Earnings Special: Apple's Forecast Disappoints, Despite Topping Estimates

Apple

Across the shows: 31 speakers in other episodes, 16 bullish and 22 bearish calls, past 30 days

• Anurag Rana · Bloomberg IntelligenceBullish

  iPhone Duo demand is very strong, and he expects about 15 million units this year.

  Analysts had started the year expecting about 10 to 12 million units. Rana's own checks with people he has talked to show extremely strong reception, which he thinks partly reflects pent-up upgrade demand from Apple's lease cycle. On that basis he expects about 15 million units this year. He notes that supplying that volume in a short window is hard, and that the screen issues could affect fulfilment.

  “the reception that I have seen even with the folks that I have talked to has been extremely strong... we think they're gonna be about 15,000,000 units this year.”at 4:59

• Anurag Rana · Bloomberg IntelligenceUncertain

  Services growth has slowed for two quarters; guidance near 10% is fair, but further deceleration would be bad.

  Apple's services business used to have very predictable guidance, but its growth has slowed for the past two quarters. Services revenue came in near expectations at about 10%. Rana says guidance around 10% for the coming quarter would be fair, but if management guides to a further slowdown, that would be a negative. He argues guidance matters more this quarter than in prior ones.

  “I think it has been slowing down for the past two quarters. And if they give a guidance right around 10%, I think that's fair... The growth rate is gonna go down even more for the services business, That's not good.”at 5:56

• Anurag Rana · Bloomberg IntelligenceBullish

  Greater China remains Apple's most important growth driver over three years, despite tougher comparisons ahead.

  Greater China revenue grew about 28% and 22% in the last two quarters, a large base that makes China the biggest geography for unit sales. The US is saturated for unit growth, and Apple still has a good but improvable China market share, so China can add more share. India matters but is a longer-term story because its per-capita income is much lower. After this quarter, year-over-year China comparisons get very tough, which is a near-term caveat, but China is still the key growth driver over the next three years.

  “over the next ten years, yes. But in the [next] three years, I think China remains the most important growth driver.”at 8:41

• Mark Gurman · BloombergBullish

  Apple's quarter is phenomenal despite few launches; the iPhone 18 Pro drove the beat, though guidance will be less so.

  Apple had no regular iPhone 18 launch, and the iPhone 18 Pro was the smallest year-over-year upgrade in a long time. Its major fall products did not ship until the holiday quarter, yet Apple still beat. Gurman attributes the beat to the iPhone 18 Pro, continued demand for the iPhone 17 Pro and Pro Max, and carrier deals. He expects the December-quarter guidance to be less impressive, because it depends on how the Duo performs.

  “none of them launched until the holiday quarter. Yet they still beat and they beat because of the iPhone 18 Pro... So this is a phenomenal report for Apple.”at 10:28

• Mark Gurman · BloombergBullish

  iPhone Duo supply shortages should shift sales into Apple's later quarters next year, giving positive numbers.

  Duo supply is tight: pre-orders have been delayed until late January for many buyers and the phone is hard to find at retail. Apple books revenue only when the customer receives the device, so unfilled orders from the December quarter push revenue into later quarters. Gurman expects pent-up demand to give Apple strong numbers in the March, June and September quarters of next year. He argues this will not hurt Apple. It fits Apple's push under Ternus to spread revenue more evenly across the year.

  “The good news for Apple could be that we're going to see a very strong [tailwind] because of the supply chain shortages, and give them positive numbers into q two, q three, q four of next year”at 12:06

• Mark Gurman · BloombergNeutral

  The iPhone Duo screen-cracking problem was an early batch defect and has largely died down.

  Reports of cracked screens came from the first units sold and have dramatically slowed. The cracks affect no consistent batch, colour, sales channel or factory. Gurman says the defect was real for a small percentage of buyers, and that the issue was early and isolated, not systemic.

  “We've seen a dramatic slowdown in people reporting the cracks... it is completely died down, tells which me this was an early batch defect.”at 13:06

• Mark Gurman · BloombergBearish

  Apple has no evidence it will turn its cash pile into a strong AI strategy; it has nothing close to ChatGPT.

  Gurman says Apple's free cash flow is an optimistic talking point, but he has seen no sign that Apple can use that cash to build a strong AI strategy. He uses ChatGPT every day as an all-day assistant that works like a human, and says Apple has nothing close. Siri AI is good for about 90% of simple questions and tasks, using Google's Gemini model, and its core product finally works. But it is not a real-world assistant, and Apple still has to build something on that foundation.

  “we've seen zero evidence from Apple that they're going to be able to successfully take advantage of that cash holding and trade that in for a strong AI strategy... Apple has nothing close.”at 15:37

• Mark Gurman · BloombergBearish

  Apple's services revenue will fall as AI assistants displace Google search, which feeds its Safari revenue share.

  Google searches are declining because of AI. A large part of Apple's services revenue is a revenue share from Google search done in Safari. As people move to Gemini, ChatGPT, Claude or Siri AI for tasks they used to do in a search engine, that services revenue will fall. Apple needs to monetise AI search on its own platforms to make up the loss, and it has not yet done so.

  “a big chunk of the revenue Apple gets from services is a revenue share from Google search done in Safari... as people move towards the [ChatGPT] app or the Cloud app... that services revenue is going to come down.”at 17:01

• Mark Gurman · BloombergBullish

  Next year will be extremely strong for Apple's AI wearables, including smart glasses and camera AirPods.

  Apple excels at AI hardware, and its pipeline for next year includes smart glasses and AirPods with cameras, which had been delayed. Gurman calls the pipeline chock-full, including a touchscreen MacBook Pro and a HomePod with a display. He is less certain about the 2028 to 2030 period, which he says will depend on robotics, AR glasses and autonomy.

  “next year is gonna be an extremely strong year in terms of AI wearables. So where they're excelling is AI hardware. Smart glasses are gonna be there. The AirPods with cameras, those have often have been off delayed.”at 18:21

• Mark Gurman · BloombergNeutral

  The midterm outcome will not materially change Apple, since tariffs stay the key issue whoever wins.

  The main political issue for Apple has been tariffs, which were pushed by Republicans in power. Gurman expects tariffs to persist regardless of which party wins the midterms. He does not expect anything dramatic from either side, so he sees no real impact on Apple.

  “I think there's going to be no impact... You know, the big political thing when it came to Apple... has been tariffs. No matter who wins, I don't see that changing.”at 19:23