Apple told investors on Monday it will fall short of its own revenue forecast for the March quarter. The cause is the coronavirus outbreak in China, which the company said has hurt both iPhone production and customer demand.
The company had guided for revenue of $63 billion to $67 billion for the fiscal second quarter. Bloomberg’s data showed analysts on average expected $65.23 billion. Apple did not give a new outlook, saying only that the situation is “evolving,” and promised more detail on its April earnings call.
“Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated,” Apple said in a statement. “As a result, we do not expect to meet the revenue guidance we provided for the March quarter.”
Factories and stores
Apple said its iPhone manufacturing partner sites sit outside Hubei province, and that all of them have reopened. They are ramping up more slowly than the company had planned. When it issued its guidance in January, Apple had expected factories to restart from Feb. 10. Worldwide iPhone supply will be “temporarily constrained,” it said.
Demand took a hit too. “All of our stores in China and many of our partner stores have been closed,” the company said. Stores that have opened keep shorter hours and see very few customers. Apple is reopening its retail stores gradually, as steadily and safely as it can. Outside China, it said, sales of products and services have been “strong to date and in line with our expectations.”
Markets reacted quickly. U.S. stock futures slid, and in early Asian trading two Apple suppliers, TDK Corp. and Murata Manufacturing Co., fell more than 3%.
Gene Munster, a longtime Apple analyst and co-founder of Loup Ventures, called it “the double-edged sword of being in China.” Apple is the only major U.S. technology company to sell most of its products and services there, he noted, while Facebook, Google, Amazon and Netflix are limited or absent. Facebook had earlier said Oculus headset production would drop because of the epidemic, and Nintendo is expected to struggle to make its Switch console.
This is the second time in two years Apple has reset its earnings outlook over China. For fiscal 2019, it cut its holiday projections after iPhone sales there came in slower than expected, a shortfall it partly blamed on the trade war with the U.S.
The outbreak itself kept spreading. China’s death toll passed 1,700, with more than 70,500 infected, after the virus emerged in Hubei province. Fresh cases outside Hubei had fallen for 13 days running: 115 announced on Monday, down from nearly 450 a week earlier. The World Health Organization’s chief said the apparent drop “must be interpreted very cautiously.”
Sources
- Apple says will not meet revenue forecasts due to virus
- Apple Won’t Meet Quarterly Revenue Target Due to Coronavirus
Sources
- Apple says will not meet revenue forecasts due to virus
- Apple Won’t Meet Quarterly Revenue Target Due to Coronavirus
