Every year, Apple's (NASDAQ: AAPL) first fiscal quarter (coinciding with the fourth calendar quarter) proves to be a monster period for iPhones. Driven by the seasonality of the holidays and Apple's annual updates to its iPhones just before the shopping season, the tech giant always posts its biggest iPhone sales of the year during the quarter.
Investors are particularly interested in this fiscal year's first quarter, because it aligns with the first full quarter of availability of the iPhone 8 and 8 Plus, and the launch of Apple's special 10th-anniversary iPhone -- the iPhone X. In addition, with the iPhone X coming to market over three years since Apple last updated the overall form factor of the iPhone, investors will be watching to see whether Apple could have an unusually robust iPhone upgrade cycle.
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Ahead of Apple's first-quarter earnings release next week, here's what to expect from the company's iPhone segment.
Looking to revenue guidance
Given Apple's recent launch of one of the most highly anticipated iPhones ever, investors should have high expectations for the tech giant's first-quarter iPhone sales.
One of the best ways to preview potential iPhone sales for the quarter is to look at Apple's guidance for total first-quarter revenue. For its first quarter, management said it expected total revenue to be between $84 and $87 billion, up 7% to 11% year over year. Since the iPhone accounted for 62% of trailing-12-month revenue, you can bet Apple's guidance is closely informed by management's expectations for the iPhone during the quarter.
Indeed, management directly mentioned the relationship between its guidance and its expectations for iPhone sales in its fourth-quarter conference call. When asked for specifics on how expectations for iPhone sales impacted management's guidance for its first quarter, Apple CEO Tim Cook mostly avoided the answer, but he did point to guidance for overall revenue as a good barometer of what to expect from the iPhone (via a Reuters transcript):
What to expect
Taking Apple's revenue guidance into consideration, investors should expect iPhone revenue to increase at a similar rate -- 7% to 11% year over year.
For iPhone unit sales, however, investors should keep in mind that management likely anticipated a higher average selling price for the product segment in Q1 since the iPhone 8 and 8 Plus cost more than the iPhone 7 and 7 Plus did at their launch, respectively. Further, the iPhone X really pushed the limits of Apple's pricing power with a $1,000 starting price. This means management's expectations for iPhone unit growth is likely slightly below its forecast for iPhone revenue growth.
Look for first-quarter iPhone unit sales growth of about 5% to 9%. More specifically, Apple should sell around 82.2 million to 85.3 million iPhones in Q1, up from a record 78.3 million iPhones in the year-ago quarter.
Driving home why first-quarter iPhone sales are so important, quarterly iPhone unit sales this high would be up 79% sequentially, based on the midpoint of expected 85.2 to 85.3 million iPhone unit sales.
Apple releases its first-quarter results on Thursday, Feb. 1, after market close.
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