5G iPhone Pushes Apple to Exceed Sales and Profit Targets, Express Chip Shortage Concerns
Apple posted sales and profits on Wednesday ahead of Wall Street expectations fueled by 5G iPhone upgrades. The tech giant however warned against a global chip shortage which could dent iPads and Mac sales by several billion dollars.
Nearly doubling physical second-quarter sales to China and topping analyst targets in every category, the company led by 6.5 billion dollars more in iPhone sales than predicted Mac sales, about a third higher than estimates.
The Tech giant also announced a 90-billion dollar share buyback, barely a day after Alphabet promised to repurchase 50 billion dollars in stock. Tim Cook, Apple’s chief executive, revealed on an investor call that the company avoided a chip shortage in the second fiscal quarter by burning through supply buffers.
The company could suffer a 3 to 4-billion dollar loss in revenue in the third fiscal quarter due to this shortage as revealed by the chief financial officer Luca Maestri.
According to Tim Cook, the iPad and Mac are the primary devices affected by the shortfalls. He also expressed that the company has faced some challenges regarding these devices, adding that the company could face some problems sourcing semiconductors made with older chip-making technology. This technology is similar to older chips whose shortage has shut down half of the production of Ford motors in its second quarter.
In addition, Cook said that his company is in competition with other industries for chip-making capacity in those all the factories. He also expressed the difficulty in predicting when shortages will come to an end. According to Maestri, revenue for the quarter ended in June is expected to grow significantly by double digits in its year-over-year analysis. However, a steeper-than-usual decline in revenue is expected, due to its second and third fiscal quarters caused by the later iPhone 12 launch.
The Tech Giant thrived through the coronavirus pandemic, due to homebound consumers stocking up on electronic devices, and signing up for paid apps and services for music and fitness. The company enjoyed a continued improvement in sales as the 5G iPhone models were released last fall.
Apple revealed that the sales and profit for the fiscal second quarter ended March 24 were at 9.6 billion dollars and 1.4 dollars per share. In comparison with estimates of 77.4 billion dollars and 99 cents per share, the company exceeded expectations.
According to Harris Anwar, a senior analyst at investing.com, judging from the widespread desire to upgrade to 5G, 5G iPhone devices were the biggest driver of growth. He also added that the successful rollout of the coronavirus vaccine in addition to stimulus checks has successfully helped to boost consumer demand for tech gadgets across the board.
Apple's business has enjoyed success and growth. However, the company's app store which is one of the fastest-growing businesses has come under an increasing amount of antitrust scrutiny due to the in-app payments rules and app review policies.
On Wednesday, Facebook warned that its growth later this year could be significantly affected adversely as new Apple privacy policies will create difficulty to target ads.
IPad devices and Mac models have in recent times had little expectation placed on them to supply growth. However, in the second fiscal quarter, these two product categories have both benefited from consumers working from home, and widespread remote learning. In addition to these recent trends, according to Tim Cook, Apple consumers were also responding positively to the new M1 Chip, the company's first in-house chip for Mac computers.
Coincidentally, both factors have overlapped to really supercharge the Mac sales making the last three quarters the strongest the product category has seen since its inception.
Apple's share dividends rose from 7% to 22 cents per share. The company placed iPhone sales at 47.9 billion dollars which exceeded analyst estimates of 41.4 billion dollars according to data from FactSet.
iPad and Mac devices made 9.1 billion dollars in sales and 7.8 billion respectively which both exceeded FactSet estimates of 6.8 billion dollars and 5.6 billion respectively.
Investors are looking for growth from Apple’s accessories business which encompasses products such as Airpod headphones and the company's new AirTag trackers. Apple's service business includes the company's App Store as well as new offerings like paid podcasts. This segment made sales of 7.8 billion dollars and 16.9 billion respectively compared to estimates of 7.4 billion and 15.5 billion respectively.
Tim Cook disclosed that the company has about 660 million paying subscribers on its platform, an increase of 40 million from 620 million in the last fiscal quarter.
In the greater China region, Apple's sales during the second fiscal quarter, which coincidentally included the busy lunar year shopping season increased by 87.5% to 17.7 billion dollars compared to 57% in the previous quarter. Apple's shares have grown about 93% over the past year compared to a 61% increase for the NASDAQ 100 index of which Apple is a component.Source