Apple may face bigger issues in supply

Apple Inc (AAPL.O) forecasted more troubles on Thursday as China’s COVID-19 lockdowns stymie production and demand, the war in Ukraine dampens sales, and development in services, which the iPhone manufacturer sees as its engine for expansion, slows.

In late trading, shares were down 2.2 percent after executives expressed their pessimism on a conference call. The announcement overshadowed Apple’s fiscal second quarter profit and sales, which concluded in March.

In an interview, Apple’s Chief Financial Officer Luca Maestri warned that the conflict in Ukraine, which forced the company to halt sales in Russia, will hurt sales even more in the fiscal third quarter.

On the call, he said supply-chain concerns would harm sales by $4 billion to $8 billion in the third quarter, which would be “significantly larger” than the hit in the second quarter.

He stated that the supply issues were centered on a corridor near Shanghai, China, and mirrored COVID disruptions and chip shortages. According to him, the epidemic was harming demand in China as well.

Tim Cook, Apple’s CEO, claimed that almost all of the Chinese plants that conduct final assembly of Apple goods have reopened following recent COVID shutdowns, but he did not say when the chips shortage, which primarily affects older models, would end.

Cook expressed the hope that COVID problems will be “transitory” and “improve over time.”

According to at least one analyst, the outlook is unclear.

“We were all waiting for greater guidance on what is really going on over there (China)… and that didn’t come out,” Louis Navellier, chief investment officer of Navellier & Associates, said.

Despite Apple’s supply chain management in the March quarter, Kim Caughey Forrest, Chief Investment Officer at Bokeh Capital Partners, stated that sustained demand remained a huge worry.

Other high-profile tech firms have expressed their concerns as well. Amazon (AMZN.O) anticipated a dark quarter due to supply chain challenges, sending its stock down 9% after the close on Thursday. Intel Corp (INTC.O) forecast a bleak quarter due to supply chain issues, sending its stock down 4%.

Both businesses, along with Apple, are members of the Nasdaq index, which has lost roughly 19 percent this year as investors flee from increasing prices.

According to Refinitiv statistics, Apple’s overall fiscal second-quarter revenue was $97.3 billion, up 8.6% from the previous year and higher than analysts’ average expectation of $93.89 billion.

Worldwide phone sales income increased 5.5 percent year over year to $50.6 billion, and services revenues increased 17 percent to $19.8 billion, both exceeding analyst average projections.

Maestri, on the other hand, predicted that service growth would slow from the March quarter but stay in double digits. He highlighted a number of causes, including higher currency exchange rates.

The company’s total earnings of $25 billion, or $1.52 per share, considerably beyond analysts’ projections of $23.2 billion and $1.43 per share.

Apple also increased its dividend by 5% to $0.23 per share, and the board approved a $90 billion stock repurchase.

As the situation in Ukraine and other factors drive up the cost of oil, food, and other basics, investors have been bracing for a reduction in consumer spending on computer products and services.

Cook waved off a query about inflation and consumers from an analyst.

“That’s something we’re keeping an eye on. But, to be honest, our main focus right now is on the supply side “he stated

When asked about rising inflation, Maestri said demand had been higher than expected at the start of the quarter, notably for iPhones. However, he did mention that inflation was affecting expenses.

Other businesses have profited from the pandemic, notably the shift to hybrid work.

Apple reported iPad sales declined 2% to $7.65 billion owing to supply-chain challenges, but revenue from Mac computers grew 14.7 percent to $10.4 billion, despite supply-chain issues.

Wearables, home speakers, and accessories sales increased 12 percent to $8.8 billion, missing Wall Street estimates for the first time. Watch and AirPods sold well, according to Maestri, who blamed the miss on seasonal variations in demand for other accessories.

Apple announced that it now has 825 million paying customers across at least seven subscription services, up from 785 million in the previous quarter. Its expansion comes as competitors such as Netflix Inc (NFLX.O) report declining user numbers.

Latest articles

Alaska limits cruise ship passengers to limit tourists

Alaska’s capital city is set to limit the number of cruise ship passengers arriving at its port due to concerns over tourism's increasing impact....

Sudan war: Millions struggle to find food

Mr. Balal, based in the UK, is a co-founder of Khartoum Aid Kitchen, which provides food to tens of thousands of people in Sudan’s...

Influencer fined €1,800 for trespassing on Sardinia pink beach

A Dubai-based influencer has been fined €1,800 for trespassing on a restricted pink-tinged beach in Sardinia and sharing videos and photos of her visit...

Florida: State of emergency declared due to flooding

In the last two days, Florida has experienced significant rainfall, prompting Governor Ron DeSantis to declare a state of emergency in Broward, Collier, Lee,...

Related articles