Translation:She is eating an apple and they are eating bread.
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It's easier to tell when is means she or they according to the verb, essen or isst.
It's because the second "sie" has the verb "essen" rather than "isst." "Isst" is singular but "essen" is plural, so therefore the first "sie" must be singular and the second plural.
I think the second sie should be with capital S= Sie essen (They are eating)
What you said is incorrect. "They" is sie with a small "s" (when in the middle of a sentence - all words at the start of a sentence have a capital).
If Sie has a capital "S" in the middle of a sentence it must mean "you" in the formal/polite way (but it could be singular or plural - you can only tell by the context).
the first sie is she and the second is they I thought that they were both she
You can tell they're different because of the forms of the verbs. In this case, they're even the same verb! This should alert you to something being different :)
"isst" is singular, so that means that the first "Sie" has to be singular, so therefore it can only mean "she"