Apple shares fell after the world’s largest company missed earnings estimates due to the global chip crisis, which it said would continue into the holiday period.
“Larger-than-expected supply constraints” cost the company $6 billion in the three months to September, CEO Tim Cook said, adding that the shortage will cost it more during the holiday period – the most lucrative time of the year.
“Supply restrictions have affected iPhones, iPads and Macs,” Cook told investors, citing chip shortages and “Covid-related manufacturing disruptions” in Southeast Asia.
The company reported $83.4 billion in revenue in the fourth quarter of the fiscal year, up 29 percent from a year ago but less than expectations of $84.3 billion.
Apple’s stock fell 5 percent in after-hours trading on the back of lost revenue, after the company beat expectations in previous quarters.
However, net income beat expectations, rising 62 percent to $20.5 billion, versus estimates of $20.2 billion, thanks to growth in higher-margin services.
The iPhone accounted for 46.6 percent of total revenue last quarter, with smartphone sales up 47 percent to $38.9 billion. The comparison was good due to Covid-related delays to the iPhone 12 launch a year ago, as total revenue from Greater China increased 83 percent to $14.6 billion.
Luca Maestri, chief financial officer, told the Financial Times that Apple has 745 million paid subscribers for its services, up from 660 million six months ago. That helped boost Apple’s services business revenue 25.6 percent year-over-year to $18.3 billion, the second-fastest-growing category after iPhone.
The Mac division only added 1.6 percent to $9.18 billion in revenue, while iPad sales jumped 21.4 percent to $8.3 billion. Revenue for wearable devices, a category that includes headphones and smartwatches, increased 11.5 percent to $8.8 billion.
Apple declined to provide specific guidance for the holiday season, but Maestri said “demand is very, very strong” and expected record returns. Analysts expect Apple to make $120 billion compared to $111.4 billion a year ago.
“We wish we had more supplies (from) where we stand now,” Maestri said.
During the 12-month period, Apple earned more than $1 billion per day for the fiscal year for the first time. Revenue rose 33.3 percent to $365.8 billion, the fastest growth rate since 2012. Net profit approached $100 billion for the year, up 64.9 percent to $94.7 billion.
Apple has done so well that analysts are finding it hard to fathom double-digit growth, with Wall Street forecasting a 4.6 percent expansion in the next 12 months, according to S&P Capital IQ.
“Growth is clearly going to slow next year, as it will slow for almost all of the big tech companies,” said Gene Munster, an investor at Loup Ventures.
Monster was more enthusiastic than others, saying that 7-9 percent top-line growth appears sustainable over the next few years “until Apple takes off in new product categories” such as augmented reality and possibly vehicles.
Apple’s financial performance could also expand more quickly thanks to an ever-increasing mix of higher-margin services, including App Store revenue and push toward ads.
Analysts at Evercore ISI noted that gross margins of 42.2 percent last quarter were above expectations. This was because Apple didn’t make predictions on lower-margin iPhone sales, but outperformed it in Services, which boasted a high margin of 70.5 percent versus 34.3 percent for devices.
“We have set records across the board (in services),” Maestri told investors. “AppleCare, music, video, ads, payment services, and the App Store all set a record in the September quarter.”
Apple earnings at a glance
actual vs estimates
Revenues: $83.4 billion for $84.25 billion
net income: $20.5 billion For $20.2 billion
Earnings per share $1.24 for $1.24
Estimated source: Visual Alpha