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Wednesday, August 10, 2022

Apple’s earnings increased by 34.6 billion dollars in the Christmas period, despite supply shortages

In the fourth quarter of 2021, Apple was able to weather the supply chain snarls that wreaked havoc on the global electronics market and other industries. The company reported an 11 percent increase in revenue and a 20 percent increase in profit in its most recent quarter, while expressing confidence that the worst of the problems were behind it.

It was a relief to see Apple, the world’s most valuable publicly traded firm, outperform Wall Street analysts’ predictions with its record earnings, assuaging concerns that the tech industry’s lengthy run of rapid expansion may be coming to an end. Profits of $34.6 billion were generated on sales of $123.9 billion in the three months ended in December, while revenue growth slowed further in the third quarter of 2018.

As is customary for Apple, the iPhone was the primary driver of sales. The company’s market capitalization briefly surpassed $3 trillion earlier in January before slipping back to about $2.6 trillion on Thursday. Sales of iPhones reached $71.6 billion, representing a 9 percent increase over the same period last year. Demand for Apple’s newest iPhone 13, which launched in September, boosted sales, but the firm has been warning for months that computer chip shortages and pandemic-related manufacturing concerns in Asia would restrict supply and hurt profitability.

A worldwide scarcity of semiconductors has hampered a broad variety of businesses, including consumer electronics and automotive manufacturing. Gina M. Raimondo, the Secretary of Commerce, said on Monday that the United States is experiencing a “alarming” scarcity of semiconductors.

Apple’s chief executive, Tim Cook, said in October that supply restrictions had lost his business $6 billion in sales during the company’s third quarter of the year. When speaking with investors on Thursday, Cook said that Apple “had supply restrictions that were larger than in the September quarter” during the Christmas season, although he did not provide a particular amount of supply constraints faced.

Mr. Cook said that he saw a light at the end of the tunnel for Apple, stating that he anticipated supply challenges to be less severe in the current quarter than they were over the Christmas season.

When asked about the company’s earnings call, he replied, “We take great satisfaction in delivering things to consumers who really want them, and we strive to do so on a timely basis, so it’s disappointing when we aren’t able to do so at the pace we would want.” In contrast to December, March is better than December, and therefore there are some promising indicators in that regard.

The difficulties, according to Mr. Cook, were mostly caused by the inability to get a certain sort of computer chip; but, he did not believe that the difficulties justified Apple re-evaluating how it managed its supply chain.

Worldwide, Apple had sales growth, driven by a 20 percent gain in China and a 19 percent increase in the rest of the Asia-Pacific region. However, sales in Japan fell by 14 percent compared to the same quarter in the previous year. Apple’s iPad sales were notably affected by the supply chain issues, according to Mr. Cook, with the firm reporting a 14 percent reduction in iPad sales from the same period the previous year.

It is developing an augmented reality headgear that might compete with products from firms such as Meta, Facebook’s parent company, as technology corporations increasingly vie for influence in the growing metaverse, a future online environment that is still in development.

During the results call, Mr. Cook dodged a question about how Apple is thinking about the metaverse, saying, “We see a lot of promise in this sector and are investing appropriately.”

As a result of its strong growth in its services business, which includes its App Store, which Mr. Cook described as a “economic miracle for developers all over the world,” Apple has continued to face accusations that it stifles competition and charges onerous fees to app developers despite the fact that it has not changed its business model. The services business increased by approximately 24 percent in the third quarter compared to the same period the previous year, reaching $19.5 billion.

Apple also announced that it intends to distribute about $27 billion of its cash to shareholders in the form of dividends. Apple’s shares rose by more than 4% in after-hours trading on Thursday evening, according to the company.

Despite the fact that Apple’s strong results came towards the end of a week of wild trading on the stock market, which was fueled in part by concerns about how rapidly the Federal Reserve would hike interest rates in a bid to limit inflation, the company’s results were still encouraging. Higher interest rates make riskier investments, such as technology equities, less tempting, increasing fears that the pandemic-fueled boom in technology businesses may be coming to an end sooner rather than later.

In contrast, Microsoft and Tesla, despite the fact that they are grappling with their own supply chain issues, recorded record earnings this week and above industry estimates. Alphabet, the parent company of Google, and Amazon will release their financial results for the final three months of 2021 next week, offering valuable information into the state of online advertising and shopping.

Jonathan James
I serve as a Senior Executive Journalist of The National Era
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