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3 Key Highlights before Apple’s Q2 Earnings Report

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Sep. 4 2020, Updated 6:51 a.m. ET

Today, Apple (NASDAQ:AAPL) plans to release its financial results for the second quarter of fiscal 2020, which ended in March 2020, after the market close. Notably, the company’s earnings report is set to arrive as it grapples with the impact of COVID-19. The pandemic has cast doubts about Apple’s annual iPhone launch schedule. However, the stock has started recovering from pandemic lows. The stock has risen about 10% this month compared to a fall of about 7.0% in March.

Here are three things investors need to know before Apple’s earnings report.

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Apple’s earnings expectations

Wall Street expects Apple’s earnings report to deliver lower profit and revenue from a year ago. The consensus estimate calls for an EPS of $2.26 for the second quarter of fiscal 2020. In the second quarter, Apple posted an EPS of $2.46, which beat the consensus estimate at $2.36.

The consensus estimate calls for Apple to deliver revenue of $54.6 billion. The revenue would be down from a year ago and fall short of Amazon’s Internet forecast. Apple delivered revenue of $58 billion in the second quarter of fiscal 2019, which beat the consensus estimate at $57.4 billion. For the second quarter of fiscal 2020, Apple originally expected revenue of $63 billion–$67 billion. The company lowered its revenue outlook when the coronavirus outbreak hit its business.

Apple’s iPhone launch schedule

Apple’s earnings report is set to arrive amid doubts about this year’s iPhone launch schedule. For example, some reports have suggested that Apple might delay or suspend the launch of its flagship 5G iPhone this year.

Supply chain disruptions and potentially weak consumer demand are some of the challenges that Apple’s iPhone business faces right now. The pandemic has cut households’ incomes, which cast doubt about the demand for high-end iPhones. The phones can cost upward of $1,000.

However, Apple has already released the pocket-friendly iPhone SE, which could be a great fit for the pandemic-hit market. The iPhone business is Apple’s main revenue source.

Services revenue

Investors will be scrutinizing Apple’s earnings report for progress in the company’s services business. Apple has been working to diversify its revenue sources outside the iPhone business.

The company has put a lot of emphasis on its services business. In 2016, Apple set out to double its services revenue in five years, which means hitting $48.6 billion in services revenue in fiscal 2020. Last year, the company came within striking distance of the target when it reported $46.3 billion in services revenue. Notably, Apple’s earnings report for the first quarter of fiscal 2020 delivered record quarterly service revenue of $12.7 billion.

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