Apple executives warned that the company could suffer losses of up to $8 billion this quarter due to factories such as supply chain shortages and factory closures in China. This underscores the importance of Chinese capacity to the world's most valuable company.
Supply will face long-term uncertainty this year
Apple Chief Financial Officer Maestri said Thursday: "Supply constraints caused by pandemic-related disruptions and industry-wide silicon shortages are affecting our ability to meet customer demand for our products." He expects the restrictions to reduce revenue by $4 billion to $8 billion this quarter, well above what Apple experienced in the March quarter.
Apple CEO Tim Cook: I think we're doing a good job of dealing with challenging environments right now/ Source: Bloomberg/FT
The remarks also underscore the fact that Apple, which relies heavily on complex supply chains, will face a long period of uncertainty this year. Before the pandemic, Apple often provided quarterly revenue guidance, but as the epidemic spread, Apple stopped releasing this data. The remarks were also Apple's harshest warning since February 2020, when the company said it was "slower than we expected to return to normalcy."
After the news broke, Apple's stock plunged 6.2% to $153.50 in late trading. The company's stock price had fallen about 7.8 percent this year before the company issued a warning. Apple said the latest supply issues only started at the end of March, so last quarter was not affected.
The "5G iPhone" continues to bring super dividends
Apple said earlier Thursday that second-quarter sales rose 8.6 percent to $97.3 billion, a record high for a non-holiday season. The increase in profit was largely due to record revenue from Apple's services division, which rose 17 percent to $19.8 billion, including App Store revenue, iCloud subscriptions, and a growing number of digital services for music and entertainment. With the services business's gross margin of more than 72.6 percent, its $14.4 billion profit was nearly double the $7.5 billion net profit of Facebook's parent company Meta in the last quarter alone.
Apple's sales continue to grow, but not as fast as last year/ Source: Bloomberg
In addition, total iPhone sales increased by 5.5%, bringing in $50.6 billion in revenue, accounting for 52% of total revenue, confirming that the 5G upgrade super cycle that began with the iPhone 12 at the end of 2020 is still continuing. Mac revenue jumped 15 percent to $10.4 billion. Wearables business revenue, which includes Watch and AirPods, rose 12 percent to $8.8 billion. However, iPad sales were not satisfactory, with revenue falling 2% to $7.7 billion. Maestri mentioned the limitations of silicon in the supply chain, with reports suggesting that Apple prioritizes chips for iPhones over iPads.
Across regions, the results were mixed. In the Americas, sales jumped 19 percent to $40 billion; in Europe, they rose 4.6 percent to $23.3 billion; and in Greater China, they jumped 3.5 percent to $18.3 billion. In contrast, sales in Japan stabilized at $7.7 billion, while the rest of asia-Pacific fell 6.7 percent to $7 billion.