Jan 2, 2019

Apple Lowers Its 1Q 2019 Earnings Guidance Due To "Fewer iPhone Upgrades”

Apple stock suddenly stopped trading before the stock market closed today, and Apple 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 forecast due to a number of factors.



Cook explains that the different times the iPhone launches will affect the year-to-year comparison, and they were unable to keep up with demand for Apple Watch Series 4, iPad Pro, MacBook Air, as well as AirPods. Perhaps most importantly, the company saw "fewer iPhone upgrades" than anticipated which as a result of lower its expected revenue estimates, also China's struggle on economic due to the trade war. The CEO also cited other factors like the battery replacement program and economic weakness in emerging markets.

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, like 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 more. In the end, Cook says Apple is still “confident and excited” about its product pipeline.

Click here for the full letter

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