People take photos with Apple CEO Tim Cook as he attends the opening of the new Apple Tower Theater retail store at Apple Tower Theatre on June 24, 2021 in Los Angeles, California.
JC Olivera | Getty Images
Apple stock fell 4% on Thursday after revenue fell short of Wall Street expectations in its fiscal fourth quarter on Thursday, which Apple CEO Tim Cook attributed to larger-than-expected supply constraints on iPhones, iPads, and Macs.
“We had a very strong performance despite larger than expected supply constraints, which we estimate to be around $6 billion,” Cook told CNBC’s Josh Lipton. “The supply constraints were driven by the industry wide chip shortages that have been talked about a lot, and COVID-related manufacturing disruptions in Southeast Asia.”
However, Apple’s overall revenue was still up 29% on an annual basis and each of its product categories grew on an annual basis.
Here’s how Apple did versus Refinitiv consensus estimates:
EPS: $1.24 vs. $1.24 estimated Revenue: $83.36 billion vs. $84.85 billion estimated, up 29% year-over-year iPhone revenue: $38.87 billion vs. $41.51 billion estimated, up 47% year-over-year Services revenue: $18.28 billion vs. $17.64 billion estimated, up 25.6% year-over-year Other Products revenue: $8.79 billion vs. $9.33 billion estimated, up 11.5% year-over-year Mac revenue: $9.18 billion vs. $9.23 billion estimated, up 1.6% year-over-year iPad revenue: $8.25 billion vs. $7.23 billion estimated, up 21.4% year-over-year Gross margin: 42.2% vs. 42.0% estimated
iPhone sales were up 47% year-over-year, but still came in under Wall Street estimates.
Apple hasn’t provided official guidance since the start of the pandemic, but Cook said Apple expects “solid year-over-year revenue growth” in the December quarter despite the fact Cook said Apple will face worse supply constraints in the current quarter.
“So we finished about a month of the quarter, the COVID related manufacturing disruptions have improved greatly. The chip shortages linger on,” Cook said.
Cook said that the supply issues were with chips were on “legacy nodes,” or older chips, instead of the technologically advanced processors at the heart of Apple’s devices.
The expectation of year-over-year sales growth suggests that Apple sees significantly more demand for its new iPhone 13 models than it can supply. Apple’s fourth quarter only included a few days of iPhone 13 sales as it ended on Sept. 25.
Apple is currently in the middle of massive growth as sales of iPhones, iPads and Macs exploded during the pandemic. Apple’s annual revenue for its fiscal 2021 was up 33% from 2020 to $366 billion.
The strongest growth in Apple product categories aside from iPhones was in its services business, which includes sales from the App Store, music and video subscription services, advertising, extended warranties, and licensing. Apple’s services grew 26% annually, which Cook said was higher than the company expected.
Cook said that Apple has 745 million paid subscriptions, which not only includes first-party services like Apple Music but also subscriptions through Apple’s App Store.
“That’s up 160 million year on year, which is up five times in five years. So it’s been quite the growth cycle,” Cook said.
Apple’s Macs did not grow strongly, only increasing 1.6% annually, but the quarter did not include sales of new MacBook Pro models that were announced in October. Apple’s iPads grew 21% year-over-year, although they were supply constrained. Apple’s Other Products category, which includes Apple Watch and AirPods models, grew 11% without new products, which went on sale in October.
This quarter marks the first time since April 2016 that Apple has failed to beat earnings estimates, and it’s the first time since May 2017 that Apple’s revenues have missed estimates, according to Refinitiv data.