After a year of rapid revenue growth, Apple showed it has a more resilient business than many of its tech peers, even as it slowed in the first three months of the year.
The company reported Thursday that profits rose 6 percent to $25 billion a slowdown in the second fiscal quarter from double-digit growth in each of the previous five quarters. Revenue rose 9 percent to $97.29 billion, beating analysts’ expectations as pandemic-related purchases of iPads and Macs slowed from a year earlier.
Apple Chief Executive Tim Cook warned investors ahead of the coming months, telling Wall Street analysts that an accelerating Covid outbreak in China will curb demand and hurt production of iPhones, iPads and Macs. He said supply chain issues are expected to reduce revenue by $4 billion to $8 billion in the current quarter.
“I think we’re doing a good job in a challenging environment right now,” Mr Cook said, noting that “almost all” of the factories that Apple relies on in the Shanghai area have resumed production.
Shares of the company fell about 4 percent in after-hours trading, giving up much of Apple’s gains earlier in the day.
That The results of a week of mixed financial reports from leading technology companies struggling to sustain last year’s explosive growth. Google’s parent company, Alphabet, and Facebook’s parent company, Meta reported declines in earnings from a year earlier while Microsoft saw an increase in profit.
The pandemic has been a double-edged sword for Apple. Remote schooling and work has boosted demand for computing equipment, and government stimulus controls and cuts in travel and leisure spending have given a boost to the company’s all-important iPhone business, analysts said. But those same forces sowed supply chain problems and sparked a global chip shortage that has cost Apple billions of dollars in lost sales.
Apple not only emphasized the challenges it faces in China, but also said that its overall revenue for the current quarter will be impacted by the decision to stop selling products in Russia due to the invasion of Ukraine. Apple counts on Russia for 1 percent of its sales and a slightly larger percentage of its profit, analysts estimate.
According to Apple, January-March sales of iPhones, iPads and other devices rose 6.6 percent to $77.5 billion.
The bigger problem for Apple could arise in the coming months as the economic strains from the war in Ukraine spill over into Europe, said Gene Munster, a longtime Apple analyst and managing partner at venture capital firm Loup Ventures. “People are nervous,” he said. “You pay more for fuel. If you live in Germany, does that influence your decision to buy the next iPhone?”
To diversify beyond selling devices, Mr. Cook has introduced a growing range of software and services for Apple products worldwide. Last year, people who were stuck at home splurged on apps, video games, and subscriptions like HBO Max. But amid the return to work and school, Apple said revenue growth at its so-called services business slowed to post $19.82 billion revenue in the quarter.
The company said it will increase its cash dividend to shareholders by 5 percent and increase its share buybacks by $90 billion.