Apple Lowers its 1Q 2019 revenue estimate as a result of “fewer iPhone upgrades”

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Apple today shared an open letter from CEO Tim Cook to the company’s investors through the Newsroom page, announcing that it will lower its 2019 Q1 (fourth quarter of 2018) revenue estimate due to the company saw “fewer iPhone upgrades” than anticipated, but also China’s struggle on economic because of the trade war. The CEO also cited other factors like the battery replacement program and economic weakness in emerging markets.

Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfalls to our guidance and for much more than our entire year-over-year revenue decline. […] While Greater China and other emerging markets accounted for the vast majority of the year-over-year iPhone revenue decline, in some developed markets, iPhone upgrades also were not as strong as we thought they would be.

Therefore, Apple now expects 2019 Q1 revenue to be:

Revenue of approximately $84 billion

– Gross margin of approximately 38 percent

– Operating expenses of approximately $8.7 billion

– Other income/(expense) of approximately $550 million

– Tax rate of approximately 16.5 percent before discrete items

In contrast, Apple’s revenue forecast in early November was:

– Revenue between $89 billion and $93 billion

– Gross margin between 38 percent and 38.5 percent

– Operating expenses between $8.7 billion and $8.8 billion

– Other income/(expense) of $300 million

– Tax rate of approximately 16.5 percent before discrete items

However, there also many positive results in the quarter, for instance, increased revenue in areas that include services and wearables, “all-time revenue records in several developed countries, including the United States, Canada, Germany, Italy, Spain, the Netherlands, and Korea”, and so on. After all, Cook says Apple is still “confident and excited” about its product pipeline.

Jing Moreno
Author: Jing Moreno

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