Today, trading of Apple"s shares were temporarily halted, so the firm could make an announcement regarding its Q1 2019 (fiscal year) earnings. As was previously rumored, the company confirmed that it sold fewer iPhones than expected during the quarter. Apple now expects revenue of $84 billion, gross margin of 38%, operating expenses of $8.7 billion, other income to be $550 million, and a tax rate of 16.5%.
There are some things that Apple was already planning for. The iPhone Xs launched in a different quarter than the iPhone X did, making it harder to do a year-over-year comparison. The strong dollar creates issues with foreign exchange, there were supply constraints on most products, and Apple expected economic weakness in emerging markets.
Mostly, the firm blames China for having to lower its expectations. It said that it didn"t predict the "magnitude of the economic deceleration" in the region. Over 100% of its YoY revenue decline came out of China.
But the company also said that iPhone upgrades weren"t as strong in developed markets either. Customers are "adapting to a world without carrier subsidies", something that we wrote about back in September, and how the lack of subsidies has driven up prices. Oddly, Apple also blamed customers that are "taking advantage" of the lower pricing on iPhone battery replacements. You might recall that Apple offered a deep discount on battery replacements after it was found that devices were being throttled without ever telling the user.
Apple went on to say that it will take advantage of "periods of adversity" like this one, and take this opportunity to reexamine itself and grow as a result.