Apple supplier Jabil Circuit just released its February earnings results and guidance for its May quarter, and the numbers are not good, either for Jabil itself or for Apple. It’s generally expected that the iPhone maker will post a decline in units for the March and June quarters, but the severity of those declines is up for debate. Because unit declines are expected, most analysts are basically casting off the iPhone 6s cycle at this point and instead focusing on the iPhone 7 cycle.

iPhone 6s A Throwaway Cycle As Analysts Strain Toward iPhone 7

How Apple affects Jabil Circuit’s numbers

Some firms say their measurement metrics suggest that the unit decline isn’t going to be as bad as expected, like Morgan Stanley, which bases its estimates on Web search results. However, others say investors may be questioning whether the decline will end up being twice as bad as expected, particularly in line of Jabil’s results and guide.

Jabil reported February quarterly revenue of $4.4 billion, which was a little light of consensus at $4.5 billion and at the low end of management’s guidance. In fiscal 2015, Apple accounted for 24% of total revenue, according to Pacific Crest Securities analysts. The Diversified Manufacturing Services segment’s revenue grew 5% to $1.76 billion, which came up short of the guide for about $1.9 billion. Stifel analysts report that Apple makes up about 40% of the segment’s revenue, although Pacific Crest pegs the percentage at more than half of the segment’s revenue for all of fiscal 2015.

Jabil Circuit said weakness in demand started in late January and then accelerated throughout the month of February, which impacted revenue by $150 million. The company added that the weakness has persisted so far into the current quarter, which is why they gave weak guidance for $4.1 billion to $4.3 billion in revenue, against Wall Street’s estimate of $4.75 billion. For the DMS segment, the company guided for a 10% decline in revenue to $1.45 billion.

What this might mean for Apple

Stifel analyst Aaron Rakers and his team are currently estimating a 14% sequential decline for Apple’s product revenue for the June quarter, but they say Jabil’s results could lead some investors to believe the decline will actually be along the lines of 30% to 35%. They draw comparisons between Apple’s sales and Jabil’s DMS revenue:

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Pushing toward the iPhone 7

Pacific Crest Securities analysts Andy Hargreaves and Evan Wingren note that Jabil’s results support the view that demand for the iPhone remains “relatively soft.” They’re currently projecting 47.5 million iPhone units for the March quarter after reducing the number from 49 million earlier this month. As a result, they don’t think Jabil’s results offer much of a downside risk to their unit estimate, although they note that Jabil said it believes it is still “gaining share with Apple,” which means that the sales shortfall is probably do to a huge drop in iPhone units instead of a loss share in Apple’s orders.

They add that while iPhone unit numbers will likely remain a challenge for now, they think the iPhone 7 will benefit from “normal” replacement volumes and that “moderated declines in new subscribers” will result in “solid” unit growth during the iPhone 7 cycle.

Apple shares edged higher by 0.19% to $106.17 in afternoon trades.