Apple says sales in next quarter could miss market forecasts

Tim Cook blames problems meeting demand and weakness in emerging markets

Apple Inc on Thursday said sales for the crucial holiday quarter could miss Wall Street expectations, which chief executive Tim Cook blamed on weakness in emerging markets, foreign exchange costs and uncertainty whether the iPhone maker can keep up with demand for new products.

Apple said it expects between $89 billion (€78 billion) and $93 billion in revenue for its fiscal first quarter ending in December, while Wall Street on average expects $93 billion, according Refinitiv data. Apple’s shares fell by as much as 5 per cent in after-hours trading on concerns about its outlook for the holiday season.

For the quarter ended in September, Apple brought in $62.9 billion in revenue and $2.91 per share in profits, beating expectations of $61.5 billion and $2.79, respectively.

Mr Cook said some of the forecast was explained by Apple releasing its top-end iPhone models, the XS and XS Max, in the fiscal fourth quarter. Mr Cook also said foreign exchange rates would have a $2 billion negative impact on Apple’s sales forecast.

Apple was unsure whether it could make enough new iPhones, Apple Watches, iPads and Mac models it released in recent weeks, Mr Cook said.

He said Apple was “seeing some macroeconomic weakness in some of the emerging markets,” without specifying which ones.

China performance

But Mr Cook stressed that Apple was happy with its performance in China, where revenue grew 16 per cent to $11.4 billion, the fifth quarter in a row the company has had double-digit growth in the region.

Apple’s cautious forecast could accelerate investor fears that have in turn erased stock market gains for much of the year. At market close on Thursday, Apple shares were up more than 25 per cent for the year – supported by purchases by Warren Buffett and a $100 billion share buy-back programme – while the Nasdaq Composite Index is nearly flat for the year.

Apple sold 46.9 million iPhones in the fiscal fourth quarter, missing analyst expectations of 47.5 million iPhones, according to FactSet. But the average selling price of iPhones was $793, well above analyst estimates of $750.78, according to FactSet.

Apple said revenue from services, which includes iCloud, the App Store and Apple Music, reached $10 billion, in line with analyst estimates. Apple investors have been increasingly focused on growth in the company’s services business as growth in the global market for smartphones levels off in terms of unit sales.

Apple forecast a tax rate of 16.5 per cent for the December quarter. "There's going to be a minimum tax on foreign earnings coming from the new tax legislation" passed in the United States, Apple's chief financial officer Luca Maestri said.

For its full fiscal 2018 ended in September, Apple reported revenue of $265.6 billion and profits of $11.91 per share, beating analyst estimates of $264 billion and $11.79 per share. – Reuters