Updated January 03, 2019 10:10:51

Photo: Tim Cook says a weaker Chinese economy has affected Apple's revenue. (Reuters: Beck Diefenbach)

Apple has warned shareholders to brace for lower-than-expected first quarter earnings due overwhelmingly to its weak sales in China.

This caused the iPhone maker's stock to plunge 7 per cent to $US157.92 ($229.72) per share in after-hours trade on Wall Street, after a brief trading halt.

The company slashed its revenue forecast to $122.49 billion for the current quarter, which ended on December 29 — down from its previous projection of $128.32 billion to $135.61 billion.

Investors learned of the news in a letter sent to them by chief executive Tim Cook on Wednesday afternoon (New York time).

"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China," Mr Cook wrote.

"In fact, most of our revenue shortfall to our guidance, and over 100 per cent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad."

Apple's boss also told investors he believes the company has a bright future in China — but the US-China trade war was a contributing factor to the weaker results.

China's economy started slowing down in the second half of 2018, and its September-quarter GDP was the second lowest in 25 years, Mr Cook wrote.

"We believe the economic environment in China has been further impacted by rising trade tensions with the United States," he said.

"As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed.

"And market data has shown that the contraction in Greater China's smartphone market has been particularly sharp."

Furthermore, Mr Cook said the weaker result was because the number of customers upgrading to new iPhone models in other countries was "not as strong as we thought they would be".

He said that due to "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". 

Topics: business-economics-and-finance, company-news, computers-and-technology, united-states

First posted January 03, 2019 10:07:31