China and Apple’s TV service will be under the spotlight when the tech giant reports earnings

Apple is set to report fiscal first-quarter results on Tuesday after the closing bell, and it’s a critical report for the company. Apple’s fiscal first quarter covers the holiday shopping season and is the company’s biggest quarter in terms of revenue.

This will be the first full quarter with iPhone 11 sales, so analysts and investors will watch closely to see how well the newest models, launched in September, are doing in the market. Apple’s iPhone remains its biggest product and a subject of considerable investor interest. But attention will also be focused on AirPods, if Apple’s services are showing up in the accounting, and demand in China.

Apple shares are up over 3% in 2020 so far, and up over 100% since it reported first quarter earnings in 2019. Apple’s rise in recent weeks has led to a slew of analysts revising their price targets higher as the share price climbs.

Analysts are expecting earnings per share of $4.55, up from $4.18 per share from a year ago, according to Refinitiv. Revenue is expected to be $88.5 billion, up year-over-year from $84.3 billion.

But Apple shares tend to move on forward guidance during earnings reports. Analysts project $62 billion in sales in the quarter ending in March, according to a survey by Refinitiv. A shortfall in that area could send shares lower.

Beyond the numbers, here are some more subtle things investors will be watching out for.

Just over a year ago, Apple CEO Tim Cook was addressing investors about weakness in China that led to an unusual revenue forecast warning.

Since then, Apple shares have been on a tear. Plus, Apple dodged tariffs on the iPhone in December after the U.S. and China struck a “phase-one” trade deal.

But there are still concerns over Apple’s exposure to China, which accounted for 16.7% of its revenue in the last four quarters, and where it manufactures the majority of its products. Stocks dropped on Monday over fears that the deadly coronavirus could hurt sales in China after some regional governments restricted travel.

“Apple is potentially losing out on sales during an important holiday period. While there are only closures in certain cities/regions, traffic footfall in the retail stores is likely to be lower,” J.P. Morgan analyst Samik Chatterjee wrote in a Monday note.

While Apple’s earnings won’t be effected by the coronavirus outbreak, which was first reported on Dec. 31, any commentary that CEO Tim Cook provides on the situation in China will be closely watched.

Goldman Sachs analyst Rod Hall believes any commentary Apple gives about its Apple TV+ streaming service will be one of the most interesting points on Tuesday.

“We continue to believe that Apple TV+ accounting will continue to boost Services revenue this year as iPhone and other product revenue is effectively reclassified into Services,” Hall wrote in a note on Monday.

Apple TV+ is a streaming service stocked with Apple-backed TV shows, documentaries, and movies. Its list price is $4.99 per month, but Apple is bundling a free year with most of its gadgets.

In September, Hall wrote that the way that Apple accounts for Apple TV+ might result in lower gross margins and profits. Apple responded to the Goldman note at the time, saying that it does “not expect the introduction of Apple TV+ … to have a material impact on our financial results.”

“As Apple starts to amortize original content creation (capex) costs through the P&L, the impact to Services profitability will be closely watched,” Cowen analyst Krish Sankar wrote last week.

For the past two quarters, Apple executives have called attention to its wearables business, which includes Beats headphones, Apple Watch and AirPods.

Apple doesn’t split it out separately — it’s lumped into “Wearables, Home and Accessories,” which includes products like iPod touch, HomePods, and third-party accessories sold by Apple. Nonetheless, analysts will be watching it closely.

“Potential upside to F1Q is most likely to come from Wearables, in our view,” wrote Morgan Stanley analyst Katy Huberty.

For much of the December, Apple’s high-end AirPods Pro were hard to find, suggesting big demand or limited supply.

In December, Citi analyst Jim Suva estimated that Apple could surpass $10 billion of quarterly wearables sales in the quarter.

“We believe consensus is underappreciating the Apple Watch and Apple AirPods demand strength,” Suva wrote.

However, Hall, the Goldman analyst, believes that investors are already expecting a big quarter from the segment.

“We expect wearables, including both Airpods and Watch, to be positive headline generators, but we believe consensus is already baking in strong numbers in Other Products,” Hall wrote.