Apple's December quarter outlook in focus ahead of latest earnings report

Investing.com -- Apple (NASDAQ:AAPL) is due to unveil its latest three-month earnings after the closing bell on Thursday, with investors eager for details on the tech giant's performance during its September quarter as well as a look into its expectations for the crucial holiday shopping season.

This year has so far been mostly positive for the iPhone maker's stock. Shares have risen by over 30% in 2023, with traders comforted by the popularity of Apple's products and solid cash flow.

Yet its fiscal fourth quarter sales are expected to come in at $89.34 billion, according to Bloomberg consensus forecasts -- a fall from $90.1B in the same period last year and the fourth straight quarterly drop.

Meanwhile, analysts at JPMorgan Chase have flagged that headwinds are looming as Apple progresses through the December quarter, particularly in the form of a strong dollar, iPhone supply problems, and rising competition from rival Huawei in its key Chinese market. Lackluster global consumer spending momentum is also driving an elongation in the replacement cycle of smart devices, they argued.

"Sentiment has turned more challenging for shares of Apple in recent days," the JPMorgan analysts said in a note. They added that they will be on the lookout for commentary around the estimated quarter-on-quarter evolution of Apple's sales of gadgets like the iPhone, iPad tablets, and Mac laptops. Projected growth in the double digits is also expected at the company's services business, which includes offerings like Apple TV+ and AppleCare device insurance.

Analysts at Barclays have warned that Apple's guidance for its current quarter -- typically its biggest by revenue thanks largely to the holiday season -- may potentially miss Wall Street estimates, citing in part signs of softening demand for new iPhones. Fresh versions of Apple's flagship smartphone, which feature a redesigned titanium body and USB-C charging port, were launched in September.

Apple's executives may also face questions around their plans to keep pace with other tech industry rivals in the intensifying race to harness and monetize the nascent growth of generative artificial intelligence, observers said. Heavy capital expenditures could be needed to grow A.I.'s presence in the business, although this would likely cause free cash flow to decline in Apple's 2024 fiscal year, according to analysts at KeyBanc.

"We believe [Apple] has a solid foundation of A.I. within its products and services though [it] has very little room for incremental capital investment in 2024 while also growing [free cash flow]," the KeyBanc analysts wrote in a note.