Apple is likely to post solid first-quarter results this afternoon, Wells Fargo Securities predicted, although concerns linger that the next iPhone could be delayed due to limited supplies. Meanwhile, reports indicate developer support for the Apple Watch may be slipping.
Senior Analyst Maynard Um lowered Wells Fargo’s estimate for iPhone shipments during the quarter to 51 million, down from a previous expectation of 53 million, “posing some risk” to earlier estimates of $53.4 billion in revenue and $2.07 earnings per share. But Um predicted gross margins of 39.1%, slightly more than Wall Street expectations of 38.7%, and he noted Apple’s recent statement that it would withhold royalty payments to Qualcomm until an ongoing dispute is resolved.
“Apple also noted that it would not be paying royalties to its contract manufacturers, mitigating gross margin risk to the June quarter,” Um wrote in a research note to investors. “Reports suggest that the OLED iPhone 8 could be delayed until October to November due to manufacturing challenges and component constraints … If the OLED iPhone availability is pushed out, we believe there is risk to our/(Wall) Street’s September/December quarter though we continue to expect an on-time launch.”
And developer support for the Apple Watch may be wavering as the overall smartwatch market continues to struggle. Google Maps recently stopped supporting the gadget in its latest update for iOS, Apple Insider reported this week, and updated iOS versions of both Amazon and eBay don’t include Apple Watch support.
Google has since said it plans to support Apple Watch in its Maps app in the future, but the moves underscore a smartwatch market that has yet to gain mass-market traction.
Canalys said in February that Apple Watch had its best quarter during the holiday season, shipping 6 million units and accounting for nearly 80% of total smartwatch revenue during the period. Apple sold 11.9 million of the devices in 2016, according to Canalys estimates, claiming roughly half of the global market for the full year.
Those figures echo estimates issued by IDC late last year that pegged Apple’s share of the worldwide smartwatch market at 41% in the third quarter. But Apple's share of the broader market for wearables was only 4.9%, IDC said, highlighting the fact that sales are being driven primarily by fitness bands as smartwatches continue to struggle.
“Smart wearables have been down in recent quarters, but clearly not out,” IDC Research Manager Ramon Llamas said in a December press release. “As user tastes change, so will their needs. That’s the opportunity for smart wearables with multifunctionality and third-party applications, both for consumers and business users. To get there, we need to see more intuitive user interfaces, seamless user experiences, standalone connectivity and applications that go beyond health and fitness and into personal and professional productivity.”