Cook also said that Apple hurt its bottom line when it slashed the price of iPhone battery replacements early a year ago after it was caught red-handed slowing down older iPhones to preserve their aging batteries. Analysts polled by FactSet had expected Apple's revenue to be about 9 percent higher - $91.3 billion.
While we are disappointed to be falling short of our quarterly revenue goal, our fiscal first quarter was also a record setter for revenue from Services, Wearables and the Mac. iPad revenue grew double-digits over the year-ago quarter, and iPhone activations in the USA and Canada set new Christmas Day records.
Sales of Apple's cheaper iPhone XR have also been a thorn in Apple's side since it hit stores in late October.
Mr Cook said that lower than anticipated iPhone sales, primarily in Greater China, accounted for all of the company's revenue shortfall compared to previous guidance.
Yes, the Apple concerns will take center stage, but for perspective the company will deliver first quarter revenue of $84 billion.
He also stated that iPhone upgrades were not as strong as the company expected "in some developed markets".
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Apple will have to figure out ways to courageous macroeconomic woes like this, and that might mean learning to make more money from non-iPhone products in its catalog.
In fact, non-iPhone product revenues actually contributed to a 19-percent growth, except in China, where, according to Cook, a cooling-down economy hurt all kinds of Apple products (but still, iPhone the worst by far). China is Apple's third-largest market after the U.S. and Europe. The news sent Apple's stock plunging after hours.
Apple became the world's first public company to reach a US$1-trillion valuation last summer, but soon fell victim to a broader rout among tech stocks in 2018's final months. "This turned out to have a significantly greater impact than we had projected", Cook said in the letter.
The Dow closed 18.78 points higher to end the first trading session of 2019, clawing back almost 400 points in losses that it shed earlier in the day amid weak economic data from China and renewed concerns about the ongoing trade war between the world's two largest economies. For its iPhone business, Apple needs a new approach now that it exhausted its strategy of slowly knocking up the average price of the iPhone over the years.
Now, $US84 ($120) billion sounds like a lot of money, especially considering the fact that Apple expects its quarterly operating costs to come in at around $US8.7 ($12) billion.
Now, Apple must try to find a way to win back Wall Street's confidence and reverse a steep decline that has erased $US350 billion in shareholder wealth in just three months. While the production cuts were common knowledge, it wasn't clear if this was a company specific issue, caused perhaps by iPhone prices rising too fast, or macro factors. Counterpoint reported iPhone sales dropped by 17% year-over-year during the third quarter due to the weak initial performance of the new models.
"Also, as I mentioned earlier, revenue outside of our iPhone business grew by nearly 19 percent year-over-year, including all-time record revenue from Services, Wearables and Mac".