The one thing everyone will watch during Apple's earnings

Apple (AAPL) will announce its Q1 2017 earnings on Tuesday afternoon, and everyone will look to see just how many iPhones the technology giant sold during the all-important holiday shopping season.

The iPhone is Apple’s biggest moneymaker. It’s the lifeblood of the Silicon Valley behemoth. And after declines in iPhone sales over the last three quarters, the biggest news will be whether Apple managed to turn those numbers around.

Apple CEO Tim Cook speaks during an event to announce new products on Sept. 7, 2016, in San Francisco. (Photo: Marcio Jose Sanchez/AP)Apple CEO Tim Cook speaks during an event to announce new products on Sept. 7, 2016, in San Francisco. (Photo: Marcio Jose Sanchez/AP)View photos
Apple CEO Tim Cook speaks during an event to announce new products on Sept. 7, 2016, in San Francisco. (Photo: Marcio Jose Sanchez/AP)
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Last quarter, Apple sold 5.2% fewer iPhones than in Q4 2015. Seeing an improvement in Q1 2017 could prove especially difficult, as Q1 2016 was the company’s best quarter ever with all-time record iPhone sales.

It doesn’t help that Apple’s iPhone 7 and 7 Plus weren’t all that different from the company’s iPhone 6s and 6s Plus in terms of design and overall functionality. The biggest change was the iPhone 7 Plus’ new dual-lens camera, which could have driven more users to opt for the pricier handset versus its less expensive, and smaller, sibling.

Apple iPhone 7.Apple iPhone 7.View photos
Apple’s iPhone 7 in jet black.
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Outside of overall iPhone sales, it’ll be important to watch the handset’s average selling price, or ASP. The average selling price tells you exactly what it sounds like — the average selling price for each iPhone that consumers purchased.

If you see an increase in iPhone sales, but a decrease in ASP, it means that consumers purchased less expensive iPhones like the iPhone SE, iPhone 6s and 6s Plus or iPhone 7. If you see a lower than expected number of iPhones sold, but a higher ASP, it means more consumers were buying the pricier iPhones like the 7 Plus, or opting for iPhones with more expensive storage options.

Of course, if we end up seeing a higher number of iPhones sold than last quarter and a higher ASP, well, then Apple had a great Q1.

UBS’ Steven Milunovich says to expect the iPhone’s ASP to be at about $693 compared to the Street’s estimate of $685, based on increased interest in the iPhone 7 Plus.

Credit Suisse’ Kulbinder Garcha and William Chu, meanwhile, believe that Apple will report a slight year-over-year increase in iPhone sales — 77 million units compared to Q1 2016’s 75 million units. The analysts also indicate there will be a positive shift towards the iPhone 7 Plus, which should push the ASP a bit higher.

Apple could have also seen a small bump in iPhone 7 sales due to Samsung’s Note7 exploding-battery fiasco.

Barclays’ analysts Mark Moskowitz and Daniel Gaide, however, believe that customers are shopping for less expensive iPhones like the 6s versus the 7. The analysts point to data from IDC, which indicates that 20% of iPhones sold cost less than $500 in the previous two quarters. Such a trend could mean customers believe less expensive devices are more than adequate for their needs.

Naturally, it’ll be important to watch for the iPhone’s performance in China, where it has had trouble recently due to competition from local manufacturers that produce similarly powerful devices at cheaper prices.

iPhone 7 Plus cameraiPhone 7 Plus cameraView photos
The iPhone 7 Plus and its dual-lens camera.
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Investors should keep an eye out to see how much revenue Apple pulled in from services like Apple Music and the App Store. There will also be interest in the company’s other hardware products like the refreshed MacBook Pro 13-inch and 15-inch. Reviewers largely praised the devices, but noted that Microsoft’s Surface laptops and 2-in-1 devices offered more flexibility in terms of overall usage.

Of course, the biggest story for Apple going forward will be the iPhone 8. The phone’s release will mark the 10th anniversary of the iPhone line and is expected to offer a variety of new features and upgrades, chief among them an embedded Home button and an OLED display.

If the phone can wow consumers with enough enhanced functionality, it could be the first iPhone in a while to whip potential buyers into a frenzy of anticipation. The other side of the coin, however, is that the phone won’t be able to live up to the lofty expectations people already have for it, and end up hurting Apple more than it helps.

We’ll find out more when Apple announces its Q1 2017 earnings after the final bell on Jan. 31.

More from Dan:

Email Daniel at dhowley@yahoo-inc.com; follow him on Twitter at @DanielHowley.

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