Apple says it won’t hit Q2 revenue target due to coronavirus

Apple has shared an investor update this afternoon focused on the guidance it provided for Q2 2020. Due to the ongoing coronavirus outbreak, Apple says it won’t hit the March revenue guidance numbers it provided.

Apple had forecast a wider-than-usual range revenue range for Q2, predicting revenue between $63.0 billion and $67.0 billion. Apple now says it won’t hit even the lower-end of that range due to the effects of the coronavirus in China:

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.

Apple cites two main reasons for this: worldwide constraints for iPhone supply and demand for Apple products within China. First, Apple says that manufacturing facilities in China have reopened, but with slower than expected production rates:

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.

It also says that Apple Stores in China are opening back up slowly, but with very low customer traffic:

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.

Outside of China, Apple tells investors that customer demand across the product and services categories has been “strong to date and in line with our expectations.” The disruption to Apple’s business is “only temporary,” it says. “Apple is fundamentally strong.”

Apple also reiterates that its first priority is the health and safety of its employees, supply chain partners, and customers. The company is also “more than doubling” its previously announced donation to support coronavirus health efforts.

Our first priority — now and always — is the health and safety of our employees, supply chain partners, customers and the communities in which we operate. Our profound gratitude is with those on the front lines of confronting this public health emergency.

Read Apple’s full announcement here. The company says it will provide more information during its fiscal Q2 2020 earnings release and call in April.

This is the second time in the past year and a half that Apple has issued a rare earnings guidance revision. For Q1 2019, Apple was forced to lower revenue expectations due to fewer iPhone upgrades and lower-than-expected iPhone sales in China.

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