Apple cuts Q1 revenue outlook due to weak iPhone sales, Chinese market


Wednesday was the first time that Apple issued a warning on its revenue guidance ahead of releasing quarterly results since the iPhone was launched in 2007.

In November, Apple said it expected Q1 revenue between $89 billion and $93 billion.

Most of the unforeseen drop in sales revenue is a result of economic deceleration in "Greater China", he said in an earnings call. In all, Cook explained, "over 100 per cent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad".

It is rare to hear that iPhone buyers prefer to replace their battery rather than upgrade to a new iPhone, which of course also suggests the converse - that Apple has been benefitting from the throttling of older iPhones and the high cost of replacing their batteries to drive sales. Based on our best estimates of how these would play out, we predicted that we would report slight revenue growth year-over-year for the quarter.

Apple also admitted that selling newer, pricier iPhones has been challenging across emerging markets in Asia. We may also see reduced iPhone prices, more emphasis on Apple's other products, and potentially a revised strategy that focuses less on the unpredictable China.

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Apple's poor performance was echoed by its fello Faang companies - Facebook, Apple, Amazon, Netflix and Google - which all performed poorly in 2018. In late December, the promotional program for the new models went live in China, adding one major perk: users in China cannot only trade in their old iPhones, but also Android phones made by Apple's major competitors in China, including Huawei, OPPO and Xiaomi. For example, CNBC says that a number of analysts had come out and cut their estimates and price target on Apple last quarter. This in turn has caused shares to drop by more than 7 percent, essentially shaving off $55 billion from Apple's overall market value.

On 2 January, Apple CEO Tim Cook noted that China's economy slowed in the second half of 2018 amid expectations that rising trade tensions with the United States will continue to impact the company's sales. To wit, sales of services (like Apple Music and iCloud) generated more than $10.8 billion in revenue during the quarter, Apple said, growing to a new quarterly record in every geographic segment.

However, Apple continues to be optimistic about China. Apple also suggested that they expected the number of shares used in computing diluted EPS to be around $4.77 billion Dollars.

Twitter has met Apple's troubles with derision, with many pointing out that new models are massively overpriced while hardly being technological breakthroughs.