Apple to report earnings as investors worry about ‘mixed’ iPhone demand

Published

9 hours ago

October 31, 2024

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Apple reports fourth-quarter earnings after the bell Thursday. It’s the end of Apple’s fiscal year, and it’s the first quarter with sales from the September launch of the iPhone 16.

Here’s what to expect, according to LSEG consensus estimates:

Earnings per share: $1.60
Revenue: $94.58 billion

The most critical item will be what Apple signals to investors about its December quarter, which is its largest seasonal sales period of the year. That will set the tone about the current iPhone sales cycle and whether it represents a chance for revenue growth driven by the launch of Apple Intelligence.

Apple doesn’t provide official guidance, but it typically offers forecast data points on a call with analysts that suggest whether the company expects sales growth and how some of its product lines might fare — especially the iPhone, which still accounts for a majority of Apple’s sales.

Without Apple’s official guidance and sales, investors parse surveys and shipping dates on Apple’s website to get a clue.

Some analysts are pointing to signs so far as “mixed.”

“To be clear, we have not heard of any iPhone build cuts in our checks, but after a month of tracking iPhone 16 demand indicators, we’d characterize iPhone demand as mixed,” wrote Morgan Stanley analyst Erik Woodring in a note Oct. 22.

Other analysts are watching for when exactly Apple Intelligence will start to boost sales. Apple Intelligence is rolling out in pieces over the next few months. It’s available in American English now, but will add support for German, Italian, Korean, Chinese, French, Japanese and Spanish next year, Apple says.

“While iPhone sales will be on everybody’s mind when AAPL reports, the stream of data points indicates that there is little reason to believe an upgrade cycle has started,” wrote D.A. Davidson analyst Gil Luria in a note this week. “That should be expected, as Apple Intelligence features (the only reason to upgrade)
have yet to be rolled out in a significant way.”

U.S. carriers, including AT&T, Verizon and T-Mobile, have also seemed unexcited about an Apple Intelligence upgrade cycle.

“We’re still waiting, obviously, for the software release and whether or not that software release drives interest in the consumer base,” AT&T CEO John Stankey said on an earnings call last week.

Sales in greater China were one of the weakest parts of Apple’s most recent quarterly report, declining 6% in the face of increased pressure from Chinese rivals.

“We believe even with new iPhone launch, Apple still faces pressure from Huawei, and we don’t expect the competition to ease any time soon,” Citi analyst Malif Atik wrote in a note this week.

But research firm Counterpoint Research told CNBC in October that iPhone sales, especially for the lower-priced devices, were strong in China.

“We’re seeing strong iPhone 16 series unit sales in China, up 20% compared to iPhone 15 series during its first three weeks of sales last year,” a Counterpoint representative said.

Investors will also look closely at Apple’s “wearables” category, which includes its Apple Watch and AirPods headphones. Both of those product lines saw new models hit store shelves during the quarter, including Apple Watches with bigger screens and low-end AirPods with noise canceling.

The new products could reverse the trend of Apple’s wearables sales declining on a year-over-year basis for four straight quarters.

Overall, analysts polled by LSEG expect about 5.6% revenue growth on an annual basis to about $95 billion in revenue.

That’s in line with what Apple signaled in August. Apple also said at the time that its services unit — the company’s catch-all, high-margin unit that includes everything from Major League Soccer subscriptions to Google search deals and extended iPhone warranties — would rise about 14% during the quarter, continuing its steady growth.

Thursday’s report will also likely be the last with CFO Luca Maestri. Apple said in August that Maestri will step down Jan. 1 and be replaced by longtime lieutenant Kevan Parekh. Maestri won’t be leaving Apple, though, and will retain oversight of some teams focusing on IT, real estate, and security.

WATCH: Apple Intelligence rollout could be an inflection point, says Futurum Group CEO’s Daniel Newman

Technology

Amazon’s cloud unit records highest profit margin in at least a decade

Published

3 hours ago

October 31, 2024

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Amazon's cloud unit records highest profit margin in at least a decade

Matt Garman, CEO of Amazon Web Services, speaks during The Wall Street Journal’s Tech Live conference in Laguna Beach, California, on Oct. 21, 2024.

Frederic J. Brown | AFP | Getty Images

Amazon said revenue in its cloud unit increased 19% in the third quarter, just missing analyst estimates.

Revenue at Amazon Web Services totaled $27.45 billion, according to a statement Thursday, while Wall Street was expecting $27.52 billion, based on StreetAccount estimates. Year-over-year growth has accelerated for five consecutive quarters.

The artificial intelligence portion of AWS is in the billions of dollars in annualized revenue, more than doubling year over year, Amazon CEO Andy Jassy, who previously led AWS, said on a call with analysts.

“I believe we have more demand than we could fulfill if we had even more capacity today,” Jassy said. “I think pretty much everyone today has less capacity than they have demand for, and it’s really primarily chips that are the area where companies could use more supply.”

AWS leads the cloud infrastructure market over Google and Microsoft and is an important source of profit for Amazon.

On Tuesday, Google parent Alphabet said revenue from Google Cloud, which includes cloud applications as well as infrastructure, totaled $11.35 billion, up 35%. Microsoft said Wednesday that revenue from Azure and other cloud services grew 33%.

AWS recorded $10.45 billion in operating income, representing 60% of its parent’s profit. Analysts expected $9.15 billion.

The unit’s operating margin came in at 38%, the widest for AWS since at least 2014. Google Cloud reported an operating margin of 17%.

“We’re being very measured in our hiring,” Brian Olsavsky, Amazon’s finance chief, said on the call.

During the quarter, Oracle said it will bring database services to AWS.

“If this is successful, we would love to find more pieces of their application stack that could run well in AWS and help customers do that,” AWS CEO Matt Garman told CNBC in a September interview.

Also in the quarter, AWS announced plans to discontinue some services, including code-repository tool CodeCommit. Garman told TechCrunch that AWS “can’t invest in everything.”

WATCH: Databricks drives more than $1 billion revenue on AWS, says Databricks’ Naveen Rao

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Technology

Amazon’s advertising business grew 19% in the third quarter

Published

5 hours ago

October 31, 2024

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Amazon's advertising business grew 19% in the third quarter

Dominika Zarzycka | Nurphoto | Getty Images

Amazon’s online advertising business brought in $14.3 billion in the third quarter, up 19% year over year, in line with analysts’ estimates of $14.3 billion.

The Seattle tech giant revealed the financial results of its growing advertising unit as part of its latest earnings report Thursday. Amazon’s overall third-quarter sales were $158.9 billion, ahead of analysts’ estimates of $157.2 billion.

Amazon’s online advertising business is still a fraction of the company’s overall business, but its growth over the years has made it a major competitor to Alphabet and Meta, which lead the digital advertising market. Alphabet’s Google currently represents 27.7% of the worldwide digital advertising market, followed by Meta at 22.8% and Amazon with 8.8%, according to data provided to CNBC by Emarketer.

Meta’s third-quarter advertising revenue came in at $39.9 billion, which was up 19% compared with the year prior. That was slightly ahead of analysts’ expectations of $39.49 billion, according to StreetAccount. Ads accounted for 98.3% of Meta’s overall third-quarter revenue.

Alphabet generated $65.85 billion in third-quarter ad revenue, the company reported Tuesday. That was up 10% from $59.65 billion the year prior. Additionally, advertising sales for the company’s YouTube unit rose 12% year over year to $8.92 billion.

Jefferies' Brent Thill on Microsoft & Meta earnings: AI expectations for investors got overinflated

Technology

Intel shares jump 9% on earnings beat, uplifting guidance

Published

5 hours ago

October 31, 2024

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Intel shares jump 9% on earnings beat, uplifting guidance

Intel CEO Pat Gelsinger holds an artificial intelligence processor as he speaks during the Computex conference in Taipei, Taiwan, on June 4, 2024.

Annabelle Chih | Bloomberg | Getty Images

Intel shares rose 9% in extended trading on Thursday after the chipmaker reported better-than-expected revenue and issued quarterly guidance that topped estimates.

Here’s how the company did in comparison with LSEG consensus:

Earnings per share: Loss of 46 cents adjusted
Revenue: $13.28 billion vs. $13.02 billion expected

Intel’s revenue declined 6% year over year in the quarter, which ended on Sept. 28, according to a statement. The company registered a net loss of $16.99 billion, or $3.88 per share, compared with net earnings of $310 million, or 7 cents per share, in the same quarter a year ago.

As part of its cost reduction plan, Intel recognized $2.8 billion in restructuring charges during the quarter. There were also $15.9 billion in impairment charges.

Intel has been mired in an extended slump due to market share losses in its core businesses and an inability to crack artificial intelligence. CEO Pat Gelsinger revealed plans during the quarter to turn the company’s foundry business into an independent subsidiary, a move that would enable outside funding options.

CNBC reported that Intel had engaged advisors to defend itself against activist investors. In late September, news surfaced that Qualcomm reached out to Intel about a possible takeover.

The Client Computing Group that sells PC chips recorded $7.33 billion in revenue, down about 7% from a year earlier and below the $7.39 billion consensus among analysts surveyed by StreetAccount.

Revenue from the Data Center and AI segment came to $3.35 billion, which was up about 9% and more than the $3.17 billion consensus from StreetAccount.

Intel called for fiscal third-quarter adjusted earnings of 12 cents per share and revenue between $13.3 billion and $14.3 billion. Analysts had expected 8 cents in adjusted earnings per share and $13.66 billion in revenue.

During the quarter, Intel announced the launch of Xeon 6 server processors and Gaudi artificial intelligence accelerators.

As of Thursday’s close, Intel shares were down about 57% in 2024, while the S&P 500 index had gained 20%.

Executives will discuss the results with analysts on a conference call starting at 5 p.m. ET.

This is breaking news. Please check back for updates.

WATCH: Qualcomm buying Intel would be a ‘horrible decision,’ says Harvest’s Paul Meeks