Apple (AAPL) started 2019 with an announcement that disappointed its investors. The tech giant’s CEO Tim Cook said in a letter to Apple investors that the company is lowering its first quarter revenue outlook to about $84 billion, hurt by the macroeconomic and Apple-specific factors. Earlier, the company had predicted revenue to come in the range of $89 billion to $93 billion. Shares of Apple plunged about 7% during the extended hours of trading.
Apple also lowered its gross margin guidance to about 38% from its prior range of 38.0-38.5%. The company currently expects operating expenses to be approximately $8.7 billion versus the prior estimate of $8.7 billion to $8.8 billion. Apple will report the final results of the quarter ended December 29, 2018, on January 29, 2019.
Apple attributed the most of the revenue shortfall in the guidance to the challenges in the emerging markets, particularly in Greater China. The slowdown in the Chinese economy, rising trade war tensions between the US and China reduced the traffic in Apple retail stores and its channel partners in China.
Apple stated that the iPhone revenue was lower than anticipated in China and iPhone upgrades were less than anticipated in some developed markets.
The first trillion dollar company reported some positive results for the December quarter, albeit cutting down the revenue forecast.
Apple’s installed base of active devices hit a new all-time high — growing by more than 100 million units in 12 months. Revenue outside of iPhone business grew by almost 19% year-over-year, including all-time record revenue from Services, Wearables and Mac.
Services generated over $10.8 billion in revenue during the quarter, growing to a new quarterly record in every geographic segment, and the company is confident of achieving its goal of doubling the size of this business from 2016 to 2020. Wearables grew by almost 50% year-over-year. Apple expects to report a new all-time record for its EPS.
Apple stock inched up 0.11% to $157.92 on Wednesday’s regular trading session. It’s worth noting that the stock plunged to a yearly low ($146.59) on December 24 and had dropped 8% in the past year.
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