It’s been more than two years since Apple Inc. issued revenue guidance. The iPhone maker initially blamed the Covid-19 pandemic, and later added chip shortages, for its inability to forecast the future. Yet the move is part of a worrying trend toward decreasing transparency at the world’s largest company.
On January 28, 2020, just as lockdown measures were shutting parts of China and a new virus was arriving on US shores, Apple gave a wider than usual March-quarter guidance range because of uncertainty about both consumer demand and supply chain impact. The forecast was for revenue of $63 billion to $67 billion, well ahead of estimates of $62.3 billion, and factored in supply chain struggles from the virus, Chief Executive Officer Tim Cook said at the time.
Three weeks later it canceled that outlook, citing the pandemic, and didn’t issue a new one. Sales ended up coming in at $58 billion, beating updated analyst estimates. Revenue guidance hasn’t returned since. An Apple spokesman on Thursday declined to say if this forecast will ever return.
Apple’s reticence is understandable. Current lockdowns in Shanghai, as well as the ongoing chip shortage, are set to impact revenue this coming period by $4 billion to $8 billion, Chief Financial Officer Luca Maestri told investors. According to the company’s own analysis, supply constraints cost it as much as $4 billion in lost revenue for the June quarter of last year, and $6 billion for the September period.
Yet all this turmoil is starting to feel like a convenient excuse to share less with investors. In November 2018, Apple announced it would stop providing shipment numbers for its iPhones, iPads and Macs. It still provides revenue figures for those products.
“The number of units sold in any 90-day period is not necessarily representative of the underlying strength of our business,” Maestri said at the time. This may be true, but that’s really for shareholders to decide, since they own the company. Investors generally believe that the real reason was to avoid publishing declines once unit growth rates had peaked.
Another item that’s seen some backsliding in transparency is its supply chain report. Apple spends significant time and resources tracking vendor compliance in areas like labor, recycling and energy conservation, publishing its findings annually. But it recently appears to have stopped providing a list of top suppliers, and started releasing the broader compliance report without notice or publicity. (Apple hasn’t responded to email queries for further information about the supplier list.)
There are several reasons to suggest that Apple actually could provide guidance even during uncertain times. It still gives gross margin and operating expense forecasts, as well as basis-point level analysis of expected impact from foreign-exchange fluctuations. Those figures all rely, to some degree, on how much revenue it expects to bring in during the period.
The company also has a very close relationship with its suppliers, even providing equipment to vendors and having its own staff working in their facilities. At the same time, Apple’s integration with its sales channels is arguably tighter than any other physical-goods company in the world. It operates hundreds of its own retail outlets around the world, as well as running an online sales platform that has products shipped from factory to customer directly. If anyone has a grip on what’s going on at the ground level, it’s Apple.
Lastly, the earnings and outlook call happens a third of the way through the quarter. It’s not a stretch to believe that by the time Apple talks to investors, it already knows how much it’s sold for approximately 50% of that period.
The most recent earnings are a case in point. Maestri just said that Covid-related disruptions didn’t impact the March quarter. And the other factor, chip supply, can be more easily ascertained because these components take weeks to make and have lead times stretching up to a few months. Yet Apple still declined to give guidance when it reported earnings back in January.
Let’s compare Apple's approach to Big Tech peers. Microsoft Corp. this week managed to not only provide revenue guidance, but a breakdown by division. Admittedly, the company mostly sells software and cloud services, which isn’t as sensitive to supply-chain snarls. Yet it does sell some hardware, and its PC operating system revenue depends heavily on how many computers are shipped during the period, over which it has almost no control and likely very little visibility.
Then there’s Meta Platforms Inc. The company better known as Facebook relies solely on the whims of clients who may or may not wish to spend money on advertising, and who can tweak purchases by the hour. Yet it somehow manages to give a decent forecast, even when its core product of targeted ads gets undermined by new restrictions imposed by Apple on tracking users.
It’s Apple’s retail investors who miss out the most. While big institutions like BlackRock Inc. and Vanguard Group Inc. have teams of analysts, access to brokerage research, and can likely get on a call with Apple investor relations anytime, mom-and-pop shareholders have far fewer resources. Instead, they are largely left to parsing public statements made by the company during earnings season.
That’s why this pandemic-inspired rollback in disclosure is a worry. Stakeholders deserve as full a picture of what’s going on as early as possible, and using short-term uncertainty as a smokescreen for reducing transparency would be a severe blow for everyone. Let’s hope quarterly revenue guidance returns soon.
Bloomberg
