What investors need to know about how iPhone release dates affect Apple's sales

Published Thu, Jan 27 20228:47 PM EST

For the past 10 years, Apple has released new iPhone models in the fall, kicking off what analysts call the upgrade cycle. It starts with a big December quarter, as customers decide whether the latest model is worth buying. Sales explode, then decline sequentially over the year, as the release of next year's iPhone approaches. But the timing of the actual release can vary from year to year and have big implications for the tech giant's quarterly numbers. While new iPhones usually hit store shelves in late September, sometimes Apple releases new models in October or November due to supply issues or other challenges. This happened in 2020 as the pandemic erupted. Apple's iPhone 12 and iPhone 12 Pro went on sale on Oct. 23 that year. The iPhone 12 Mini and iPhone 12 Pro Max went on sale on Nov. 13. In 2021, the iPhone release schedule was back to normal. The new iPhone 13 models released on Sept. 24, as Apple's fiscal year was coming to a close. This presents a challenge for Apple investors and analysts, because it shifts year-over-year comparisons. When an iPhone is released late in the middle of Apple's December-ending quarter, people who couldn't get one during the holiday season could decide to buy in January or February instead. Regular orders from Apple's retail partners who buy wholesale iPhones could also shift to the next quarter as well. That's exactly what Apple CFO Luca Maestri warned about on Thursday, when the tech giant reported its fiscal first-quarter results . He told analysts during a conference call that Apple faced a challenging "year-over-year compare" in the coming quarter. "Remember that last year we launched our new iPhones during the December quarter, while this year we launched them during the September quarter," Maestri said. "Due to the later launch a year ago, some of the associated channel inventory fill occurred during the March quarter last year." Maestri noted that during last year's March quarter, amid the delayed iPhone 12 cycle, Apple's total revenue grew 54%. That was driven by nearly $48 billion in iPhone revenue. On Thursday, Maestri said that tailwind wasn't at Apple's back anymore. He noted that the company expects current-quarter revenue to grow year over year, albeit at a slower rate than last quarter. (Apple hasn't provided revenue guidance since the start of the pandemic, but it has offered directional data points.) This opens the door for iPhone sales and growth to look weak in the current quarter, or even negative. However, it reflects a reporting artifact driven by release dates and isn't a signal of the ultimate performance of iPhone 13 models. For iPhones, which make up the majority of Apple's revenue, analysts surveyed by FactSet are predicting $46.6 billion in sales for the current quarter. That would be a 2.8% decrease from last year's sales. Some analysts believe that this timing quirk is well understood by the market and has already been priced into Apple stock. "In our opinion, potential weakness in F2Q is well understood and investors will turn their attention to the next several catalysts including updated capital return (Apr.), WWDC (June) and next iPhone launch event in Sept.," BofA Securities analyst Wamsi Mohan wrote in a note earlier this week before Apple reported earnings. Still, he wrote that Apple could be facing a tough quarter marked by an annual decline. "iPhone units in [fiscal Q2 2022] face a tough year-over-year compare given the staggered launch of the iPhone 12 in 2020. Hence, we we expect reported iPhone units and revenue to be lower year-over-year," Mohan wrote. The last time there was a difficult second-quarter comp based on iPhone release dates was in 2019. In late 2017, Apple released the iPhone X and iPhone XR models in October and November. In 2018, Apple had a great second-fiscal quarter with nearly $38 billion in iPhone sales. But the hangover came a year later when Apple only reported $31 billion in iPhone sales in the second fiscal quarter of 2019.

Apple CEO Tim Cook attends the premiere for season two of the television series "Ted Lasso" at Pacific Design Center in West Hollywood, California, U.S. July 15, 2021.

Mario Anzuoni | Reuters

But the timing of the actual release can vary from year to year and have big implications for the tech giant's quarterly numbers.