A Peek at Apple’s Soft Revenue Guidance



Apple’s fiscal 2018 fourth-quarter results

Apple (AAPL) posted better-than-expected earnings and revenue in the fourth quarter of fiscal 2018, which ended on September 29, but it issued disappointing revenue guidance. Apple posted EPS of $2.91 in the quarter, beating the estimate of $2.78. Its revenue of $62.9 billion also exceeded the estimate of $61.57 billion in the quarter.

Apple’s revenue came mainly from the Americas, followed by Europe (EFA) and Greater China. These regions saw revenue rises of 19%, 18%, and 16% YoY (year-over-year), respectively. The company’s revenues in Japan and the remaining Asia-Pacific regions rose 34% and 22% YoY, respectively.

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iPhone sales

iPhone sales rose 29% YoY to $37.2 billion driven by a higher average selling price. The iPhone’s average selling price rose 28% YoY to $793 in the quarter, higher than analysts’ estimate of $750.78. Besides the iPhone segment, Apple’s total revenue growth of 20% YoY in the fourth quarter was driven by YoY growth in its Mac, Services, and Other Products segments. The iPad, however, saw a revenue fall of 15% YoY in the quarter.

Disappointing first-quarter sales

Apple expects its fiscal 2019 first-quarter revenue to lie in the range of $89 billion–$93 billion. The company expects foreign exchange costs, demand-supply issues, and weakness in emerging markets to hurt the quarter’s sales. Apple has also been facing headwinds in emerging markets—particularly in Turkey, India (INDA), Brazil (EWZ), and Russia—due to their weak currencies compared to the US dollar (UUP).

Apple’s weakening demand for iPhones is expected to dent its revenue, as such demand contributes significantly to its total revenue. The US-China tariff war could increase the costs of products such its iPhones, Apple Watch, AirPods, Apple Pencil, HomePod, Mac Mini, adapters, and chargers.


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