Apple CEO Tim Cook released a letter yesterday saying that Apple is lowering their guidance for the fiscal 2019 first quarter, which ended on December 29. He attributes almost 100 percent of the revenue shortfall to their business in China:
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline occurred in Greater China across iPhone, Mac, and iPad.”
Cook attributes their China problem to issues such as China’s overall economic slowdown partially due to trade tensions with the United States. Many analysts believe that the biggest reason for slower sales in China is actually Apple’s high price point for their newest phones and this is only exacerbated by China’s weakening economy.
Apple Services Growth is Apple’s Future
One silver lining in Tim Cook’s letter is his announcements about the growth of Apple Services worldwide. Cook says that Services generated over $10.8 billion in revenue during the quarter, growing to a new quarterly record in every geographic segment. He says that Apple is on track to achieve their goal of doubling the size of this business from 2016 to 2020.
Apple CEO Tim Cook discussed the incredible growth of their services business as part of an interview on CNBC:
Services Has Grown an Incredible Amount
Services has grown an incredible amount. We’re going to report over $10.8 billion when we report later this month for last quarter. That’s a new record. This is incredibly exciting for us because so many things hit records in there.
The App Store did. Apple music hit a new record. Apple pay hit a new record. Our search ad product from the app store hit a new record. iCloud hit a new record. It’s very wide. Each of the geographies hit a quarterly record.
Services Business Driven by Huge Installed User Base
Even in China, the App Store hit a quarterly record. Why is that? It’s because have and our installed base grew nicely year over year in China as well. As I say in the letter we’ve picked up a 100 million more active devices over the last twelve months alone. This is an incredible number.
We’ve also got some interesting things in the pipeline on services and of course, we do on products as well. That’s sort of another way to grow the company.