Apple 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.
Apple fell under 3% in extended trading.
“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% and each of its product categories grew on an annual basis.
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, higher than the $6 billion hits to revenue in the September quarter. Still, Apple says that its December quarter will be the company’s largest in terms of revenue in its history.
Apple CFO Luca Maestri said in a call with analysts that iPad sales would decline year-over-year in the December quarter due to supply constraints while other product categories would grow.
“So we’ve 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 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.