Huawei’s Comeback Could Derail Apple’s Holiday Quarter Plans

Apple investors will have one big question when the world’s most valuable company reports earnings on Thursday – will Huawei’s resurgence in China dampen its holiday-quarter expectations? The company, which will post results for the July-September period, is grappling with an uneven recovery in the world’s second-largest economy and tougher competition from Huawei after the Chinese firm’s new Mate 60 Pro series phones saw early solid sales. Its own iPhone 15 line-up has gotten off to a slow start.

Apple’s holiday quarter is a crucial test of demand for its latest products, especially its higher-priced smartphones. Analysts expect a slight increase in average selling prices, which account for roughly a third of revenue, to help counter declining unit sales.

But a key factor may be how much of an impact the ongoing crisis between the United States and China has had on the tech giant’s supply chain, particularly in Asia, where most of its hardware is manufactured. That could lead to a sharp decline in the number of phones that make it to consumers.

Regardless, many analysts still see Apple as well positioned to beat revenue and profit estimates based on a history of solid product cycles and a business model that relies heavily on high-margin services and software. Apple is also expected to report lower costs, boosting the bottom line.

The company has been releasing new products this year to try to reinvigorate its sales, including the MacBook Pro and iMac computers that were introduced this week and three new chips that will power those devices. But the company will likely have to contend with a softer market for PCs in general, as well as continued weakness in iPhone sales.

Apple is also expected to deliver a strong showing in its services division, where revenue growth has been a bright spot for the company over the past several years. But the bank is not counting on a massive rebound in the Mac or iPad businesses, which are expected to see double-digit revenue declines.

Goldman Sachs analyst Rod Hall said the company cannot rely on those businesses to drive growth in its overall earnings, which will be boosted by a solid performance from its iPhone and Services operations. The firm rates Apple at “Buy” with a $213 price target, representing a potential upside of 25%.

Huawei is a global leader in telecom equipment and a significant player in cloud computing, cyber security, and 5G network technology. But US sanctions and worries about its ties with the Chinese government have dampened its business. In response, it has focused on expanding internationally and has invested in boosting its brand recognition among consumers.

However, experts say the company faces a significant challenge in marketing itself globally and establishing a credible track record abroad. It’s a challenge that has also held back other domestic competitors, such as Xiaomi and ZTE, which have struggled to overcome a weaker reputation in the markets where they compete.