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Apple Inc. (AAPL) Explains Negative Currency Effect Before Anyone Asks

Apple Inc NASDAQ:AAPL
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Apple Inc. (NASDAQ:AAPL) revenues went up in China exhibiting regional growth, but currency headwinds countered some growth in other regions. This forced the US firm to release the so-called ‘supplemental material’ to explain what some might view as concerning trends.

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Apple explains currency effect

Apple raked in $75.9bn in quarterly revenue in its first fiscal quarter of which $29.3bn came from the U.S. down 4% on YoY basis. The firm generated $18.4bn in revenue from Greater China, an increase of 14% on a year over year basis, making China the second-most lucrative market of Apple.

CEO Tim Cook said these numbers could have been higher, if the currency rates had not been extremely volatile. Apple, for the first time ever, prepared supplemental material with its earnings report, explaining the currency headwinds it is facing abroad.

Apple Inc. (NASDAQ:AAPL) did some calculations to conclude that $100 of non-U.S. dollar revenue in the Q4 2014 is just worth $85 today. The firm said if currency had remained constant, then the revenue for Q1 would have been higher by $5bn representing an 8% increase on year-over-year basis. Even after applying constant currency to regional revenues, revenue from the US is still down 1%, but a slight bump is seen in China with year over year growth of 17%.

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Europe was the biggest sufferer or the biggest beneficiary depending on the way data is perceived. European revenue grew by 4% from last year and was reported at $17.9bn, but those numbers get a boost to 18% on a constant currency basis after which they stand at $20.2bn.

iPhone charm dimming

Thanks to the iPhone, which accounts for two-thirds of the company’s revenue, Apple is the most valuable firm in the world. But, the iPhone sales too have limits. For the fiscal first quarter, the iPhone sales went up by less than 1% from a year earlier. This was the slowest year over year growth rate ever for the firm.

Apple expects the sluggishness to continue, and is projecting its first revenue decline in more than a decade. Soaring sales of the iPhone and other devices helped the firm deliver high double-digit revenue gains once, but as iPhone sales saturate, and the absence of a new blockbuster product from Apple, the revenue gains of the firm is withering off.

“We’re seeing extreme conditions, unlike anything we’ve experienced before, just about everywhere we look,” Cook said during the earnings call.

On Tuesday, Apple Inc. (NASDAQ:AAPL) shares closed up 0.55% at $99.99. Year to date, the stock is down over 5% while in the last one-year, it is down over 11%.

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Aman Jain

Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.

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