Apple 3Q19 Earnings Expectation Meters

Apple finds itself in a financial tug-of-war as declining iPhone revenue is being offset by growth in every other product category. When Apple reports 3Q19 earnings on Tuesday, we will get the latest snapshot of how this tug-of-war is playing itself out.

While the press remains infatuated with the storyline that slowing iPhone sales are driving Apple to become a services company, which isn’t true, such an intense focus on services is leading to a lack of attention being given to the incredible growth seen with Apple’s wearables platform and the turnaround story underway with the iPad business.

Historically, Apple’s FY3Q (April to June) earnings have proven to be more of a wildcard as FY4Q revenue guidance is heavily dependent on product launch timing in September. This produces a situation in which light guidance can be explained away more easily than in any other quarter.

Ahead of Apple’s 3Q19 earnings release, I am publishing four expectation meters:

  1. iPhone revenue

  2. Non-iPhone revenue

  3. Products vs. Services revenue

  4. 4Q19 revenue guidance


The following table contains my overall Apple 3Q19 estimates.

A detailed discussion of these estimates, including my methodology and perspective behind the numbers, is found in my Apple 3Q19 earnings preview available here (first half) and here (second half). Above Avalon membership is required to read my earnings preview. To become a member, visit the membership page.

iPhone Revenue

We know that iPhone sell-through demand improved moving from March into April and May. The question is, to what degree was iPhone demand in June impacted by U.S./China trade tensions? Given that roughly two-thirds of 3Q19 iPhone sales were already in the books prior to June and FY3Q is historically Apple’s weakest quarter for iPhone sales, any potential slowdown in demand will have a more modest impact than the sales implosion Apple experienced at the end of 2018. In addition, Apple has undertaken a number of initiatives in an effort to streamline iPhone upgrades, including lowering prices outside of the U.S. to neutralize demand headwinds related to foreign exchange.

My expectation is that Apple will report $25.3B of iPhone revenue, a 14% decline from 3Q18. An iPhone revenue number that exceeds $26.0B would be considered strong while a number less than $25.0B would be on the weak side.

Non-iPhone Revenue

Apple’s non-iPhone business includes revenue from the following line items:

  • Services

  • iPad

  • Mac

  • Wearables / Home / Accessories

My expectation is that Apple will report $27.7B of non-iPhone revenue. A revenue number north of $28.0B would be considered strong while a number less than $27.0B would be on the weak side.

Products vs. Services

In order to reflect Apple’s revised financial disclosures, the following expectation meter is being introduced for the first time. Apple’s revenue is broken out into two categories: products (i.e. hardware) and services.

4Q19 Revenue Guidance

Consensus expects Apple to report $61B of revenue in 4Q19. This seems on the light side. My estimate is for Apple to announce 4Q19 revenue guidance in the range of $62B to $64B. Light revenue guidance can easily be explained away by a flagship iPhone model or two being delayed into October while strong guidance may reflect an easier year-over-year compare as the iPhone XR launched in 1Q19.

Additional thoughts and perspective on Apple’s earnings and 4Q19 guidance are available in my 3,800-word earnings preview, which includes two parts:

  1. Setting the stage / overall expectations / estimates for the iPhone business

  2. Estimates for the non-iPhone business / 4Q19 guidance / access to my updated earnings model / final thoughts

Above Avalon membership is required to read my earnings preview. To access the earnings preview and have my Apple earnings review sent directly to your inbox when published, sign up at the membership page