Apple’s Profit Warning Signals Trouble In China, But Everyone Should Remain Calm

According to the news reports since Wednesday afternoon, Apple Park is on fire and the company is on track for a quarterly loss. Even though the earnings miss discussion is not a net positive for the company, there are a few things to consider.

Last night, we received a large number of emails about what transpired, and let me tell you — they are loaded with opinions. Let’s talk about them, what’s going on, and what it means for Apple users, excluding the trolls who use a variety of foul language and so forth.

In case you were living under a rock yesterday, Apple published a revenue revision indicating that the company’s holiday quarter revenue would reach $84 billion. As a result, the majority of headlines we’ve seen overnight concern Apple’s $9 billion revenue shortfall.

Certainly, that is not incorrect, but it is also imprecise. So, to be precise, the $84 billion that Apple CEO Tim Cook mentioned falls between $5 billion and $9 billion short of Apple’s predicted range.

And, despite the revision, the quarter will still be Apple’s second-largest in company history, surpassed only by the 2017 holiday season.

Let’s look more closely.

The profit margin is practically unchanged

There has been much discussion about whether Apple’s holiday sales helped or hindered its quarterly performance. Given that Apple’s profit margin is unchanged from the previous quarter, unchanged from what the company predicted for the quarter in November, and essentially the same as the holiday quarter in 2017, this appears not to be the case.

Since Steve Jobs handed over control of the company to Tim Cook, Apple’s sales have been more aggressive. There have always been ways to purchase Apple products at a discount.

We would have preferred that Apple had met its goals, but let’s discuss the letter and the knee-jerk reactions we’re seeing.

Key points from the letter

The most important takeaway is doing business in China, which I mentioned briefly in our forums last night. Cook had much to say on the subject, but the emphasis we’ve placed on the following quote is not his.

Lower-than-expected iPhone sales, primarily in Greater China, account for the entirety of our revenue shortfall relative to our guidance and a significant portion of our year-over-year revenue decline. Non-iPhone categories (Services, Mac, iPad, Wearables/Home/Accessories) grew nearly 19 percent year-over-year.

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.

There are two key takeaways from this. Apple’s other products, such as the Mac and iPad, more than made up the difference — and performed better than the company anticipated — as a result of the iPhone’s weakness in China.

Even with all the sales that have been criticized by analysts, revenue records were set across the globe, but not in China.

In addition, we anticipate breaking revenue records in several developed nations, including the United States, Canada, Germany, Italy, Spain, the Netherlands, and Korea. And while we encountered difficulties in some emerging markets, others, including Mexico, Poland, Malaysia, and Vietnam, set records.

Cook also specified which products contributed to these record-breaking revenues.

In addition, as previously mentioned, revenue outside of our iPhone business grew by nearly 19 percent year-over-year, including all-time revenue records for Services, Wearables, and Mac.

In particular, services generated more than $10.8 billion in revenue during the quarter, breaking records in “every geographic segment.” Wearables revenue increased by 50 percent year-over-year, Mac revenue increased by an unspecified amount, and iPad Pro revenue increased by double digits.

Cook stated in his letter that Apple would report record-breaking earnings per share

The earnings per share metric are derived. It’s fantastic that this is a record, but it was inevitable given the company’s unrelenting stock buyback efforts.

However, the analysts were correct!

Given that their job is to tell investors what they believe a company’s prospects are, it’s about time they got something right. A blind squirrel finds a nut in the end. However, the majority of their irresponsible hot takes this morning are coming fast and furious.

Calls for Tim Cook’s resignation are insane from the perspective of shareholder value. There are doubts regarding everything. There is a pending lawsuit alleging that Apple misled investors with last quarter’s claims about China, since sales were up in China last quarter, so how could they be down this quarter? There is a great deal of unwarranted concern regarding every aspect of Apple’s business, including the record-breaking Services, Mac, and wearables that Cook highlighted.

Moreover, there is already an abundance of unnecessary hyperbole, such as Daniel Ives of Wedbush claiming that Wednesday was “Apple’s darkest day in the iPhone era.” One analyst, who has repeatedly emailed us with the same claim, asserts that Apple store foot traffic is “pathetic.” Given our observations and the letter’s explicit description of the record-breaking revenue in the United States, this seems to be an incorrect interpretation. Other analysts have already begun making idiotic comparisons to Nokia and Blackberry.

This does not alter the fact that there will be an iPhone in 2019, and probably every year thereafter until we are all dead and forgotten.

Seriously, stop saying “Steve Jobs would never…”

This is not the first time Apple has missed earnings expectations. Steve Jobs also announced one in 2002. Apple issued a two-paragraph warning on June 18, 2002, that they would miss earnings. Apple anticipated revenue of approximately $1.6 billion. This figure was revised to be between $1.4 billion and $1.45 billion.

This is half the warning issued at the time.

“Similar to others in our industry, our sales have slowed this quarter. Consequently, we will miss our revenue projections by approximately 10%, resulting in slightly lower profits “Steve Jobs, CEO of Apple, stated. “We have some incredible new products in the works, so we are excited for the coming year. As one of the few companies currently generating a profit in the PC industry, we remain optimistic about Apple’s long-term growth prospects.”

Here, we will not delve into history. This was extensively discussed by John Gruber on Daring Fireball, and it is a good read.

However, what does this mean for users?

Obviously, from this vantage point, we would have preferred Apple to have met the projected revenue goal. However, Wednesday’s letter to investors has the same significance to users as every other earnings report in the past fifteen years. It has absolutely no meaning.

Why this occurred is irrelevant to the user, outside of China. It’s not surprising that Chinese consumers purchased cheaper Chinese brands; what was surprising was the extent to which they did so.

Apple has no intention of shutting down the iCloud servers, selling itself to Dell or anyone else, or focusing on anything but the high-end of the market. Your iPhone will not cease to function because the company expects to earn only $84 billion this quarter, and the data that I am transferring from one Thunderbolt array to another right now will not transfer more slowly. Regarding pricing, we do not anticipate any significant changes to the company’s sales structure for any of its hardware.

In the weeks leading up to the earnings announcement, you will hear a great deal. On the news, in our forums, on Reddit, on Twitter, and your preferred social media platform, you will hear numerous talking heads opine on what Apple should do, as well as numerous hardware recommendations that will save the company. While this fantasy may make the individual happy, none of the suggestions will be the savior of the company as the navel-gazer believes.

The only thing that changed for all of us between December 31 and January 1 was a numerical year increment; attitudes and humanity as a whole did not undergo a seismic shift on that single day. Similarly, the only difference between Wednesday morning and Thursday afternoon for Apple is that the company will report that it made more money in a quarter than it did from 2000 to 2005, instead of 2000 to 2006.

It will continue to evolve as it always has and thrives.

Why Trust Us?

Best Top Reviews Online was established in 2018 to provide our readers with detailed, truthful, and impartial advice on what to buy. We now have millions of monthly users from all over the world and annually evaluate over a thousand products.

The above article was written by the BestTopReviewsOnline team, which consists of some of the most knowledgeable technical experts in the United States. Our team consists of highly regarded writers with vast experience in smartphones, computer components, technology apps, security, and photography, among other fields.

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