Not too long ago, analysts with Credit Suisse said that checks with Apple's (NASDAQ:AAPL) supply chain indicated that orders for iPhone components would be "weaker than originally forecast." The analysts attributed this weakness to the obvious culprit: "weak demand for the new iPhone 6s."

Until now, investors have really had no good way to verify these claims. Note that Apple supplier Avago Technologies (NASDAQ:AVGO) technologies recently reported its financial results. These results, coupled with management's commentary around the results, appear to corroborate Credit Suisse's claims.

It's all in the numbers
Avago reported that during its fourth fiscal quarter, it saw a 10% sequential boost in its wireless revenue, with sales to Apple in support of the iPhone 6s/6s Plus launch offsetting "product cycle rollover at one of [its] large Asian customers."

However, during the coming quarter, Avago is guiding its wireless business down by a "low-teens" percentage on both a sequential and a year-over-year basis.

Such a decline is usually normal and in-line with typical seasonal trends. The problem here is that this time last year, Avago was much more upbeat about demand staying flat to only declining "slightly" sequentially, with actual results showing 3% growth.

What this means for Apple stock
It's looking increasingly likely that Apple will have a difficult time keeping iPhone sales flat year-over-year; at this point I'm inclined to think that Apple will post a slight decline in iPhone unit shipments in the current fiscal year.

Given that iPhone makes up more than half of Apple's entire revenue base (and probably even more of its operating profit as iPhone is a higher margin product than iPad/Mac/Watch), Apple might have a hard time growing revenue for the year. Additionally, with Apple seemingly continuing to grow its research and development spending, keeping operating profit flat could prove an even greater challenge.

Indeed, last fiscal year Apple's revenue from iPhone totaled $155.041 billion (let's just call it $155 billion). If Apple sees revenue decline, say, 3.9% year-over-year (Credit Suisse analysts think units will decline by 3.9%), then that's a $6.05 billion hole that the company will need to plug with growth from elsewhere.

In the table below, I have included Apple's revenue by product category for fiscal 2015:

Product Category

Revenue in FY 2015 (billions)









Other Products


Data source: Apple.

To offset a 3.9% decline in iPhone revenue, Apple would essentially need to grow its non-iPhone business, in aggregate, by about 7.7%.

I think that if Apple refreshes its MacBook lineup early in the year then those products, coupled with third party estimates that call for a flat PC market next year, could help Apple achieve roughly 7% year-over-year growth in Mac revenue.

I could also believe that both "services" and "other products" could grow at 7%+ in the coming fiscal year. The product segment that I remain skeptical of is iPad.

Although Apple should benefit from increased average selling prices thanks to the introduction of iPad Pro, it's not yet clear whether iPad will return to being a growth business from a revenue perspective next year. The most I'd be willing to bet on at this point is that the year-over-year declines will lessen in the coming year.

At any rate, I think that if iPhone declines in the coming fiscal year, there's a reasonable chance that overall corporate revenues and operating profit will decline.

Fortunately for Apple stockholders, the shares are quite cheap (under 13 times trailing twelve month earnings per share; even cheaper once net cash is backed out), so I don't exactly see the shares plunging if Apple fails to grow this year.

What I will be watching is the market reaction to iPhone 7. If Apple sees iPhone return to growth in the next cycle, then the investment community should be able to write-off this cycle as a fluke (thanks to the very difficult iPhone 6/6 Plus comparisons). If iPhone 6/6 Plus represented "peak iPhone" then I wouldn't be surprised to see Apple's price-to-earnings ratio compress in the years ahead.