Apple sees bigger supply problems after strong start to year

Apple forecast bigger problems as Covid-19 lockdowns snarl production and demand in China, the war in Ukraine dents sales and growth slows in services, which the iPhone maker sees as its engine for expansion.

Shares were slightly down in early Friday trade, hours after executives laid out their glum outlook on a conference call. The news outweighed record profit and sales for Apple’s fiscal second quarter, which ended in March.

Chief Financial Officer Luca Maestri warned in an interview that the war in Ukraine, which led Apple to stop sales in Russia, would cut sales more deeply in the fiscal third quarter. He told analysts on the call that supply-chain issues would hurt sales in the quarter by $4 billion to $8 billion, “substantially larger” than the hit in the second quarter.

Chief Executive Officer Tim Cook said almost all of the Chinese factories doing final assembly of Apple products had restarted after recent Covid shutdowns, but the company is not forecasting when the chips shortage, mostly affecting older products, would end.

Apple’s overall second-quarter revenue was $97.3 billion, up 8.6 per cent from last year and higher than analysts’ average estimate of $93.89 billion, according to Refinitiv data. Profit was $25 billion, or $1.52 per share and topped analysts’ forecast of $23.2 billion and $1.43.