Apple soars past sales, profit targets with strong iPhone demand, warns of chip shortages

Cook said on a conference call with investors that Apple avoided a hit to fiscal second-quarter sales from chip shortages by burning through Apple’s supply ”buffers and offsets.”

But Chief Financial Officer Luca Maestri told investors on conference call that constraints due to the global chip shortage could cost the company USD 3 billion to USD 4 billion in revenue in the fiscal third quarter.

On the conference call, Cook said the shortages ”affect primarily the iPad and the Mac. And so we’ll have some challenges in there in meeting the demand that we’ve got.”

Cook said that ”most of our issue” is semiconductors made with older chipmaking technology. Those are the same classes of chips that have hobbled other industries, including automakers such as Ford Motor Co and General Motors Co. Cook said it was difficult to tell how long supply shortages would last because so many industries use those chips.

”We would need to know the true demand from each of these players and how that’s going to change over the next few months. And so it’s very, very difficult.”

Maestri said Apple, which stopped giving formal financial guidance a year ago amid pandemic volatility, expects revenue for the quarter ending in June to grow by ”strong double digits” year over year, said Chief Financial Officer Luca Maestri on a conference call. Maestri said the company expects a steeper-than-usual decline in revenue between its fiscal second and third quarters because of the unusual timing of its iPhone 12.

Apple thrived through the coronavirus pandemic as home-bound consumers stocked up on electronic devices and signed up for paid apps and services for fitness and music, and sales shot up even higher as Apple released 5G iPhone models last fall.

For the fiscal second quarter ended March 27, Apple said sales and profits were USD 89.6 billion and USD 1.40 per share, compared with estimates of USD 77.4 billion and 99 cents per share, according to Refinitiv data.

Apple shares rose 3 percent in extended trading after the results.

iPhones were the biggest driver of growth, suggesting consumers are upgrading to 5G, said Haris Anwar, senior analyst at Investing.com.

”Stimulus cheques and the successful vaccine rollouts are certainly helping to boost consumer demand for tech gadgets across the board. This environment will last for at least another year providing a solid platform for Apple to expedite its growth.”

While Apple’s business is booming, its App Store, one of its fastest-growing businesses, has come under increased antitrust scrutiny because of Apple’s in-app payment rules and app review policies.

Facebook warned on Wednesday that growth later this year could ”significantly” decline as new Apple privacy policies will make it more difficult to target ads.

In the coming weeks, Apple will defend a high-profile antitrust lawsuit brought by ”Fortnite” maker Epic Games, while European Union antitrust regulators are set to chare the company following a complaint by music streaming service Spotify, Reuters reported this week.

Macs and iPads – two product categories that Wall Street rarely counted on to supply growth – both benefited from consumers working from home and remote learning. On top of those trends, Cook said Apple customers were responding strongly to the company’s M1 chip, its first in-house processor for Mac computers.

”Both of those things happening at once really supercharged the Mac sales. The last three quarters on Mac have been the strongest three quarters ever in the history of the Mac,” Cook told Reuters.

Apple raised its dividend 7 percent to 22 cents per share, a penny ahead of estimates, as well as announcing the USD 90 billion share repurchase. Google-owner Alphabet Inc announced a USD 50 billion buyback on Tuesday.

Apple said iPhone sales were USD 47.9 billion compared with analyst estimates of USD 41.4 billion, according to data from FactSet. Sales of Macs and iPads were USD 9.1 billion and USD 7.8 billion, respectively, compared with FactSet estimates of USD 6.8 billion and USD 5.6 billion.

Apple investors are looking for growth from Apple’s accessories business, which includes products like AirPods headphones and its new AirTag trackers, and its services business, which includes its App Store and new offerings such as paid podcasts. Sales in the segments were USD 7.8 billion and USD 16.9 billion, respectively, versus estimates of USD 7.4 billion and USD 15.5 billion.

Cook said the company has 660 million paying subscribers on its platform, an increase from the 620 million in the fiscal first quarter.

Apple’s sales in the Greater China region during the fiscal second quarter, which included the busy Lunar New Year shopping season, were up 87.5 percent to USD 17.7 billion, compared with a 57 percent rise in the previous quarter.

Shares of Apple are up some 93 percent over the past year, compared with a 61 percent rise for the Nasdaq 100 index of which Apple is a component.