Covid, supply chain: Apple reports solid Q2, but warns of $4-$8bn hit

NEW YORK: Apple reported better-than-expected profits Thursday amid continued robust consumer demand, but warned that the China Covid-19 lockdown and ongoing supply chain woes would dent June quarter results by $4 to $8 billion. The iPhone maker enjoyed another solid performance for the period ending March 26, registering record revenues for the quarter. But executives said the difficulties of the pandemic have returned with a vengeance since the reporting period ended.

“Supply constraints caused by Covid-related disruptions and industry-wide silicon shortages are impacting our ability to meet customer demand for our products,” Chief Financial Officer Luca Maestri said on a conference call with analysts.

“We expect these constraints to be in the range of $4 to $8 billion, which is substantially larger than what we experienced during the March quarter.”

The impact will depend on the speed of the ramp-up of production in the Shanghai area, where factories have recently begun to reopen after a Covid-19 lockdown, said chief executive Tim Cook, who said Apple was not “immune” to the inflation challenges roiling the economy.

Maestri declined to offer an overall revenue forecast for the June quarter. Executives also avoided giving an outlook on semiconductor supplies.

In the March quarter, the technology giant reported earnings of $25 billion, up 5.8 percent from the year-ago period as revenues rose nine percent to $97.3 billion.

The results looked good following stumbles by some Big Tech peers as growth from the stay-at-home demand amid the pandemic slows and companies confront rising operating and labor costs.

The company scored revenue increases in most of its categories, including iPhone and Services. But sales fell for the iPad, with Maestri pointing to supply chain constraints during a conference call with analysts.

The strongest growth by region was the Americas, with the company also reporting moderate revenue increases in Europe and Greater China. Revenues fell in Japan and other Asian markets.

Apple said it authorized $90 billion in additional share repurchases. Shares initially rose following the report, but dropped 2.5 percent to $159.55 in after-hours trading. Shares had risen 4.5 percent during Thursday’s session ahead of earnings.