Can Continued Services Growth Aid Apple's (AAPL) Q3 Earnings?

Apple’s AAPL third-quarter fiscal 2022 results, to be reported on Jul 28, are expected to have benefited from continued momentum in the Services business.

The segment, which includes revenues from the App Store, Apple Music, iCloud, Apple Arcade, Apple TV+, Apple News+ and Apple Card, accounted for 20.4% of sales in second-quarter fiscal 2022.

Apple currently has more than 825 million paid subscribers across its Services portfolio. The App Store continues to draw the attention of prominent developers from around the world, helping the company to offer appealing new apps that drive App Store traffic, thereby expanding the subscriber base.

Apple expects Services revenue growth to be in strong double digits. However, the growth rate is expected to be lower than the March quarter. Services revenues grew 17.3% from the year-ago quarter to $19.82 billion in fiscal second quarter.

Apple Inc. Revenue (TTM)

Apple Inc. Revenue (TTM)

Apple Inc. revenue-ttm | Apple Inc. Quote

Click here to know how Apple’s overall third-quarter results are likely to be.

Apple’s Non-iPhone Portfolio to Boost Revenues

Apple’s non-iPhone portfolio, which comprises Mac, iPad and Wearables, is expected to have aided its top-line growth in the fiscal second quarter.

This Zacks Rank #3 (Hold) company’s Mac sales are expected to have remained strong. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Markedly, per Gartner’s latest report, 72 million PCs were shipped during the second quarter of 2022, down 12.6% from the year-ago period. Lenovo LNVGY, HP HPQ and Dell Technologies DELL witnessed 12.5%, 27.5% and 5.2% declines, respectively.

Overall, Lenovo remained the top vendor with a market share of 24.8%. HP holds the second spot with a market share of 18.8% in worldwide PC shipments. Dell’s market share was 18.5% in second-quarter 2022.

Apple’s market share, on the other hand, grew from 7.1% to 8.8%.

During the to-be-reported quarter, Apple introduced a new M2 chip and macOS Ventura, which features Stage Manager. Apple launched the M2-supported MacBook Air and 13-inch MacBook Pro.

The Zacks Consensus Estimate for Mac revenues for the fiscal third quarter stands at $8.70 billion, implying 5.6% growth from the figure reported in the year-ago quarter.

Apple is also riding on its strong market share in the wearables space. The company’s endeavor to add healthcare features to its smartwatch has been a game changer for the device, which faces significant competition from the likes of Google, Xiaomi, Samsung Electronics and Huawei Technologies.

However, iPad sales are expected to decline in the to-be-reported quarter. The Zacks Consensus Estimate for the same stands at $7.05 billion, suggesting a 4.4% decline from the figure reported in the year-ago quarter.

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