Apple likely sold 49.4M iPhones in Q2, though analysts warn China could be a risk

Apple's (NASDAQ: AAPL) continued strength in smartphones will likely produce stronger year-over-year iPhone sales in the second quarter, according to analysts. However, as China's economy slows amid a slide in the stock market there, Apple's sales could take a hit.

As CNET points out, analysts and research firms polled by Fortune estimated Apple sold 49.4 million iPhones in the second quarter (Apple's fiscal third quarter), which would be up 40 percent year-over-year. The second quarter is typically the weakest for Apple in terms of iPhone sales, as the company starts ramping up production for the September release of the next iteration of the phone, customers hold back on upgrading and sales of last year's model wane.

However, the iPhone 6 and 6 Plus have proven extraordinarily resilient this year, as Apple's upgrade to a 4.7-inch and 5.5-inch model has helped it against Android competitors. Samsung Electronics, Apple's chief rival, is also expecting a weaker second quarter, as analysts think it underestimated demand for tis Galaxy S6 Edge phone and could not adjust production fast enough.

Analysts polled by Fortune expect Apple to report revenue of $49.3 billion. Wells Fargo analysts Maynard Um, Munjal Shah and Jason Ng wrote in a research note they expect the company to report total quarterly revenue of $50.2 billion, up from a previous estimate of $48.8 billion. "We believe upside could be driven by strength in iPhone (helped by channel inventory fill and 25 carrier additions in the quarter) as well as Macs," they wrote.

Apple, which is typically conservative in its revenue and earnings guidance, said in April its sales for the June quarter would likely total $46 billion to $48 billion.

The Wells Fargo analysts think Apple will announce 50.1 million iPhone sales, up from their previous estimate of 48.2 million. "We think unit upside could be driven by the 25 carriers added in the quarter…as well as purposely building indirect channel inventory (ended last quarter at the low end of its 5-7 week target)," they wrote. "We are comfortable with our ASP of $615 (up 9.6% y/y). We believe gross margin upside in this S-cycle may be offset by increased bill of materials and potential pricing actions at the lower end."

Analysts polled by Fortune expect Apple to report 10.7 million iPad sales, which would be down 19 percent from 13.28 million a year ago and would represent Apple's fourth straight quarter of iPad sales decline. The Wells Fargo analysts think Apple will sell 12.3 million iPads. "While a refreshed iPad and/or a larger 12.9 inch iPad could temporarily help sales, we believe the bottom line impact would be minimal as overall tablet demand has remained soft in 2015 and every 10% increase in iPad sales increases EPS by $0.01, all else equal," they wrote.

The real danger for Apple, however, may be a slowdown in China. "We have witnessed fewer and fewer first-time buyers in China, a sign that the mobile-phone market there is reaching saturation," Gartner analyst Annette Zimmermann wrote in a research note, according to CNET.

China surpassed the United States as Apple's biggest smartphone market last quarter, thanks in part to a surge in sales around the Chinese New Year in February. Apple is also likely seeing continued residual benefits from its January deal with China Mobile, the world's largest wireless operator with more than 800 million subscribers.

China's economy has shown signs of slowing the last few months and its stock market has been in freefall, so investors will be looking for clues from Apple CEO Tim Cook and other executives on how China's economy could affect the company. "A slowing Chinese economy is a risk for Apple," UBS analyst Steven Milunovich told CNET. But UBS economists expect the Chinese stock market plunge to have a limited impact on the region's overall economy. "We think Apple is OK for now, but we will watch the situation closely," Milunovich said.

For more:
- see this CNET article
- see this MarketWatch article
- see this Fortune article

Related articles:
Apple's massive reported iPhone order could be driven by Chinese demand
Report: Apple asks suppliers to make up to 90M new iPhones by year-end
Report: Apple to start ramping up production of new iPhones with pressure-sensitive 'Force Touch' technology
Analysts: Apple's carrier partnerships have likely peaked, Q4 iPhone 6S sales could be flat
Apple design guru Jony Ive gets promotion, but steps back from day-to-day duties
Apple's iPhone beats expectations with 61.2M shipments