(Bloomberg) – Apple Inc. fell as much as 2.9% in recent trading after warning that sales growth could be slowing and supplies are shrinking, dampening investor enthusiasm after a third quarter. record.
The company said in a conference call Tuesday that supply constraints will affect the iPhone and iPad in the current quarter. The slowdown in demand for services will also drive the slowdown. Apple declined to provide specific revenue forecasts, a practice it adopted during the pandemic.
The cautious comments followed a 36% sales gain in the third quarter, with revenue of $ 81.4 billion breaking Wall Street’s estimate of $ 73.8 billion. But investors remain in a wait-and-see attitude. Parts shortages and a patchwork of restrictions from Covid will continue to weigh on Apple’s business this year.
The lack of specific guidance from the Cupertino, California-based company for the fourth quarter continued a trend that began when Covid-19 first appeared in 2020. And Apple is not alone. Many companies have reduced their prospects in the face of the uncertainty of the pandemic.
For now, business is booming. The iPhone, Apple’s main product, grew about 50% to $ 39.6 billion in the latest quarter, beating projections of $ 34.6 billion. The third quarter is typically one of Apple’s slowest periods, with consumers expecting the launch of new phones around September, but the iPhone 12 5G appears to have helped the company counter that trend.
And the company still expects “strong” double-digit growth in the fourth quarter.
“Our record operating performance in the June quarter included new revenue records in each of our geographic segments,” CFO Luca Maestri said in a statement. Apple continues to make significant investments to support long-term growth, generating $ 21 billion of operating cash flow and returning $ 29 billion to shareholders during the third quarter, it added.
Apple reported $ 7.37 billion, or 12% growth, in revenue for the iPad, beating expectations of $ 7.13 billion. Apple introduced new iPad Pro models in April, but the lineup was limited due to problems building new displays for the larger models. For Macs, Apple reported revenue of $ 8.24 billion, or 16% growth, exceeding the estimate of $ 8 billion.
Apple previously warned that third-quarter revenue would be hit by $ 3 billion to $ 4 billion due to chip shortages affecting some iPad and Mac components. Third-quarter earnings were $ 1.30. per share, compared to an estimate of $ 1.01 per share.
Service revenue reached $ 17.5 billion, up from the estimate of $ 16.3 billion and a third more than in the same period last year. That business relies heavily on sales from in-app purchases and third-party app downloads, and Apple recently cut the cutback needed for most apps from 30% to 15%. The company has launched a host of new services in recent years, including Apple TV + and Apple Arcade, but it hasn’t said how they’re performing.
Apple also saw its wearable, home and accessories segment grow 36% to $ 8.78 billion. That category includes Apple Watch, AirPods, Apple TV, HomePod, and various other accessories. Apple hasn’t updated AirPods earbuds since 2019, last year’s Apple Watch updates were minor, and this year’s Apple TV updates focused on a faster processor and redesigned remote.
All of Apple’s retail stores reopened as of June, and the company has also started a hybrid program to help staff work from home or in stores with more flexibility.
As economies have continued to reopen due to vaccines, the demand for Apple devices in general has increased. However, with Covid cases increasing again and chip shortages continuing, challenges are expected to persist through the holiday season.
Delays in returning to work
The emergence of the Covid Delta variant has already prompted Apple to delay the employee office return mandate by at least a month, and has reinstated masking rules within retail stores.
Even with the moderate reaction to the results, Wedbush Securities analyst Dan Ives said they should help lay the foundation for Apple to reach a market value of $ 3 trillion over the next year. The stock is up 11% year-to-date, giving it a valuation of around $ 2.5 trillion.
“We would characterize this as a ‘gold medal’ performance from Apple during the quarter, especially considering the chip shortage,” he said.
(The updates share the reaction from the first paragraph).
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