Apple Reduces Guidance For The Holiday Quarter Due To Lower-than-anticipated iPhone Sales

CEO Tim Cook blamed the performance on weaker-than-anticipated iPhone sales. Apple lowered its revenue forecast for the current December quarter on Wednesday, a move that came as a surprise.

Cook stated in a letter to investors that the company’s current revenue goal is $84 billion. This is less than the November forecast, which anticipated between $89 billion and $93 billion.

Cook acknowledged that Apple has seen “fewer” iPhone upgrades than anticipated, citing “foreign exchange headwinds” from a strong U.S. dollar and “economic weakness in some emerging markets” as contributing factors.

“Lower-than-expected iPhone sales, primarily in Greater China, account for the entirety of our revenue shortfall relative to our guidance and for much more than our entire year-over-year revenue decline,” said Cook. “While Greater China and other emerging markets accounted for the vast majority of the year-over-year decline in iPhone revenue, iPhone upgrades in some developed markets were also weaker than anticipated. While macroeconomic challenges in some markets were a major contributor to this trend, we believe there are other factors broadly impacting our iPhone performance, such as consumers adjusting to a world with fewer carrier subsidies, price increases related to the strength of the US dollar, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements.”

Other figures are “broadly in line” with projections, Cook continued, adding that the final data will not be presented for several weeks.

Supply constraints for AirPods, the iPad Pro, the Apple Watch Series 4, and the redesigned MacBook Air also hampered revenue.

“These last two factors have led us to reduce our revenue guidance,” Cook explained, attributing the entire decline in the company’s global revenue to a slowing Chinese economy and the trade war initiated by U.S. President Donald Trump. The non-iPhone segments of Apple’s worldwide business, which include iPads, Macs, Watches, services, and accessories, collectively grew 19 percent as a result of the “particularly sharp” decline in the Chinese smartphone market.

Cook also cited inexpensive battery replacements and a reduction in carrier subsidies as reasons for the lack of iPhone upgrades.

In an attempt to put a positive spin on the situation, the letter cites “many positive results” for the December quarter, including an increase of 100 million units in the install base over a 12-month period and over $10.8 billion in services revenue, which set quarterly records in every region. According to reports, the corporation is “on track” to double its services revenue between 2016 and 2020.

The company is poised to set revenue records in the U.S., Canada, Germany, Italy, Spain, the Netherlands, and South Korea. Wearables revenue increased by nearly 50 percent year-over-year. Apple predicts a record-breaking earnings-per-share (EPS) figure. Records have already been set in Mexico, Poland, Malaysia, and Vietnam, and Apple is anticipating its highest-ever EPS.

Apple halted after-hours trading in anticipation of the release of Cook’s note, and the stock is currently down 7%.

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