before it becomes apparent that those are runaway successes. So far, it’s also hard to extrapolate the strength of the Apple Watch and Apple TV sales, even as its “other” segment continues to grow.

But even with all that, company’s stock hasn’t exactly been doing well — it’s down around 21% on the year. So far, it doesn’t seem like investors are confident in the company’s ability to innovate (at least, not right now).

Then, there are the other usual suspicions for Apple: the Mac could continue to grow incrementally, while iPad sales could continue to decline. Apple will still print money and continue to pay back investors, but even with all that cash it hasn’t found a new market for growth just yet. (And, naturally, someone’s going to ask about the Apple Car on the call. We’re looking at you, Gene.)

In terms of the iPad, Apple now has two new iPad Pro models in different sizes, one of which came out this quarter. So we wouldn’t expect to see strong results from the smaller iPad Pro’s launch baked into its earnings just yet given that the iPad sales have never really been as strong as the iPhone. Either way, the question will be whether that’s going to be flat or go down — and whether Apple has to re-assess its iPad strategy.

Like last quarter as well, industry watchers will also be watching the next year’s guidance. Last quarter, the company forecast its first down quarter in recent memory — and investors are going to be wondering if Apple will do that once again (and again, and again). That’s going to give Apple watchers a better handle on the company’s own outlook, and whether Apple itself is feeling the urgency of its situation as it looks to find new huge growth drivers.

There are, naturally, other ways that Apple could surprise people. Stocks tend to move based on whether or not the company beats or misses expectations set by industry watchers. So Apple could just make more money than expected, or sell more iPads than expected. But for the most part, the money is probably going to move on the iPhone — and whether Apple’s strongest driver of growth has begun to stall out.

For a split second, Apple was dethroned as the most valuable company in the world by Alphabet. It’s since gained a significant distance from the maker of Android, but the question remains: will it be able to continue to hold that title?

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