What you need to know
- Apple has told investors that it won’t meet its previous earnings guidance for Q2.
- It made the predictions on January 28.
- Since then the impact of coronavirus has worsened.
Apple says the situation in China is still evolving.
Apple has issued a note to investors today, informing them that it won’t meet the Q2 earnings guidance that was issued on January 28. It says that the current coronavirus situation is impacting it in two ways.
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 of those two factors is an inability for Chinese manufacturing plants to ramp up to 100% capacity as quickly as was first hoped. That means that production is being hampered more severely than initially anticipated. As a result, an iPhone product shortage is anticipated.
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 issue is that demand in China has been impacted as a whole, with fewer products sold in the country. That’s thanks in part to Apple Stores across the region being closed recently, with them only currently open during reduced hours.
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 was also quick to note that demand outside China has remained strong throughout. It also took multiple opportunities to point out that the health and safety of people in and around China is paramount, with the company “more than doubling our previously announced donation to support this historic public health effort”.