As earnings season continues to unfold, one important report to watch next week is Apple‘s ( AAPL -0.10% ). Investors will look to the world’s most valuable publicly traded company’s fiscal second-quarter update to see how it’s handling ongoing global supply challenges, particularly related to semiconductor shortages.
Further, investors will be keen to see how the iPhone-maker is faring in light of its tough year-ago comparisons. Will Apple be able to keep growing its top line at a meaningful rate, or will tough comps weigh on its reported growth rate?
Ahead of Apple’s earnings report next Thursday, here’s a preview of some of the key items investors should check on.
Apple store. Image source: Apple.
Total revenue growth
Apple’s revenue growth rate decelerated meaningfully in the tech company‘s most recently reported quarter. Fiscal first-quarter revenue increased 11% year over year, down from 29% growth just three months earlier.
Growth has been negatively impacted by “significant supply constraints,” according to comments from management during the company’s fiscal first-quarter earnings call. Management said it expected these challenges to persist in fiscal Q2, but the negative impact is anticipated to be less than it was in fiscal Q1.
Impressively, management said that despite supply constraints and a tough year-ago comparison when revenue soared 54% year over year, it expects “solid” growth in its top line during fiscal Q2.
Services revenue
While many people think of iPhones, iPads, and Macs when they think of Apple, the company’s services business has become integral to its operations. In fact, services revenue, coming in at $19.5 billion, was significantly higher than every segment except iPhone fiscal Q1. Further, the segment is growing very fast — services revenue grew 24% year over year in fiscal Q1.
Management said it expects more strong double-digit growth for services in fiscal Q2 but that some deceleration for the segment would be normal. “This is due to a more challenging compare because a higher level of lockdowns around the world last year led to increased usage of digital content and services,” said Apple chief financial officer Luca Maestri in the company’s fiscal first-quarter earnings call.
Guidance
Finally, investors should look to see if management provides any guidance for fiscal Q3. Because of uncertain global economic conditions lately, Apple has been refraining from providing specific revenue guidance recently. But it has been providing some vague insight into the direction it expects revenue to trend. To this end, hopefully Apple management will say it expects another quarter of meaningful year-over-year growth.
Apple is scheduled to report its fiscal second-quarter results after market close on Thursday, April 28.
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