Apple on Wednesday issued a revision for its fiscal Q1 2019 earnings, lowering its revenue expectations from $89 billion to $93 billion, down to ‘approximately $84 billion.” Tim Cook made the announcement in an open letter to investors, and trading halted on the news.

In the letter, Cook breaks down all of the factors that have contributed to the lower-than-expected revenue, but the two big ones are economic weakness in emerging markets and fewer iPhone sales/upgrades.

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.

[…] While Greater China and other emerging markets accounted for the vast majority of the year-over-year iPhone revenue decline, in some developed markets, iPhone upgrades also were not as strong as we thought they would be. While macroeconomic challenges in some markets were a key contributor to this trend, we believe there are other factors broadly impacting our iPhone performance, including consumers adapting to a world with fewer carrier subsidies, US dollar strength-related price increases, and some customers taking advantage of significantly reduced pricing for iPhone battery replacements. 

While it’s not unprecedented for a company to lower its earnings guidance mid-quarter, it’s been a long time since Apple has had to make such an announcement. It seems there may have been something to the recent supply chain reports regarding dipping iPhone sales.

Apple’s December 2018 quarter guidance before the revision:

  • Revenue: $89 billion—$93 billion
  • Gross margin: 38 percent—38.5 percent
  • Operating expenses: $8.7 billion—$8.8 billion
  • Other income and expense: $300 million
  • Tax rate: 16.5 percent before discrete items

Apple’s December 2018 quarter guidance after the revision:

  • Revenue: $84 billion
  • Gross margin: 38 percent
  • Operating expenses: $8.7 billion
  • Other income and expense: $550 million
  • Tax rate: 16.5 percent before discrete items

Cook closes the letter stating that Apple is already hard at work on solutions to the above-mentioned problems, and they are not taking their “foot off the gas” when it comes to innovation. Shares of AAPL were down 7% in after-hours trading at the time of publishing.

Apple is set to announce its holiday quarter earnings on Tuesday, January 29 at 2pm PST.