- Apple lowered its first-quarter guidance Wednesday and cited slowing growth in China in an unexpected update to investors.
- That follows economic data pointing to a slowdown in the country.
- Watch Apple trade in real time here.
China’s economy is losing steam.
In a letter lowering Apple’s revenue forecast Wednesday, chief executive Tim Cook partly blamed weak sales in the second largest economy and said the company hadn’t anticipated the degree of deceleration taking place.
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Cook said.
Forecasting $84 billion in revenue for the first fiscal quarter, compared with analyst expectations of more than $91 billion, he said most of the revenue decline occurred in greater China across products including iPhones, Macs and iPads.
The announcement comes amid increasing concerns about the Chinese economy, which grew at its weakest pace in a decade in the three months ending in September.
Earlier Wednesday, data showed China’s private manufacturing sector contracted for the first time in 19 months in December, only adding to concerns after stocks closed their worst year in a decade.
Ongoing trade tensions with the United States have added to uncertainty, Cook said, referring to the spate of tariffs that Washington and Beijing have placed on hundreds of billions of dollars worth of each other’s products.
“As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed,” he said. “And market data has shown that the contraction in Greater China’s smartphone market has been particularly sharp.”
At the same time, economists say the slowdown last year was in part thanks to a state-led deleveraging campaign as authorities attempted to crack down on risky lending.
“For most of 2018, worries about a domestically-driven slowdown in China’s economy and the trade war with the US hit both the renminbi and the country’s stock markets,” said John Higgins, chief markets economist at Capital Economics.
In after-hours trading Wednesday, shares of Apple dropped more than 7%.