While Apple’s new iPhone XS, XS Max and XR are mighty fine smartphones, they’ve not been selling as briskly as the company had hoped – and this could end up costing Apple around $9 billion in revenue.
Apple CEO Tim Cook has addressed the issue in a letter to investors which warns of weaker-than-expected first-quarter earnings, with the finger pointed squarely at the issue being “fewer iPhone upgrades than we had anticipated.” Simply put, people aren’t buying Apple’s latest phones.
According to Cook, “lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline,” although he also notes that “in some developed markets, iPhone upgrades also were not as strong as we thought they would be.” The iPhone XR – which was proclaimed as the ‘budget’ model by many fans – seems to have been most at fault; while Apple has stated that it has sold well, it is being reported that Apple has had to slash production quotas with its suppliers, which hints that the device is not selling as well as was expected.
While some areas of Apple’s business actually grew recently, the fact that it relies so heavily on the iPhone to generate revenue means these increases have been wiped out somewhat by the fact that people simply aren’t upgrading their smartphone all that often.
Another point raised is that many people took advantage of the company’s $29 battery replacement service (which came about after Apple was found to be throttling older iPhones via software) to prolong the lifespan of their phones, which also hurts iPhone sales. Thanks to their robust build quality and excellent legacy software support, Apple’s phones tend to remain in decent working order much longer than their Android rivals, so it stands to reason that people would hold onto them for longer – especially with a new (and cheap) battery installed.
All of this amounts to Apple’s revised Q1 guidance forecast failing by ‘up to’ $9 billion in revenue. Unsurprisingly, Apple’s stock dropped by nearly 10 percent on the back of this news.