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Apple’s sales and profit peak estimates due to chip shortages decline




January 27 (Reuters) – Apple Inc (AAPL.O) overcomes the costly global shortage of computer chips, hitting record sales over the holiday quarter, beating profit estimates and predicting a decline in deficits.

The iPhone maker, which is the world̵[ads1]7;s largest company by market value, has handled supply chain challenges such as factory outages and shipping delays caused by the pandemic better than any of its top colleagues, analysts said. Apple shares rose by around 5% in aftermarket, erasing half of the losses during the year. The gains came after the company teased its ambitions for augmented reality in the meta-verse.

More people wanted iPhones, iPads and other gadgets during the holiday quarter than Apple had to sell, which cost the company over $ 6 billion in sales, or in line with what they feared. Nevertheless, Apple, which is the biggest customer of many suppliers, used its purchasing power to pressure these suppliers to send enough gadgets to drive record sales in iPhones, Macs and wearables and accessories segments. Apple executives said that chip shortages largely affect older models of the products and in particular reduced iPad sales.

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“They have navigated the supply chain better than anyone else, and it shows in the results,” said Ryan Reith, who studies the industry-leading smartphone tracking industry IDC.

The four best-selling phones in urban China were all iPhone models, Apple said, as competitors struggled to produce competing offerings. It was the best-selling supplier in China for the first time in six years, the research firm Counterpoint Research reported on Wednesday.

Nicole Peng, who follows China’s smartphone sector at analysis firm Canalys, said that relatively low prices and the withdrawal of the main competitor Huawei from the market led to a strong quarter.

Peng said Apple would hardly repeat its quarterly performance this year, given it was driven by one-off factors. However, she said the company could still have a strong 2022 if Chinese consumers warm up to a new iPhone SE, which is expected to be released this year.

Apple’s growing sales of services such as music, TV and training subscriptions are also helping to dampen the battle with low equipment consumption. The company said it now has 785 million paying subscribers across its at least seven subscription offerings, up from 40 million from the previous quarter, reassuring investors who are worried about slowing the growth of rivals such as Netflix Inc.

Even better, Apple’s CFO Luca Maestri told Reuters that easing the chip shortage should mean less than $ 6 billion in lost revenue in the current quarter. But he refused to estimate further in the future.

“The level of limitation will depend a lot on other companies, what will be the demand for chips from other companies and other industries,” he said.

Reuters graphics

BRING IPHONE UPGRADE

Pedestrians walk past an Apple store while Apple Inc. reports fourth-quarter earnings in Washington, DC, January 27, 2022. REUTERS / Joshua Roberts

The iPhone 13, which began shipping days before the quarter began, led to a worldwide revenue of $ 71.6 billion for Apple’s phone sales, a 9% increase from the 2020 holiday season that practically hit the Wall Street targets, according to Refinitiv data. Maestri attributed the increase in sales to a record number of upgrades from older iPhones and double-digit growth in the number of people switching from rivals.

Apple’s total revenue in the first quarter was $ 123.9 billion, up 11% from last year and higher than analysts’ average estimate of $ 118.7 billion. The profit was $ 34.6 billion, or $ 2.10 per share, compared to analysts’ expectations of $ 31 billion and $ 1.89 per share.

However, Maestri warned that revenue growth will slow in the current quarter compared to the December quarter, mainly due to less favorable exchange rates and different launch dates for the products.

Apple’s only category segment that missed sales expectations was iPads. Sales fell 14% to $ 7.25 billion compared to analyst estimates of $ 8.2 billion, which seems to confirm industry predictions that tablets will have low priority for scarce parts.

Services, Apple’s second-largest segment after the iPhone, increased sales by 24% to $ 19.5 billion.

Revenue from Macs rose 25%, with Apple saying the past six quarters have been the best for Mac sales.

The pandemic has accelerated the use of digital tools for communication, learning and entertainment, and driven Apple to inflate sales over the past two years.

But investors this year have moved funds toward safer assets and away from technology stocks like Apple that have risen during the pandemic with people spending more time online.

Wall Street has questioned how long it will take Apple to deliver its next major product, such as an augmented reality (AR) headset for metaverse.

“We see a lot of potential in this area and are investing accordingly,” CEO Tim Cook told investors on Thursday.

Apple is also facing antitrust pressure in the US and Europe that could lead to new regulations that reduce service revenues.

Late last month, the Dutch Consumer and Markets Authority (ACM) ordered Apple to make changes to apps offered in the Apple App Store in the Netherlands by January 15, or face fines, after finding out that the US company had abused their market. dominance by requiring developers of dating apps to use Apple’s payment system exclusively in the app.

Still, Apple is trading at 27 times expected earnings over the next 12 months. While it was down from as much as 35 a year ago, it is still above the company’s five-year average of 20 times expected earnings, according to Refinitiv.

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Reporting by Danielle Kaye in New York, Paresh Dave in Oakland, California, and Nivedita Balu in Bengaluru; Edited by Kenneth Li, Peter Henderson and Lisa Shumaker

Our standards: Thomson Reuters Trust Principles.



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