Apple services likely to top $7 billion this quarter

Apple Inc. is expected to report revenue at the high end of its guidance when it releases second-quarter earnings after the market closes Tuesday, fueled by the iPhone 7 Plus and continued growth in services.

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  has shifted the tone of its earnings calls recently to focus on software and services in addition to its flagship hardware. While the iPhone remains Apple’s biggest top-line contributor by far, services such as Apple Care and Apple Music surpassed the Mac last year, as revenues topped $24 billion.

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Last quarter, Apple CEO Tim Cook, who has referred to services as a “large and important source of recurring revenues” for the company, forecast that Apple’s services revenue would double by 2020. Credit Suisse analyst Kulbinder Garcha, who recently reiterated an outperform rating on the stock and lifted his price target to $170 from $160, said he believes services will grow to become 33% of Apple’s gross profit within a few years, with revenues increasing to $52 billion by 2020.

Overall, analysts are expecting an in-line quarter. But it’s important to note that this fiscal year is being compared against a historically weak 2016, when Apple recorded its first annual revenue decline in more than a decade and suffered its first-ever decline in iPhone sales.

Here’s what to expect:

Earnings: Analysts expect Apple to report GAAP earnings per share of $2.02, up from $1.90 in the year-earlier period, according to FactSet. Estimize, a software platform that uses crowdsourcing from hedge-fund executives, brokerages and buy-side analysts to predict earnings, has Apple earning $2.07 a share. Apple has a long history of topping the FactSet consensus estimate, and it usually comes relatively in-line with the forecasts on…

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