Apple Slashes Revenue Guidance

Apple lowered its Q1 guidance in a letter to investors from CEO Tim Cook Wednesday.

Wall Street Journal graphic

CNBC reports Apple lowered revenue guidance to $84 billion, down from the $89 to $93 billion it had previously projected. The company lowered gross margin to about 38 percent from between 38 percent and 38.5 percent.

Apple blamed a variety of factors for the lowered guidance, including a weakening economy in China and lower-than-expected iPhone revenue. Apple said the lower-than-anticipated revenue happened "primarily in Greater China," but also said that upgrades to new iPhone models in other countries were "not as strong as we thought they would be."

Cook's letter said fewer carrier subsidies, price increases based on the strength of the U.S. dollar and cheaper battery replacements caused the weak iPhone upgrades for the quarter.

There have been several reports pointing to weak iPhone sales in recent months. Some Apple suppliers cut their estimates last quarter, leading many to speculate consumers weren't upgrading to the new models. Apple also took the unusual step of promoting discounted prices for iPhones on its website if customers traded in an older model. The company also increased the trade-in value of some older iPhone models.


Apple CEO Tim Cook blames China for weak iPhone sales from CNBC.

Despite the lowered guidance, Cook did point out some growth areas in the letter to investors. He said Apple's device install base increased by 100 million units over the last year. Apple has been promoting its growing install base as a way to show it can squeeze more revenue out of each of its uses through subscription services like iCloud storage and Apple Music. The company is said to be considering new subscription products through its Apple News and TV apps as well.