Apple Flags Slower Growth Amid Supply Issues
Synopsis
The company issued a softer-than-expected sales outlook as parts shortages continued to affect iPhone deliveries.
Key Highlights
- Apple expects September-quarter revenue growth of 9% to 11%, below Wall Street’s 12% forecast.
- The supply chain challenges are attributed to shortages of advanced chipmaking technology and memory chips, the company said.
- Apple reported June-quarter revenue and earnings that beat analyst expectations as sales of the iPhone and Mac strengthened.
Apple forecasts that revenue growth in the current quarter ending in September will be slower than Wall Street expected, saying supply chain constraints have made it difficult to deliver products. Shares of the company fell 6% in after-hours trading following the guidance.
Chief Financial Officer Kevan Parekh, said the company expects 9 to 11% year-on-year growth in September quarter revenue, below the analyst expectation of 12%, as per LSEG data.
He further said that iPhone revenue would grow at a mid-teens rate and below Wall Street’s prediction of 17.6% when gross margins were expected to span between 47% and 48%.
Supply Chain Constraints Continue
Apple Chief Executive Tim Cook said the company is dealing with supply constraints with limited flexibility and the company is assessing alternative vendors for components.
Cook said an industry shortage of advanced chipmaking tools impacted a lot of firms and was the primary limitation in Apple’s silicon chips during the fiscal third quarter.
He said the shortage now particularly affects the Mac lineup, with sales increasing 29% regardless of price increases for the MacBook Neo and MacBook Pro.
The heightened demand for Apple products beat expectations, and the more sophisticated chipmaking supply chain had little flexibility to respond to demand, Cook said.
Meanwhile, Apple faces supply chain pressure due to hundreds of billions of dollars in capital expenditure being pulled away from memory chips and processors supplied by Taiwan Semiconductor Manufacturing Co. (TSMC). Cook had previously told analysts Apple suffered shortages of memory chips and iPhone processors in recent weeks.
June Quarter Beats Expectations
Apple posted a third-quarter revenue of US$109.42 billion up by 16.4% from a year earlier, higher than analyst estimates of US$108.65 billion and in line with company guidance for growth ranging between 14% and 17%.
Earnings were US$2.02 per share, including 11 cents shares tariffs refunds. Those earnings still exceeded Wall Street’s estimate of US$1.89 per share, excluding those refunds.
Earlier this year, Apple launched a reworked Siri virtual assistant with its own brand of AI-driven helpers created with help from Google. Consumers and software developers increasingly preferred Macs for on-device AI tasks, rather than paying monthly fees to use cloud-based artificial-intelligence services, the company said.
iPhone and Mac Drive Results
iPhone sales rose US$54.25 billion exceeding analysts’ estimate of US$53.86 billion, and made it Apple’s best fiscal third-quarter iPhone sales ever.
After global supply shortages in memory chips led Apple to scramble to raise the prices of its Macs and iPads, it is not surprising that customers are buying iPhones ahead of anticipated price hikes. Apple is expected to announce iPhone price increases during its yearly September product unveiling, a move that analysts believe is becoming more and more likely.
Mac revenue climbed 28.7% year over year to US$10.35 billion, ahead of analysts’ estimate of US$6.92 billion, but at a higher price point.
Apple reported a 5.9% decline in iPad revenue of US$6.19 billion, which missed analysts’ estimate of US$6.92 billion. According to Cook, the drop was due to a hard comparison versus last year, when Apple released the A16 iPad in that same quarter. Revenue from wearables grew 6.5% to $7.88 billion, edging out analysts’ expectation of $7.82 billion
Services Growth Misses Estimates
Apple’s services business ranging from the App Store to iCloud and content services contributed US$30.74 billion, an annual increase of 12.1% but missing analysts’ consensus estimate of US$31.22 billion in revenues.
Analysts said investors are worried that if iPhone sales slow after the current purchasing spree then the slowing growth trend in services could become more noticeable.
Apple’s gross margins came in at 50.1%, with two percentage points attributed to tariff refunds. Excluding the refunds, gross margins were 48.1%, topping Apple guidance at the midpoint and analysts’ estimate of 47.92% according to LSEG.
Sales increased in all regions, with Greater China revenue jumping 22.4% to US$18.82 billion, although this was below analysts’ estimate of US$19.67 billion.
Source: Reuters
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