iPhone sales got hit by coronavirus. Now, Apple’s told us how bad

Update: Apple released financial results on April 30 showing iPhone sales fell more than 6%, but also saying services and wearables both grew double-digits. Apple’s results were the latest example of how big tech is getting bigger during the coronavirus.

When Apple warned in mid-February that the coronavirus would take a toll on the company’s sales and iPhone supply, it was a surprise. The virus had hit China and some of Europe, but it hadn’t yet severely disrupted life in the US.

Two months later, more than 1 million cases and 60,000 deaths have been confirmed in the US, and many people live under state-mandated lockdowns. Medical authorities have confirmed 3.2 million cases and 228,000 deaths worldwide, according to data compiled by Johns Hopkins University & Medicine.

On Thursday afternoon, Apple will go from ringing the alarm to sharing the details when it releases its quarterly results. Unlike in years past, investors have no idea what to expect. Many companies have withdrawn the guidance they gave to Wall Street, merely saying they won’t meet whatever numbers they’d offered before. 

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In Apple’s case, the iPhone maker had once expected to tally sales between $63 billion and $67 billion, even with early warning signs of the coronavirus showing disruption to manufacturing and supplies throughout China.

“Do the numbers even matter?” Toni Sacconaghi, a longtime Apple analyst at AllianceBernstein, said in a note to investors. He added that he doesn’t have much conviction in forecasts, in part because “everyone knows the…results will not be good.”

He also expects that the “worst is likely yet to come.”

Whatever Apple says will be interpreted as a bellwether, as the iPhone maker is one of the world’s most highly valued tech companies. Its sales and profits dwarf those of most other companies. Additionally, the $220 billion that Apple has in the bank makes it larger than the gross domestic product of many countries, including Greece, New Zealand and Panama.

No one questions whether Apple will weather the coronavirus and its economic fallout, just as the company easily survived the recession a decade ago. But in trying to forecast what the next year looks like, Apple analysts use words like “economic abyss,” “dark days ahead” and “dark valley.”

According to Yahoo, analysts on average expect Apple to report profits of $2.28 per share from $54.7 billion in sales, a drop of more than 5% from the same time a year ago.

“The negative impact of COVID-19-driven global social distancing on the broader economy and several of our companies’ end markets has been severe,” wrote analysts at Goldman Sachs. The firm also downgraded Apple’s stock to “sell,” in part because it believes other analyst estimates are too optimistic.

Apple declined to comment ahead of its earnings.

Apple’s 5G future

Though Apple did release a new MacBook Air, iPad Pro, Magic Keyboard and well-timed $400 iPhone SE this year, none of that will matter much to Apple watchers. The biggest question on everyone’s mind will be the next iPhone, which is expected in the fall.

The rumor mill increasingly points to an iPhone that will include 5G wireless technology. This new cellular signal promises download speeds 10 to 100 times speedier than what we have now.

That’s part of why nearly every new phone this year has 5G built into it, or will offer a 5G variant. That includes the Samsung Galaxy S20 5G, the LG V60 ThinQ 5G and the OnePlus 8. Aside from many having a conspicuous “5G” attached to their names, all these phones tend to also carry a premium. The $699 OnePlus 8, however, shows prices are coming down.

While the next iPhone is expected to have 5G too, the larger question is when. There’s an increasing drumbeat of rumors saying the 2020 iPhone may be delayed by manufacturing slowdowns and supply shortages linked to the coronavirus. One report in Nikkei, citing anonymous sources with “direct knowledge” of Apple’s internal discussions, said the phone may be delayed “by months.” The Wall Street Journal, meanwhile, said Monday its sources peg the delay at about a month.

Unfortunately even for Apple, analysts say it’s unlikely anyone will truly know whether the iPhone will be delayed until closer to launch date. And even if it does launch on time, or slightly later, nearly all experts agree the company will have limited supplies at first.

Apple CEO Tim Cook, who’s notoriously tight-lipped, will likely stick to generalities about how great the product lineup looks for the future when he speaks with analysts on a conference call following his company’s earnings announcement Thursday. But it’s also an opportunity for him to signal how one of the world’s biggest companies is navigating one of the worst health catastrophes in generations.

Morgan Stanley analyst Katy Huberty, for one, told investors in a memo last week that it’s likely Apple will figure out how to help make the iPhone 5G device a hit. “Apple took its medicine early,” she said.