Here’s what to expect from Apple this week (AAPL)

Apple reports its second-quarter earnings on Tuesday, and the big question is whether Apple’s revenue could shrink for the first time in years.

Analysts expect that Apple may report a year-over-year decline in revenue for the first time since 2003. Along with the revenue decline, many are predicting that iPhone sales will fall year-over-year for the first time in the device’s history.

Last year, during this quarter, Apple reported $58 billion in revenue with profit of $13.6 billion. Analysts are predicting, on average, sales of around $52 billion.

Because the iPhone contributes about two-thirds of Apple’s revenue, a drop in iPhone sales could send Apple investors into a panic.

But last quarter, Apple already lowered its revenue guidance for this quarter, putting it between $50 billion and $53 billion. Apple’s stock price has fallen 18% in the past year.

Here are some other things investors will be looking at:

China performance

China has been the growth engine for Apple over the past few years, and the region contributed over $18 billion to Apple’s top line last quarter. But there are concerns that as China’s economy slows down and more of its middle and upper classes already have smartphones, the demand for Apple’s highly priced iPhone could be cooling down.

In addition, Chinese regulators recently shut down Apple’s online iTunes media store that sold movies and books in the country. If either Apple’s relationship with Chinese regulators is cooling or if its growth in the country is slowing, both would be concerning to long-term Apple investors.

iPad sales

Steve Kovach/Tech Insider

Apple released a new version of its 9.7-inch iPad this quarter, the iPad Pro, and several weeks of its sales will be counted in Apple’s earnings.

Whether that’s enough for Apple to reverse its decline in shipments remains to be seen. iPad sales peaked in 2013, and fell in 2014 and 2015. The more professionally focused iPad Pro was partially designed to appeal to businesses, with the hope being that an increasing number of businesses will simply issue iPads to their employees instead of a traditional laptop.

But the iPad Pro has been on sale for only a single month — just like Apple’s new-old iPhone SE — so it might not have had the opportunity to make a huge difference yet.

Services

Apple has signaled that it wants to be a services company — basically, it says that it can provide paid services to its installed base of over 1 billion devices in use.

CEO Tim Cook even addressed the issue during a conference call to discuss the company’s first-quarter earnings and broke out services revenue into its own chart.

“In addition, a growing portion of our revenue is directly driven by our existing install base. Because our customers are very satisfied and engaged, they spend a lot of time on their devices and purchase apps, content, and other services,” Cook said.

In the past quarter, there hasn’t been a huge deal in terms of new services or revenue streams, but investors will want to see that usage has continued to grow. In addition, the App Store, one of Apple’s most profitable services, recently changed leadership and added new features to appeal to developers. Investors will want to see that services continue on pace to be Apple’s next “$50 billion business.“

Next quarter’s guidance

BI Intelligence

But the No. 1 question on investors’ minds will be if Apple provides guidance for a second-straight quarter of negative growth.

Some analysts, citing the supply chain, believe that the bottom has not yet been reached in terms of iPhone sales. Nikkei reported earlier this month that iPhone production will remain slow through June, temporarily dropping Apple’s share price.

Top Apple analyst Ming-Chi Kuo has also outlined a worst-case scenario in which iPhone shipments could fall below even their 2014 level, concurring with an increasing number of analysts who think that iPhone sales for 2016 could be surprisingly low.

Other analysts believe that iPhone orders have stabilized, and they expect them to grow again in the fall with the help of the iPhone 7. Still, it turns out, the most important number in Apple’s second-quarter earnings will be what the company expects from the third quarter.