Apple shares plunge after CEO Tim Cook slashes revenue outlook, blaming China slowdown and trade war
- Apple shares fell 7.6 per cent, after it announced disappointing revenue of US$84 billion in the quarter ended December
- CEO Tim Cook said Apple ‘did not foresee the magnitude of the economic deceleration, particularly in Greater China’
Apple has lowered its outlook for fiscal first-quarter revenue after an unexpected slowdown in demand from China and fewer upgrades to iPhone models.
The announcement late on Wednesday sent Apple shares plunging.
The company now expects revenue of about US$84 billion in the quarter ended December 29, chief executive Tim Cook said in a letter to investors Wednesday. Analysts had been forecasting US$91.3 billion, according to data compiled by Bloomberg.
Apple shares fell 7.6 per cent in extended trading after the announcement.
They have fallen more than 32 per cent from an October peak amid growing concerns about the iPhone – by far Apple’s most important product line, comprising more than 60 per cent of its 2018 revenue.
“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.
While Greater China and other emerging markets accounted for the vast majority of year-over-year iPhone revenue decline, in some developed markets, iPhone upgrades also weren’t as strong as the company anticipated, Cook said.
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. But the move also highlighted the company’s desire to become more of a services business.
In the letter, Cook said Apple generated US$10.8 billion in services revenue during the quarter. That would be a 27 per cent increase from a year earlier.
The rare revenue warnings from Apple suggested weaker-than-anticipated sales of iPhones and other gadgetry, in part because of trade frictions between Washington and Beijing.
“We believe the economic environment in China has been further impacted by rising trade tensions with the United States,” Cook said.
Cook said other factors will also pull down Apple’s revenue, including the timing of its iPhone launches last year and a strong dollar that means lower revenues when converted to US currency.
Apple also cited supply “constraints” for some products, including its latest Apple Watch and iPad Pro.
Cook added that Apple was performing well in a few emerging markets and could see record revenues in Malaysia, Mexico, Poland and Vietnam.
Additional reporting by Agence France-Presse