Apple Inc. is expected to report its second straight quarter of iPhone declines on Tuesday, but the company’s software and services business could provide growth that hardware sales have lost.

Apple AAPL, +1.46% is on tap to report results for its fiscal third quarter after the market closes Tuesday. The company has struggled to grow hardware sales in recent quarters as customers await next-generation devices, take longer to upgrade and opt for cheaper competitors more often than in the past. Last quarter, Apple reported the first year-over-year iPhone sales decline in the history of the smartphone, which generates the majority of Apple profits.

To counter that trend, Apple has shifted the tone of its earnings conference call to focus increasingly on software and services, which now generate more revenue than the Mac. Revenue from software and services, which includes the App Store, Apple Care, Apple Pay, Apple Music and iCloud, rose 20% to $6 billion last quarter, compared with $5.1 billion for the Mac. The growth of that division prompted Chief Executive Tim Cook to declare services as a “large and important source of recurring revenues” for Apple, buoyed by the company’s one-billion-plus installed base.

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But the lag in hardware continues to be an issue for the company. Analysts have started to shift their attention to the launch of the iPhone 7 in September—and potentially a special-edition iPhone 8 in the second-half of 2017 to commemorate the product’s 10-year anniversary—in hopes of a new replacement cycle that helps the company’s high growth rates return.

“With a view that investor sentiment has moved beyond near-term weakness to a focus on the iPhone 7 setup (and in some cases iPhone 8), Apple’s commentary on the growth in its active iPhone installed base remain a key focus,” Stifel Nicolaus analyst Aaron Rakers wrote in a recent note.

Here’s what to expect:

Earnings: Analysts on average expect Apple to report earnings per share of $1.40, down from $1.85 in the year-earlier period, according to FactSet. Estimize, a software platform that uses crowdsourcing from hedge fund executives, brokerages and buy-side analysts to predict earnings, has Apple earning slightly more, at $1.42 a share. Apple missed both the FactSet and Estimize consensus estimate last quarter, snapping a 13-quarter streak of beating the FactSet consensus.

Revenue: Sell-side analysts expect Apple to report revenue of $42.2 billion, according to FactSet, down from $49.6 billion in the same period last year. Contributors on Estimize are forecasting revenue of $42.1 billion. In April, Apple forecast revenue in a range of $41 billion to $43 billion. The company missed both the FactSet and Estimize consensus estimates last quarter, but beat expectations in the five quarters prior. Revenue from the iPhone is projected to fall by 22% to $24.5 billion, according to FactSet.

Stock reaction: Shares of Apple have declined by 7% in the past three months and 22% in the past year, underperforming both the Dow Jones Industrial Average DJIA, -2.32% and S&P 500 SPX, -1.76% . The 30-company Dow index, of which Apple is a member, has risen 2.5% in the past three months and 5% in 12 months. The average rating on the stock among a poll of roughly 40 analysts surveyed by FactSet is the equivalent to buy, and the median stock target is $120.96, implying 22% upside to Thursday’s closing price.

What to watch for: Apple’s expected second straight quarterly iPhone decline would put the company on track for its first-ever annual decline in iPhone sales. Roughly 40 million phones are expected to have been sold during the quarter, according to FactSet, compared with 48 million in the same quarter last year.

While the iPhone 7 debut, expected in September, may put a charge in Apple revenue, analysts have been tempering expectations. Longer replacement cycles—spawned by the death of the traditional two-year contract and carrier plan—may entice some customers to wait to upgrade until the iPhone 8 is released. The iPhone 7 is also going to include only minor changes from the previous iteration, according to The Wall Street Journal, while Apple prepares for a major iPhone hardware overhaul beginning next year.

Deutsche Bank analyst Birdy Lu wrote in a note that he expects iPhone production—which he uses as a metric, along with other supply chain data, to gauge iPhone demand—to continue posting year-over-year declines through the remainder of the calendar year. Deutsche Bank is “not excited about the growth outlook” for the iPhone, but believes new innovation will help buoy the market in coming years, he said.

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Credit Suisse analyst Kulbinder Garcha said he expects to see a subdued iPhone cycle for the next few quarters, but believes the market will slightly recover in 2017 with the launch of the iPhone 7 before accelerating sharply in 2018 after the launch of the iPhone 8.

Apple’s other hardware is not expected to pick up much slack, as the iPad tablet has suffered a prolonged sales decline and sales of personal computers like Apple’s Mac line are still struggling. The Apple Watch, which hit the anniversary of its debut last quarter, experienced a huge year-over-year sales decline from its launch, according to an IDC report.

A positive for Apple is its large-and-growing installed base, which will help expand Apple’s higher-margin services business. By 2020, gross profit from services could roughly double to $37.3 billion, comprising roughly 30% of total gross profit, according to Garcha’s estimates. Garcha has said investors might be underestimating the growth potential of that business.

Apple is expected to announce software and services revenue of $6 billion for its fiscal third quarter, according to FactSet. That would be $1 billion more than the same quarter a year ago and again make the sector Apple’s second-largest moneymaker behind the iPhone, with the Mac business expected to come in third at $5.5 billion, according to FactSet.