Apple Makes Drastic Cut To Q1 Sales Guidance, With iPhone Performance To Blame

Apple Inc. AAPL slashed its previously issued first-quarter sales guidance Wednesday from a range of $89 billion to $93 billion to $84 billion — $7.5 billion less than the Street's expectations of $91.5 billion in sales. The news moved tech stocks lower in after hours trading.

What To Know

Revenue from the iPhone was lower than expected, mostly in China, and this accounts for the shortfall, CEO Tim Cook said in an 8-K filing. Smartphone upgrades were not as strong as anticipated, he said. 

"While macroeconomic challenges in some markets were a key contributor to this trend, we believe there are other factors broadly impacting our iPhone performance, including consumers adapting to a world with fewer carrier subsidies, U.S. dollar strength-related price increases and some customers taking advantage of significantly reduced pricing for iPhone battery replacements." 

Cupertino also cut its Q1 gross margin forecast from a range of 38-38.5 percent to 38 percent. The company is set to deliver its Q1 report after the close on Tuesday, Jan. 29. 

Why It's Importnat

The timing of iPhone launches, a strong U.S. dollar, an "unprecedented" number of new product ramps and economic weakness in emerging markets were named by Apple as the largest factors affecting its Q1 performance.

The launch of the iPhone XS and XS Max in Q4 vs. the launch of the iPhone X in Q1 of 2018 creates a "difficult" compare in 2019, Cook said, adding that the setup "played out broadly in line with our expectations." 

Cook said economic concerns in emerging markets "turned out to have a significantly greater impact than we had projected."

Apple shares were down 7.4 percent at $146.23 in Wednesday's after-hours session. Tech stocks such as Amazon.com, Inc. AMZN Netflix, Inc. NFLX and Facebook FB were down about 2 percent.

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Photo courtesy of Apple.