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Apple projected weaker than expected revenue for the three months to September, reflecting pressure on tech supply chains from the AI infrastructure boom, as Tim Cook marked his last earnings report as chief executive.
Kevan Parekh, chief financial officer, told analysts Apple expects 9-11 per cent revenue growth in the three months to the end of September, undershooting Wall Street forecasts of 12 per cent.
The stock fell 7.5 per cent after-hours, as Cook warned investors: “We continue to expect high levels of demand, however, with less flexibility in [the] supply chain we expect the impact from the supply constraints to increase significantly.”
The disappointing forecast came after the hardware giant reported iPhones sales of $54.3bn, up nearly 22 per cent year on year and better than the $53.1bn Wall Street expected, despite a broad contraction in global smartphone sales caused by higher memory chip prices.
Revenue from China continued a rebound after declines in recent years because of competition from domestic rivals such as Huawei, rising 22 per cent from the year before to $18.8bn.
“We were able to achieve this great result despite supply constraints and sequential foreign exchange headwinds,” said Parekh.
Apple recently reclaimed its title as the world’s most valuable company, and briefly touched $5tn in market value, as the hardware giant’s relatively small investments in AI made it a haven for investors among Big Tech stocks that are otherwise heavily exposed to the AI trade.
But investors were watching Thursday’s results closely for signs of how Apple intends to weather an industry-wide memory chip shortage that it blamed for a rare 20 per cent price increase on MacBooks and iPads in June.
Hardware chief John Ternus, who will take over as chief executive in September, needs to convince investors he can manage the vast supply chain that Cook was instrumental in building at a time of acute pressure.
Apple is widely expected to raise iPhone prices later in the year and to stagger the launch of its base-model iPhone 18 and the new iPhone Air into next year, taking some pressure off its suppliers.
To smooth over price increases, Apple has embraced new payment options for consumers, announcing a deal with buy-now, pay-later company Klarna this week that allows US customers to lease an iPhone starting at $17.99 per month.
In the short term, holding iPhone prices has helped Apple grow its market share to 20 per cent in the quarter, up from 17 per cent last year. Global smartphone shipments declined 11 per cent during the quarter.
Bernstein analysts this week wrote Apple “significantly outperformed the broader market” as the only major smartphone maker to avoid price increases.
Memory chip prices have risen about 300 per cent in the second quarter of the year alone, according to the International Data Corporation, as demand from AI data centre builders hoovered up the supply.
Apple managed to hold in its typically strong margins. Gross margin for the quarter was 50 per cent, incorporating a 2 percentage point boost from refunds on President Donald Trump’s emergency tariffs levied last year that have since been struck down by the US Supreme Court.
The gross margin on Apple’s products was 40 per cent, beating estimates of 36.3 per cent.
The iPhone maker said its revenue was $109.4bn in the three months to the end of June, up 16 per cent year on year and just above analyst expectations of $108bn compiled by Visible Alpha.
MacBook sales also beat estimates at $10.4bn versus the $8.8bn expected, up strongly year on year. Net income was $29.8bn, above estimates of $27.4bn.
Its services revenue, which includes the App Store and Apple Pay, was $30.7bn, lower than the $31.4bn analysts expected.
Capital spending was $2.5bn, about $1.1bn less than in the same period last year and well below that of rivals.
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