'Tough near-term setup': Here's what Wall Street expects from Apple's 2nd-quarter earnings

• Apple is scheduled to report its fiscal second-quarter earnings on Thursday after the market close.
• Investors are focused on Apple's iPhone sales in China as competition ramps up.
• Here's what Wall Street expects from Apple's upcoming earnings report.

All eyes are on Apple as it gets ready to report its fiscal second-quarter earnings on Thursday after the market close.

Analysts are dialed in on Apple's iPhone business in China, which has faced a surge in competition over the past year, as well as its capital return plans and guidance as it prepares to release its next-generation iPhone later this year.

Here are the quarterly figures Wall Street expects, according to data from Bloomberg.

• Revenue: $90.33 billion
• Earnings per share: $1.50
• Gross margin: 46.6%

The sentiment on Wall Street is that Apple, which has seen little-to-no revenue growth over the past year, is due for a big iPhone replacement cycle when it launches its next-generation iPhone 16 later this year. Rumors that the iPhone 16 will include AI capabilities is exciting Wall Street, but whether it will be able to spark a return to growth for the company remains to be seen.

Here's what Wall Street analysts are saying about Apple's upcoming earnings report.

Wells Fargo: 'Tough near-term setup'

Wells Fargo said Apple faces a "tough near-term setup" due to weak iPhone sales in China, which has led the company to lose market share to local competitions like Huawei and Xiaomi. 

The bank said Apple will likely see a 2% decline in its iPhone business this year, as its iPhone 15 has not lived up to the hype of sparking a replacement cycle for its massive user base.

"We now see F2Q24 iPhone ship b/w 50-52M; slightly below our 52.9M est," Wells Fargo said in a recent note. The bank said it expects a 20% year-over-year decline in Apple's China iPhone business, as well as the average selling price of the iPhone hitting $870, which is about $20 below Wall Street's estimates of $890.

Overall, Wells Fargo expects Apple to report a slight beat on revenue and earnings per share in the quarter, but said more importantly the focus will be on Apple's guidance and capital allocation plans. 

"We think a dividend increase of 10% and another $90B in new share repurchase authorization would be viewed positively," Wells Fargo said.

Wells Fargo rates Apple at "Overweight" with a $225 price target.

Barclays: Better Mac and iPad sales to offset iPhone weakness

Channel checks at Barclays suggest "slightly better" iPad and Mac revenues will help offset weak iPhone revenue, according to a recent note.

The firm said Wall Street estimates on Apple are too high, with analysts underestimating the ongoing weakness in China.

"Our latest checks also indicate iPhone 15 sell-through in China continues to show DD declines on a Y/Y basis over the last few weeks, after being down 20% in C1Q, with a higher mix of the base models, leading to negative mix shift and margin headwinds, with likely ASP declines on a Y/Y basis," Barclays said.

And while Apple management might talk up the Vision Pro on its earnings call, investors shouldn't put too much weight into it as financial results from the product will be "immaterial".

Finally, Barclays said the AI-capable iPhone 16 won't deliver the growth that some investors expect. 

"We don't expect iPhone 16 to have significant design changes, and any differentiated GenAI applications with the iPhones will likely not launch until 2025 at the earliest. The initial build plan for iPhone 16 is expected to be in low 80Ms range, implying flattish unit growth Y/Y," Barclays said.

Barclays rates Apple at "Underweight" with a $158 price target.

Goldman Sachs: Risk in Apple stock is well understood by investors

Goldman Sachs expects Apple to deliver an in-line quarter when it comes to its second-quarter revenue and earnings per share, and said that the risks in Apple stock are well understood by investors.

The bank said that any weakness in Apple stock following its earnings report, perhaps sparked by underwhelming third-quarter revenue guidance, would be an attractive entry point for investors.

The bank said investor focus should shift from Apple's earnings to its second half-of-the-year catalysts, which include new product announcements like the iPhone 16 and new product launches across its iPad and Mac lineup.

"June quarter earnings could mark a turning point in sentiment, with the next catalysts being Apple's Worldwide Developers Conference on June 10-14, where it will discuss the latest operating systems and potentially discuss new generative AI features and the launch of iPhone 16 in September," Goldman Sachs said.

Goldman Sachs rates Apple at "Buy" with a $226 price target.

JPMorgan: 'Cyclical headwinds prior to AI tailwinds'

Low expectations heading into Apple's second-quarter earnings release are warranted, according to JPMorgan, but the "cyclical headwinds" could soon turn into "AI tailwinds," according to a recent note.

"The upcoming earnings print will still matter for investors in offering insights into the magnitude of the cyclical challenges on account of pressured consumer spending as well as the headwinds in relation to market share moderation in China," JPMorgan said.

The bank said investor expectations might be so low that a slight miss from Apple could spark a turnaround in the stock price as the result may be better-than-feared.

JPMorgan said that based on the latest demand trends, it expects Apple to report a modest revenue miss in the quarter, as well as a "more significant" miss to revenues when it reports third-quarter revenue guidance.

JPMorgan rates Apple at "Overweight" with a $210 price target.