Apple's top models, iPhone XS and iPhone XS Max, shipped in the fourth quarter of 2018 - placing the channel fill and early sales in that quarter, whereas past year iPhone X shipped in the first quarter of 2018, placing the channel fill and early sales in the December quarter.
Apple blamed bad sales numbers in China as a big reason why it had to revise its forecast. Cook said that most of the revenue shortfall to the company's initial guidance "occurred in greater China across iPhone, Mac and iPad". Emerging markets, beyond China, are too small to move the needle for Apple, Jain says.
Analyst Daniel Ives from Wedbush Securities called the revenue miss "jaw dropping". "Based on our best estimates of how these would play out, we predicted that we would report slight revenue growth year-over-year for the quarter", Cook wrote in a long-winded letter to investors. Growth in 2018 is set to be the weakest since 1990. As Q1 progressed, traffic to Apple retail stores and its channel partners in China declined. Economic headwinds and global trade pressures have put the squeeze on Apple. China's smartphone market has been down 6% year-over-year in the third quarter of 2018 and is expected to drop by 3% in the fourth quarter of 2018, according to IDC.
Apple's surprise announcement added to concerns about the ability of USA companies, particularly its technology giants, to navigate an increasingly uncertain economy and a continuing trade war between the United States and China. Other brands such as General Motors (GM), Volkswagen (VLKAF) and Starbucks (SBUX), which will report earnings in the coming weeks, could be affected.
Technology companies in particular, which rely heavily on sales to China, have been slumping in recent months out of fears of a slowdown there.
"The iOS developer community in China is among the most innovative, creative and vibrant in the world", he said. Additionally, Bloomberg's Mark Gurman noted that Cook is slated to address Apple staff about the decline in sales on Thursday - another sign that the company is anxious about these numbers. All three major indexes were lower, too.