Analysts expect Apple to post its first year-over-year revenue decline since 2019’s March quarter when it reports earnings on Thursday. There are a few contributing factors.

The company couldn’t build enough of its high-end iPhones when its primary assembly facility in China was shut down for weeks during Covid lockdowns. Customers in many regions noticed as early as November that Apple couldn’t promise Christmas delivery of a new iPhone.

Apple gave a rare warning to investors that month explaining that production issues would result in lower shipments than “previously anticipated.” It was a data point that caused many analysts watching the stock to cut their estimates.

“We believe the peak impact of the disruptions was felt in early to mid November as wait times hit an extreme level (link) as the wait time in the US for the 14 Pro and 14 Pro Max reached 34 days while wait time in China at the high-end hit 36 days,” UBS analyst David Vogt wrote in January.

Analysts polled by Refinitiv expect Apple to report just over $121 billion in revenue in the December quarter, which would be a slight decline from the company’s $123.9 billion from a year ago.

But the problems aren’t Apple-specific. The PC and smartphone markets are slumping as consumers and businesses digest sales from the pandemic and cut costs to prepare for a possible recession.

The smartphone market saw an 18% decline in shipments in the fourth quarter, according to IDC, the worst decline ever recorded by the market research firm. The PC market fell 28% in the fourth quarter, according to the company. But many investors believe that Apple is outperforming its competitors even in a contracting market.

“While the state of consumer demand remains a near-term concern, we believe the underlying drivers of Apple’s model – a growing installed base and spend per user – remain intact, and that the strength/stability of Apple’s ecosystem remains undervalued,” Morgan Stanley analyst Erik Woodring wrote in a note earlier this month.

Here’s what Wall Street is expecting, according to Refinitiv consensus estimates:

• Revenue: $121.19 billion
• Earnings per share: $1.94 per share
• iPhone revenue: $68.29 billion
• iPad revenue: $7.76 billion
• Mac revenue: $9.63 billion
• Other products revenue: $15.26 billion
• Services revenue: $20.67 billion

Apple hasn’t given guidance since 2020, citing uncertainty first caused by the pandemic. However, the company usually provides a few data points that can give analysts a sense of how it’s doing.

Investors want to know whether the shortage of iPhone 14 Pro models in the December quarter will drive demand in the March quarter now that supply has improved.

Analysts expect just over $98 billion in sales in the March quarter, according to consensus estimates, signifying slight year-over-year growth.

“While we believe it’s well understood that Apple’s March quarter revenue should decline at a less-than-seasonal rate due to the pushout of iPhone demand from the December quarter to the March quarter,” Morgan Stanley’s Woodring wrote in a note last week, “the consumer electronics spending backdrop remains challenging, with tablets, PCs and more discretionary products (i.e. wearables) all facing continued demand headwinds.”

But if consumer confidence erodes in the face of higher interest rates and shrinking savings around the world, then Apple could suggest to investors that the company’s March quarter will be slow.

“While we don’t expect the resumption of detailed guidance typical of Apple earnings prior to Covid, we expect the commentary to be cautious regarding Product demand across the board,” UBS’s Vogt wrote.

If management commentary is soft, investors looking for a silver lining might want to look at Apple’s services business, which is profitable and has been growing strongly for years. However, several data points in the fourth quarter, including Apple’s own App Store payouts, suggest a significant slowdown in App Store growth, although analysts are split on its severity.

The App Store is one of the largest components of services, but it’s only a part of the business, which includes online subscriptions, warranties and search licensing fees. Apple shares could push higher if services such as Apple TV+ and Apple Music look like they’re generating a higher percentage of Apple’s revenue, D.A. Davidson analyst Tom Forte wrote in January.

Services are expected to total $20.67 billion in the December quarter, according to Refinitiv estimates, representing a 5.9% growth rate.

Analysts will also watch to see if the strong dollar continues to hurt Apple, given that so much of its sales are overseas. During the December quarter, the British pound, the Canadian dollar and the Japanese yen all weakened compared to the dollar. Apple management previously said the strong dollar would be a 10 percentage point drag on sales growth.