Please ensure Javascript is enabled for purposes of website accessibility

How Might iPhone Revenue Fare in Q4?

By Daniel Sparks – Sep 20, 2019 at 12:01PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Will iPhone revenue decline again during the current quarter?

This time last year, Apple (AAPL -1.26%) was seeing strong top-line momentum. The company had seen its year-over-year growth rate for total revenue accelerate for seven quarters in a row -- and it was about to wrap up what would be its eighth consecutive quarter of accelerating growth.

While Apple's services and wearables segments were growing rapidly then, as they are now, the big difference between the tech giant then and now was its rapidly rising iPhone revenue. The company's smartphone revenue soared 20% year over year in the third quarter of fiscal 2018 and accelerated to 29% growth in fiscal Q4. In the three quarters to follow these periods, however, iPhone revenue has been falling.

But what can investors expect from iPhone in the current quarter? Will iPhone revenue fall yet again?

Customers shopping inside an Apple store

Image source: Apple.

Expect iPhone revenue to decrease again

While the iPhone segment has been in decline for the past three quarters, they have been moderating. In the fiscal third quarter of 2019, for instance, iPhone revenue was down 12% year over year -- an improvement from a 17% drop in fiscal Q2.

Importantly, when combining this moderating decline in the iPhone business with the tech company's strong performance in its four other segments during its fiscal third quarter, Apple was able to return to consolidated top-line growth. Total revenue rose 1% year over year during the period.

For Apple's fiscal fourth quarter, the iPhone segment will likely decline again. In addition, it could be similar to what was seen in fiscal Q3 -- at least this is what Apple's guidance for fiscal fourth-quarter revenue suggests will play out. With iPhone typically accounting for well over half of the company's revenue, Apple's guidance for total revenue often provides a window into what management expects from its smartphone segment.

Management guided for revenue in its fiscal fourth quarter to be between $61 billion and $64 billion. The midpoint of this guidance range implies a 0.6% year-over-year reduction in total revenue. But if Apple's revenue comes in toward the high end of its guidance range, as it often does, this would put total revenue growth at a similar rate to what was seen in fiscal Q3. Since Apple has seen strong momentum in its other segments, iPhone revenue would likely have to slump once again for its consolidated revenue growth during the period to be similar to what it was in fiscal Q3.

Looking ahead

Of course, when Apple reports its fiscal fourth-quarter results, investors may be more focused on looking for signs of what to expect from iPhone in the first quarter of fiscal 2020 than they are on Q4's iPhone revenue. With less than two weeks left in its fiscal fourth quarter, Apple just launched a new lineup of iPhones. Fiscal Q1, therefore, will be the first full quarter of these new phones' availability. Will Apple guide for strong total revenue growth in fiscal Q1? If it does, this will suggest initial sales of the latest iPhones are going well. Furthermore, it would imply that the iPhone business could return to growth in fiscal 2020.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: short January 2020 $155 calls on Apple, long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, and long January 2020 $150 calls on Apple. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$149.84 (-1.26%) $-1.92

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.