Apple delivered an earnings beat on both the top and bottom lines for its fiscal third quarter on Thursday, but its stock sank 7% after CEO Tim Cook warned that its supply chain was facing “very significant constraints.”
Apple’s services business, iPad segment, and China sales all came in below Wall Street’s estimates. The company’s revenue growth guidance for the current quarter came in below Wall Street estimates.
The company’s all-important iPhone sales came in slightly above estimates, at $109.4 billion for the quarter, compared with $108.85 billion. Earnings per share were $2.02, beating analysts’ estimates of $1.89. Mac revenue smashed expectations, coming in at $10.35 billion compared to estimates of $8.62 billion.
This marks CEO Tim Cook’s final earnings cycle as CEO, with “product guy” and hardware boss John Ternus taking over on September 1st. Cook will remain on as executive chairman.
Ternus is inheriting the helm as Apple’s stock has been the best performer in the elite group of mega-cap tech names this year, up 25%. The company surpassed a $5 trillion market cap for the first time earlier this week, then fell slightly.
But Apple’s analyst call made it clear the incoming CEO will face supply chain challenges, an area that has been Cook’s specialty.
Apple raised hardware prices in June in a move it said would help offset rising memory costs amid a global shortage. Cook said it was too early to know the impact of the price hikes, which have not yet included the iPhone.
“The primary issue is advanced nodes that we run our SOCs on,” Cook said on the analyst call, referencing supply constraints of its system-on-a-chip silicon. “That’s the primary supply constraint now, and the root cause of it is not a regular supply issue. It’s a demand forecast issue.”
“We’ve been pulling supply ahead, and at some point, there’s a limit to that, and so we’ve got a quarter that we’re going to be scrambling on the supply side, essentially,” Cook said.
Scroll on for the complete play-by-play of Apple’s earnings call:
