Apple lowers its expected revenue, blames weakness in China’s economy

January 3, 2019

Photo: AFP

For the first time in almost two decades, Apple lowered its revenue outlook, blaming fewer than expected upgrades to new iPhones, weakness in China’s economy and supply constraints to newer models of the Apple Watch, iPad Pro and AirPods.

Apple CEO Tim Cook said on Wednesday that the company expects sales of about $84 billion in the quarter that ended December 29, down from earlier estimates of $89 billion to $93 billion. Apple reported sales of $88.3 billion in the fiscal first quarter a year earlier, so the new estimate would mean Apple is reporting a holiday quarter slowdown for the first time since Cook became CEO in 2011, according to Bloomberg.

The announcement sent shares down as much as 8.5% in extended trading.

“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Cook wrote in a letter to investors. Greater China and other emerging markets accounted for the vast majority of year-over-year iPhone revenue decline, but iPhone upgrades also weren’t as strong as the company anticipated in some developed markets, Cook said.

Related: Apple being sued because customer didn’t think the iPhone had a notch

Suppliers in Asia slumped on the news and several key Apple suppliers overseas had cut their revenue estimates during the past few months, suggesting something was amiss. In November, the company said it would stop reporting unit sales of iPhones, iPads and Macs beginning in fiscal 2019. That sparked concern Apple wanted to avoid disclosing weak growth numbers. Apple’s stock had fallen 32% from an October peak amid growing concerns about the iPhone.

The CEO attributed much of the company’s “shortfall” in its outlook to struggles in China that he pinned on the economy and “rising trade tensions” with the US.

“As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed,” Cook said.

The announcement of Apple blaming its shortcomings partly on President Donald Trump’s trade war with China may increase pressure on American officials to ease the tensions quickly. Mid-level officials from the Trump administration are scheduled to travel to Beijing for talks early next week.

 
 
 
 
 


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