Apple Q1 Earnings Preview: Can tech giant impress the market this time?

Apple Inc. (NASDAQ: AAPL) will report first-quarter earnings on Thursday, amid speculations about the demand trends for its popular gadgets. The market will be closely watching the event, anticipating updates on the company’s plans for the new year after a challenging 2024. Recently, there have been concerns about declining iPhone sales and slow progress in Apple’s AI innovations.

After rising to a record high a month ago, Apple’s stock ended its prolonged rally and entered 2025 on a weak note. It has lost about 6% so far this year, while the S&P 500 index grew about 2% during that period. However, the stock has regained strength ahead of the earnings and is expected to maintain the uptrend in the coming weeks.

Q1 Report Due

The Cupertino-headquartered tech behemoth is preparing to report its first-quarter 2025 results on Thursday, January 30, at 4:30 pm ET. Wall Street’s estimate for first-quarter earnings is $2.34 per share, excluding special items, compared to $2.18 per share in Q1 2024. The bullish forecast reflects an estimated 3.7% increase in revenues to $124.03 billion in the December quarter.

Regarding the company’s expectations, Apple’s former CFO Luca Maestri said at the Q4 earnings call, “We expect our December quarter total company revenue to grow low to mid-single digits year over year. We expect services revenue to grow double digits at a rate similar to what we reported in the fiscal year 2024. We expect gross margin to be between 46% and 47%. We expect operating expenses to be between $15.3 billion and $15.5 billion. We expect OI&E to be around negative $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 16%.”

While the leadership bets big on Apple Intelligence, the company’s ambitious personal intelligence system that uses AI to improve user experience on Apple devices, it has faced criticism for lack of efficiency and misinformation. That’s not good news during a time when iPhone sales are slowing down both in the US and overseas markets, including China where the company is facing stiff competition from local players.

Strong Q4

In the final three months of FY24, sales grew across all product categories except Wearables and Accessories, with iPhone sales rising a modest 6%. Consequently, fourth-quarter sales rose 6% annually to about $95 billion. Adjusted earnings jumped 12% to $1.64 per share during the three months. Weakness in China was more than offset by strong sales in other markets. During the quarter, Apple’s active installed base of devices reached a new high.

Apple’s shares traded down 2% on Wednesday afternoon, after opening the session at $238.26. The average stock price for the last 52 weeks is $210.48.