Apple Reports Disapointing Q1 2019 Revenue

Frank Lenk


Published: 01/03/2019 07:50:01 AM EST in Frank Lenk

Apple Reports Disapointing Q1 2019 Revenue

In his quarterly letter to investors, Apple CEO Tim Cook has reported that the company's Q1 2019 revenue will be lower than its original estimate.

Total revenue for the quarter, ended December 29, will come in at about US$84 billion. However, revenue is expected to be lower than Apple's original guidance, issued 60 days ago, which predicted "slight revenue growth year-over-year." Final results won't be released for "a number of weeks."

Economic Factors

Cook notes that Apple's predictions were based on four factors, both "macroeconomic and Apple-specific," three of which "played out broadly in line with our expectations."

First, Q1 2019 saw no major product launch comparable to that of the iPhone X in Q1 2018. This would work to the disadvantage of year-over-year comparisons for that quarter. Second, the strong US dollar was expected to reduce revenue growth globally. Third, supplies of new products such as the Apple Watch Series 4 and iPad Pro were expected to be constrained during the quarter.

Fourth, Apple expected "economic weakness in some emerging markets." This turned out to have a larger impact than predicted. Also, Apple saw fewer iPhone upgrades than predicted. These two factors are said to be responsible for the lower-than-expected quarterly revenue.

"Most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad," reports Cook. He notes that "China's economy began to slow in the second half of 2018," and that China's "government-reported GDP growth during the September quarter was the second lowest in the last 25 years."

Cook also takes an understated swipe at President Trump's recent innovations in trade relations, stating that "We believe the economic environment in China has been further impacted by rising trade tensions with the United States."

Market data, says Cook, shows that "the contraction in Greater China's smartphone market has been particularly sharp. And it was the iPhone which accounted for "all of our revenue shortfall to our guidance and more than our entire year-over-year revenue decline."

While China took the biggest hit, iPhone upgrades in other developed markets were also not as strong as expected. Aside from "macroeconomic challenges," Cook attributed this to several factors: fewer carrier subsidies, a lower US dollar, and reduced pricing for iPhone battery replacements.

Positive Side

Apple did have some good news, in a number of areas. For a start, the installed base of its "active devices" grew by more than 100 million units in 12 months, reaching an all-time high.

Apple's non-iPhone revenue grew by almost 19% year-over-year, including all-time record revenues from Services, Wearables and the Mac. Services alone generated over US$10.8 billion in revenue during the quarter, on-track to achieve Apple's goal of doubling in size from 2016 to 2020. Wearables, including the Apple Watch and AirPods, grew by almost 50% year-over-year.

Mac revenues grew year-over-year, helped by launches of the MacBook Air and Mac mini. iPad revenues grew by double digits, aided by the launch of the new iPad Pro.

While total revenues were below prediction, all-time record revenues were still expected in a number of developed countries, including the US, Canada, Germany, Italy, Spain, the Netherlands and Korea, and in emerging markets including Mexico, Poland, Malaysia and Vietnam.

Also, according to Cook's letter, Apple's quarterly earnings per share were expected to hit a new all-time record. Nonetheless, business sources reported a sharp 7% drop in Apple's share price after the disappointing Q1 revenue announcement.

It would be presumptuous to read too much into a single quarterly report. However, observers will no doubt be keenly scrutinizing the next few quarterly statements for any sign of longer-term weakness in iPhone demand... especially in China.





Article Tags:  Apple, Q1, 2019, financials, letter, investors, Cook, Tim Cook, China, iPhone, iPad, Mac

x

Apple Reports Disapointing Q1 2019 Revenue








(To send to multiple recipients, please insert a semi-colon ";" in between addresses)





comments powered by Disqus


wifihifi

FEATURED ARTICLES


wifihifi

Weekly Newsletter - Register today!