It is not often that Apple updates the guidance that it provides to investors, however there are times when it is necessary. The first time was with Q1 2019 guidance. In that case it was due to a myriad of factors, including lack of sales in China and Emerging Markets and foreign exchange rates.
Apple is revising its guidance again with Q2 2020 numbers. The primary reason for this is due to the COVID-19, or Coronavirus, that has been a problem within Mainland China and that Apple is “experiencing a slower return to normal conditions than we had anticipated.” This means that Apple will not meet their revenue guidance. From Apple:
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. Outside of China, customer demand across our product and service categories has been strong to date and in line with our expectations. The situation is evolving, and we will provide more information during our next earnings call in April. Apple is fundamentally strong, and this disruption to our business is only temporary. 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.
I think Apple is doing the right thing, from both a fiduciary as well as a humanitarian standpoint. They do have to legally report to the shareholders any changes that will affect their guidance. Regarding the humanitarian side, this is a very contagious virus and the health and safety of Apple’s direct employees as well as the works within the factories that produce their products.
I am sure that Apple, and the world as a whole, would prefer that COVID-19 virus was not an issue, but that is not the world we live in, and we all have to adjust accordingly.