Apple is doing better than expected but sees the sky darkening

Apple’s second-quarter revenue hit $97.2 billion, up 9% year-on-year.

Apple did better than expected, notably with record sales of iPhones for this period of the year, but announced that the confinements in China and the suspension of its activities in Russia would weigh on its future results.

The group notably indicated that the disruption caused by the resurgence of cases of coronavirus should deprive it of 4 to 8 billion dollars of turnover during the third quarter of its staggered financial year (from April to June). “It’s significantly more” than in the previous quarter, explained the chief financial officer, Luca Maestri, during a conference call for presentations of the results. It is also more than in the last quarter of 2021, during which the group had mentioned a shortfall of six billion dollars.

If, in previous quarters, the difficulties were mainly limited to the supply of silicone, an essential element in the manufacture of electronic chips, this time the problem is broader, according to Luca Maestri. The general manager, Tim Cook, nevertheless announced that the factories of subcontractors located in the industrial zone of Shanghai, subject to strict confinement for several weeks, had all been able to reopen. “Coronavirus disruptions are also impacting consumer demand in China”, continued the financial director, without further details. In addition, the suspension of sales in Russia, in response to the invasion of Ukraine, should cut the company’s annual growth by around 1.5 percentage points, according to Luca Maestri.

It is a blow for the giant of Cupertino (California), which had managed so far to limit the supply problems which affect the whole electronics sector, in particular in the semiconductor industry. In electronic trading after the close of Wall Street, Apple shares lost nearly 3%. Even before the confinements in China, Apple showed signs of slowing down during the second quarter of its staggered fiscal year (from January to March). Turnover reached 97.2 billion dollars, up 9% over one year, significantly higher than forecast (93.8 billion). This is the first time since the quarter ended in September 2020 that Apple has posted single-digit quarterly growth. In January, the Californian group said it expected less impressive growth than previous quarters in the first three months of 2022.

The fault, according to Apple, is an unfavorable comparison effect with the same period of 2021, marked by confinements which had boosted the use of electronic devices and digital services. If they weigh more than half of the turnover, sales of iPhones only increased by 5.4% compared to the same period of 2021. Geographically, it is the Americas zone which has supported growth, with a 19% increase in revenues over one year. The group’s other areas of activity were much less dynamic, in particular Asia-Pacific excluding China and Japan, which posted a decline in sales. Net profit was $25 billion, up 5.8%. Reported by action, an indicator followed by Wall Street, it is higher than analysts’ forecasts.

In addition to the logistical tensions, the apple firm is also facing challenges to its integrated model, in particular its application store, a compulsory passage point for publishers. Apple’s services business, which includes the App Store in particular, still maintained significantly higher growth (17%) than the group’s other businesses during the past quarter. The Member States of the European Union, the Commission and the European Parliament reached an agreement at the end of March which aims to regulate the practices of American technology leaders. In particular, it provides for the free choice of application stores, which will in particular make it possible to circumvent the App Store. A law, which came into force in mid-March in South Korea, goes in the same direction, prohibiting Apple and Google from forcing developers to use their mobile application stores, in particular to receive payments from users.

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