Apple shares swing to a loss after executives warn of billions in additional costs

Apple Inc. has overtaken Earnings forecast and set a new record for March quarter revenue to start 2022, but executives expect to see greater pressure and billions of additional costs from challenges in the current period, sending stocks lower in after-hours trading.

“Supply constraints from 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.
-3.66%
Thursday earnings report.

The company expects it will see $4 to $8 billion in negative impacts related to the restrictions in the June quarter, which Maestri added is “much larger” than what Apple saw during the March quarter.

While Apple felt some sting from the lack of silicon in the March period, it is now facing new challenges from temporarily closing factories in China in connection with the COVID-19 outbreak, CEO Tim Cook noted. He expects the pressures to affect “most product categories”, although some factories are now reopening.

Shares fell about 2% in pre-market trading on Friday after having originally risen in after-hours trading on Thursday in the wake of the strong results. Apple beat expectations in terms of profits and revenue thanks to particular strength in the iPhone and Mac segments.

The company reported second-quarter net financial income of $25 billion, or $1.52 per share, up from $23.6 billion, or $1.40 per share, in the prior quarter last year. Analysts tracked by FactSet were expecting $1.42 in earnings per share. Apple’s revenue rose to $97.3 billion from $89.6 billion, while analysts had expected $94.0 billion.

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

The company saw $7.6 billion in iPad revenue, down from $7.8 billion a year earlier, as well as $10.4 billion in Mac revenue, up from $9.1 billion. FactSet’s consensus was on revenue of $7.2 billion from iPads and $9.1 billion from Mac.

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

The wearables, home, and accessories category from Apple brought in $8.8 billion in revenue, compared to $7.8 billion a year earlier, while analysts were looking for $8.9 billion.

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

Apple executives along with their latest results announced that they are adding $90 billion to share repurchase permission, with quarterly earnings increasing 5% to 23 cents a share. Dividends will be paid on May 12 to shareholders of record as of the close of business on May 9.

Apple usually provides updates on its capital return plans through its March 3rd quarter report, and it has proceeded to become net cash neutral over time. When asked if Apple would consider making a big acquisition rather than just pulling its cash balance through dividends and buybacks, Cook replied that Apple would “only acquire something strategic” but the company is “always looking”.

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