Apple (AAPL +1.27%) is about to answer some burning questions for investors. In its upcoming earnings report, which covers the selling period through late September, the tech giant will reveal how well its new products, like the iPhone 13, are selling. We'll get big updates on Apple's growing services segment, too, along with an official sales projection for the critical holiday quarter ahead.
With that big picture in mind, let's look at three key numbers to watch in the announcement, set for Thursday, Oct. 28.
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The sales figure
Apple's iPhone refresh came in the final days of the quarter, and so the release won't play a big role in the sales figure. But CEO Tim Cook and his team will discuss consumers' appetite for the iPhone 13 compared to their expectations. The quarter benefited from new releases in the iMac segment and the iPad division, which last quarter notched some if its fastest growth in a decade. Look for Apple to extend that positive hardware momentum through the current quarter.
Cook will likely highlight Apple's fast-growing services segment that carries nearly double the profit margin of its lucrative hardware unit. Soaring demand in both areas helps explain why most investors who follow the stock are looking for the company to add a head-turning $20 billion, or 31%, to its revenue footprint this quarter.
Gross profit margin
Apple is facing the same cost and supply chain challenges as its peers, and those issues might pressure earnings this quarter and over the holidays. The company might need to pay more for shipping and might struggle to secure enough semiconductors or other key materials.
A big worry heading into the holiday season is whether Apple can fully capitalize on the unusually strong demand environment.
AAPL Gross Profit Margin data by YCharts
The good news is that Apple's industry-leading profitability makes it easier for it to weather these challenges. Its clout allows it to make bigger orders for materials, giving it another leg up against rivals.
Still, investors will want to watch gross profit margin for signs of stress heading into the holiday season crush. That metric rose by nearly a full percentage point last quarter, to 43% of sales. Apple makes more on services (70% of sales) than it does on hardware (36% of sales).
Cash returns
Most of Wall Street will be focused on management's Q1 sales forecast that covers the holiday shopping period. But Apple tends to be conservative in those short-term estimates, so don't spend too much time worried about the outlook.
Instead, keep an eye on cash returns. Apple entered the quarter with $72 billion of cash, giving it plenty of room to improve on the $29 billion it spent last quarter on stock repurchases and dividend payments.
That cash haul has amplified shareholders' returns over the past few years, mainly by reducing Apple's outstanding share count, and raising investors' proportion of earnings as a result.
The holiday season has a wide range of potential sales and earnings outcomes, but cash returns are more predictable. They're likely to keep rewarding shareholders through fiscal Q1, despite extra cost pressure and inventory challenges.
