American multinational technology company, Apple Inc. have surpassed sales and profits ahead of Wall Street expectations fuelled by 5G iPhone upgrades, but has also warned of a global chip shortage that could dent iPads and Mac sales by billions of dollars.
This is as its fiscal second-quarter sales to China nearly doubled and results topped analyst targets in every category, led by $6.5 billion more in iPhone sales than predicted, and Mac sales about a third higher than estimated.
Apple also announced a $90 billion share buyback, a day after Alphabet Inc (GOOGL.O) promised to repurchase $50 billion in stock.
Chief Executive of Apple, Tim Cook noted that the company avoided a chip shortage in the fiscal second quarter by burning through supply buffers.
Apple’s Chief Financial Officer, Luca Maestri, added that the company noted that in the fiscal third quarter, the shortage could cost the company between $3 billion to $4 billion in revenue.
The shortfalls “affect primarily the iPad and the Mac. We’ll have some challenges in there,” Cook said.
He added that there could be trouble sourcing semiconductors made with older chip making technology, noting that Apple competes against other industries for chip making capacity in those older factories and “it’s very, very difficult” to predicted when shortages will end.
Meanwhile, Maestri said he expects revenue for the quarter ending in June to grow by “strong double digits” year over year, but a steeper-than-usual decline in revenue between its fiscal second and third quarters because of a later iPhone 12 launch.
Apple had thrived through the coronavirus pandemic as home-bound consumers stocked up on electronic devices and signed up for paid apps and services for fitness and music, which made sales shoot up even higher, as Apple released 5G iPhone models.
For the fiscal second quarter ended March 27, Apple said sales and profits were $89.6 billion and $1.40 per share, compared with estimates of $77.4 billion and 99 cents per share, according to Refinitiv data.
According to Haris Anwar, senior analyst at Investing.com, IPhones were the biggest driver of growth, suggesting consumers are upgrading to 5G.
“Stimulus checks and the successful vaccine rollouts are certainly helping to boost consumer demand for tech gadgets across the board,” Anwar said.
While Apple’s business is booming, its App Store, one of its fastest-growing businesses, has come under increased antitrust scrutiny because of its in-app payment rules and app review policies.
Also, sales of Macs and iPads were $9.1 billion and $7.8 billion, respectively, compared with Fact Set estimates of $6.8 billion and $5.6 billion.
While Apple raised its dividend 7percent to 22 cents per share, it said iPhone sales were $47.9 billion compared with analyst estimates of $41.4 billion.
Apple investors are further looking for growth from its accessories business, which includes products like AirPods headphones and its new AirTag trackers, as well as its services business, which includes its App Store and new offerings such as paid podcasts.
Cook added that the company also saw an increase from the 620 million paying subscribers in the fiscal first quarter, to 660 million on its platform.
