Apple says it will not meet its initial $63-67 billion estimates for this quarter, citing supply issues and lowered demand due to the novel coronavirus outbreak in China. Apple did not provide an updated forecast for its fiscal second-quarter revenue. As Apple puts it:
Our quarterly guidance issued on January 28, 2020 reflected the best information available at the time as well as our best estimates about the pace of return to work following the end of the extended Chinese New Year holiday on February 10. Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated. As a result, we do not expect to meet the revenue guidance we provided for the March quarter due to two main factors.
The first is that worldwide iPhone supply will be temporarily constrained. While our iPhone manufacturing partner sites are located outside the Hubei province — and while all of these facilities have reopened — they are ramping up more slowly than we had anticipated. The health and well-being of every person who helps make these products possible is our paramount priority, and we are working in close consultation with our suppliers and public health experts as this ramp continues. These iPhone supply shortages will temporarily affect revenues worldwide.
The second is that demand for our products within China has been affected. All of our stores in China and many of our partner stores have been closed. Additionally, stores that are open have been operating at reduced hours and with very low customer traffic. We are gradually reopening our retail stores and will continue to do so as steadily and safely as we can. Our corporate offices and contact centers in China are open, and our online stores have remained open throughout.
Apple had some idea of the issue when it released its initial estimate on January 28. “As you can see from the range, anticipates some level of issue there. Otherwise, we would not have a $4 billion range,” CEO Tim Cook said at the time. While Apple's manufacturing facilities have all reopened in China, the company still expects supply chain issues for the foreseeable future.
Some precedent — This is actually the second time in 13 months that Apple has had to update its investors in this way due to issues in China. In January of 2019, Apple lowered its estimates because of economic deceleration in the region.
What does it mean? — The novel coronavirus' situation on the ground is still unclear, as the Chinese government initially would not publicly acknowledge the disease — until it was brought to public attention by Dr. Li Wenliang, who has since died from his exposure. Though time will tell, Apple's lack of a new forecast does not speak to the company's confidence in the stability of the market or its supply chain.