Apple sales and profit top estimates as hit from chip shortages eases

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Apple Inc has reported record sales in the holiday quarter, beating estimates due to high iPhone demand and growing subscribers, even as a chips shortage that it said has begun easing cost it over $6 billion in revenue.

Apple shares rose over 5% in after-hours trading. But they have been down 10% this year, in line with the broader market, as investors reconsider stocks that have soared during the pandemic and shift funds toward safer assets.

The record results for the quarter ended December the 25th reflected what analysts have described as Apple taking advantage of its incredible size. The company, which has more than 1.8 billion active devices in the market, has been able to squeeze suppliers and manufacturers to produce big quantities of iPhones and other devices despite shortages brought on by the pandemic and most recently the Omicron variant.

"They've navigated the supply chain better than everybody, and it's showing in the results," said Ryan Reith, who studies the smartphone market for industry tracker IDC.

Investors question how long it will take Apple to deliver its next big product, such as an augmented reality (AR) headset for the metaverse.

"We see a lot of potential in this space and are investing accordingly," CEO Tim Cook told investors.

CFO Luca Maestri said revenue growth will slow in the current quarter compared with the December quarter primarily due to less favourable foreign exchange rates and the different launch dates of products.

Maestri told journalists in an interview that supply constraints would decrease in the current quarter, ending in March.

"The level of constraint will depend a lot on other companies, what will be the demand for chips from other companies and other industries. It's difficult for us to predict, so we try to focus on the short term," he said.

With few rival phones debuting in the holiday shopping season, the iPhone 13, which started shipping days before the quarter began, led to worldwide phone sales revenue for Apple of $71.6 billion, a 9% increase from the 2020 holiday season that handily beat Wall Street targets, according to Refinitiv data.

Apple's smartphone market share in China reached a record 23% in the holiday quarter, when it was the top-selling vendor there for the first time in six years, research firm Counterpoint Research reported on Wednesday.

The company's overall fiscal first-quarter revenue was $123.9 billion, 11% up from last year and higher than analysts' average estimate of $118.7 billion. Profit was $34.6 billion, or $2.10 per share, compared with analysts' expectations of $31 billion and $1.89 per share.

The pandemic has accelerated adoption of digital tools for communication, learning and entertainment, powering Apple to blowout sales across each of the company's segments, including computers, accessories and tablets.

Apple's services business, which covers paid apps such as Apple TV+, Apple Music and Apple Fitness, also has seen a big bump. Services revenue rose 24% to $19.5 billion, topping analysts' estimates of $18.6 billion. The company has 785 million paying subscribers across its offerings, an increase from 620 million a year ago and 745 million last quarter.

Sales for iPads fell 14% to $7.25 billion compared with analyst estimates of $8.2 billion, seeming to confirm industry predictions that iPads would have low priority for any scarce parts.

Sales for Macs rose 25% to $10.9 billion compared with estimates of $9.5 billion, and sales for accessories rose 13% to $14.7 billion compared with estimates of $14.6 billion.

For investors, the growing services business is helping mitigate production challenges. Apple is trading at 27 times expected earnings over the next 12 months. While down from as much as 35 a year ago, it remains above the company's five-year average of 20 times expected earnings, according to Refinitiv.

Apple is facing antitrust pressure in the United States and Europe that could lead to new regulations that cut into its services revenue.

Late last month, the Dutch Authority for Consumers and Markets (ACM) ordered Apple to make changes for apps on offer in the Apple App Store in the Netherlands by Jan. 15 or face fines, after it found that the US company had abused its market dominance by requiring dating app developers to exclusively use Apple's in-app payment system.

The team at Platform Executive hope you have enjoyed the '[post_title]' article. Automatic translation from English to a growing list of languages via Google AI Cloud Translation. Initial reporting via our official content partners at Thomson Reuters. Reporting by Danielle Kaye in New York, Paresh Dave in California and Nivedita Balu in Bengaluru. Editing by Kenneth Li, Peter Henderson and Lisa Shumaker.

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