Blog Post

Apple earnings preview: The iPad may finally rival the iPhone

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

Apple’s(s AAPL) most popular product is the iPhone. It makes most of its money from the iPhone too, leaving little doubt that it is the company’s core product. But in a quarter without a new iPhone, and one in which the iPad has continued to gather steam as it’s released in more countries, it’s worth wondering if the iPad could be finally rivaling the iPhone in terms of sales and significance to Apple’s bottom line when it reports its fiscal third-quarter earnings on Tuesday.

The iPhone, no matter what, is the product that will determine how investors react to these quarterly results — overall revenue is expected to be somewhere around $37.4 billion and earnings per share $10.35. If sales are up from the 20.3 million iPhones sold during the same quarter last year and the 35.1 million sold between January and March this year, investors will be ecstatic. Analyst predictions for iPhone sales cover a wide range, from 27 million units to 38.5 million units.

One bit of data that could be making Apple investors slightly nervous heading into Tuesday’s call is Verizon’s(s VZ) results from last week. The carrier sold 2.7 million iPhones during the quarter, making it the single most popular smartphone model it sold, but that total is down from the 3.2 million sold in the previous quarter. It’s just one carrier — AT&T’s(s T) data won’t be available until later this week — which obviously doesn’t account for the hundreds of other carriers around the world that sell the iPhone. But it is one hint.

Still, even without a new device, Apple took some important strategic steps with iPhone distribution during the quarter, which could help make up for any dropoff with Verizon sales. Apple attempted to broaden its customer base by adding its first prepaid carriers in the U.S. with Cricket and Virgin Mobile.

Meanwhile, iPad sales are expected to shatter records. Last quarter’s results, 11.8 million, included less than one month of sales data with the third-generation iPad on store shelves, and in just a few countries. Apple added 21 countries during the quarter to bring the total to 56, the fastest it has rolled out a new version of the tablet yet. And that has Apple watchers pegging sales between 12.7 million and 24 million units. For perspective, the record is 15.4 million, and that was over a holiday quarter.

It’s possible that the iPad could start venturing into iPhone territory. The two devices would be in the same ballpark if the iPhone came out on the low side of estimates (27 million) and iPad on the high side (24 million).

No matter what, it’s likely going to be another quarter that will enable Apple CEO Tim Cook to talk about the post-PC world Apple is building. Apple’s Mac sales figures are one of the bigger mysteries going into these earnings, but Mac sales trail its iOS cousins by a large margin.

It was a difficult quarter for outsiders to read the performance of the Mac business. Apple waited almost a year to update its laptop lineup, causing many customers to sit out making purchases. (That was reflected in last quarter’s results which saw very modest 7 percent year-over-year sales growth.) The updated MacBook Air, MacBook Pro and new MacBook Pro with Retina display were introduced at WWDC and went on sale late last month, which means that those new orders aren’t likely to have a huge impact on the quarterly numbers. And the two research firms that keep track of PC sales had widely divergent data regarding Mac sales: IDC showed Apple’s U.S. computer sales dipped slightly by 1.1 percent, while Gartner showed Macs bucking the wider industry trend, seeing its Mac sales rise by almost 2 million units compared to the same quarter a year ago.

These are now the three legs of the stool that former Apple CEO Steve Jobs once used as a metaphor for Apple’s business: back then, it was the Mac, the iPhone and the iPod, but the iPad has supplanted the once ubiquitous music player. The iPod and the Apple TV are relevant to Apple’s quarterly earnings only in terms of the questions they now spark. As in, does Apple ever plan on doing a significant update to the iPod lineup again? And what exactly are Apple’s plans for the living room?

Those are interesting questions, but Tuesday will belong to the iPhone and iPad.

This post was updated at 11:35 a.m. with the correct EPS consensus.

5 Responses to “Apple earnings preview: The iPad may finally rival the iPhone”

  1. Adam C

    It makes no sense that the analysts guesses, er, estimates are more important than the actual earnings of a company.

    It is time for the industry to relook at analysts estimates because they are just guesses and judge the performance of a company on the merits of its earning results and not the wild guesses of these wall street analysts.