Apple stock tumbles to loss after executives warn of billions in additional costs

Apple Inc. beat profit expectations and set a new revenue record for the March quarter to start 2022, but executives expect greater pressure and billions in additional costs from the challenges of the current period, pushing the shares lower after hours trading.

“Supply constraints caused by COVID-related disruptions and industry-wide silicon shortages are impacting our ability to meet customer demand for our products,” said CFO Luca Maestri on a conference call related to Apple’s AAPL,
+4.52%
earnings report Thursday.

The company projects that it will see $4-8 billion in negative stress-related impacts in its June quarter, which Maestri said was “significantly greater” than what Apple experienced in its quarter. Of March.

While Apple suffered some silicon shortage sting during the March period, it is now facing new challenges posed by temporary factory shutdowns in China related to the COVID-19 outbreaks, noted the managing director Tim Cook. He expects the pressures to affect “most product categories”, although some factories have now reopened.

The shares fell 3% in after-hours trading after initially rising on strong results. Apple beat earnings and revenue expectations thanks to particular strength in its iPhone and Mac categories.

The company posted net income of $25 billion in the second quarter, or $1.52 per share, compared with $23.6 billion, or $1.40 per share, in the previous quarter. Analysts tracked by FactSet were expecting $1.42 in earnings per share. Apple’s revenue fell from $89.6 billion to $97.3 billion, while analysts expected $94.0 billion.

Apple generated $50.6 billion in revenue from its iPhone business, up from $47.9 billion a year before and before the FactSet consensus, which was $48.4 billion.

The company posted $7.6 billion in iPad revenue, up from $7.8 billion a year earlier, and $10.4 billion in Mac revenue, down from $9.1 billion. The FactSet consensus forecast revenue of $7.2 billion for the iPad and $9.1 billion for the Mac.

Cook noted that Apple “continues to see such strong demand for [the] iPad even while navigating the significant supply constraints we predicted at the start of the quarter.

Apple’s wearables, home and accessories category generated $8.8 billion in revenue, down from $7.8 billion a year earlier, when analysts were looking for $8.9 billion.

The company’s services business added $19.8 billion, up from $16.9 billion a year earlier. The FactSet consensus was $19.7 billion.

Apple executives announced alongside their latest results that they were adding $90 billion to their stock buyback authorization, while increasing the quarterly dividend by 5% to 23 cents per share. The dividend will be payable on May 12 to shareholders of record at the close of business on May 9.

Apple typically provides updates on its capital return plans with its March quarter report, and it’s committed to becoming net cash neutral over time. When asked if Apple would consider making a major acquisition instead of just dipping into its cash balance through dividends and buyouts, Cook replied that Apple would “only acquire something strategic” but that the company was “always looking for”.

Sallie R. Loera