The COVID-19 pandemic has roiled equity markets, and the downward trajectory that began in late February is likely to extend in the near term as governments continue to take stock of the economic impact of the outbreak.

Several countries have shut their borders and announced lockdowns. As a result, consumers are spending less on non-essential goods and services and delaying purchases. This is expected to hit the top line of several companies by a significant margin.

One tech giant that is set to experience a considerable decline in revenue is Apple (AAPL 0.48%). The company generates a majority of sales from its flagship product -- the iPhone. In the December quarter, iPhone sales rose 7.7% to $56.0 billion and accounted for 61% of total revenue. This growth was driven by strong demand for the company's new lineup of smartphones.

But on Feb. 17, Apple released a statement confirming that the company will miss the quarterly guidance issued during the previous earnings call. Apple attributed the shortfall to a constrained iPhone supply and a slow production ramp-up in its manufacturing sites in China. These headwinds have the potential to depress Apple's results beyond the current quarter.

Global impact of Coronavirus

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iPhone shipments down 61% in China

Apple reported reduced demand for its products in the Chinese market as the company had to shut down all of its 42 retail outlets in the country. Over the last month, though Apple re-opened stores in the region, it is still experiencing lower customer traffic and working hours.

According to a Reuters report, Apple sold approximately 494,000 iPhones in China in February, down from 1.27 million units in the same period last year. In January, iPhone shipments in China numbered approximately two million and were "steady" year-over-year. Strategy Analytics forecast global smartphone shipments fell 38% year-over-year in February. 

While China is limping back to normalcy, other regions such as Italy, Spain, and the United States are still struggling to contain the outbreak. Earlier this month, Apple announced the temporary closure of all retail locations around the globe, which suggests iPhone sales will also decline in Europe and North America -- two of the company's biggest markets. In the December quarter, the Americas accounted for 45.1% of revenue, followed by Europe and Greater China at 25.4% and 14.8%, respectively.

Will other businesses offset Apple's iPhone decline?

While the above numbers are only estimates -- Apple CEO Tim Cook has historically refuted these figures from market research firms -- the slowdown in China paints a bearish picture of how things will proceed in the company's other major markets. Apple iPhone sales could fall a high single-digit percentage in the March quarter, which would result in major blow to the company's top line. The latest analyst consensus estimates put Apple's fiscal 2020 second-quarter revenue at $57.0 billion, down significantly from management's original outlook of $65 billion (at the midpoint).

Apple still depends on the iPhone for top-line growth, but COVID-19 is likely to impact sales of its other devices, including the MacBook, iPad, Apple Watch, and AirPods. However, the high-growth services segment can offset some of these declines as users spend time at home consuming digital entertainment. Subscription services such as Apple TV+, Apple Music, and Apple Arcade are likely benefactors of the surge in demand.

Apple was poised to have two bumper years of solid iPhone sales driven by strong demand for the iPhone 11 line up, as well as upcoming 5G-enabled smartphones. Instead, COVID-19 may end up driving shipments to multi-year lows.

However, investors should be aware that the pandemic is likely to be a only short-term headwind. Apple has massive cash reserves, a strong balance sheet, and robust cash flows. It will weather this storm, and the stock's rebound in the second half of 2020 may well be as spectacular as the recent pullback.