Apple does better than expected, but sees the sky getting dark

Apple, as expected, saw its growth slow in the January to March period, but outperformed expectations, notably with record iPhone sales for the period.

Apple performed better than expected, notably with record iPhone sales for this time of the year, but announced that the lockdown in China and the cessation of its operations in Russia would weigh on its future results.

Notably, the group said the disruption caused by the resurgence of coronavirus cases should wipe out its $4 to $8 billion in revenue in the third quarter of its staggered fiscal year (April to June).

“It’s significantly more” than in the previous quarter, chief financial officer Luca Maestri said during a conference call for results presentations.

It is also more than in the last quarter of 2021, when the group reported a $6 billion deficit. While the difficulties in previous quarters were mainly limited to the supply of silicone, an essential part of the manufacture of electronic chips, this time the problem is broader, says Luca Maestri.

The general manager, Tim Cook, nevertheless announced that the subcontractor factories in Shanghai’s industrial zone, which had been under strict confinement for several weeks, could all reopen.

“Coronavirus-related disruptions are also impacting consumer demand in China,” the chief financial officer continued, without elaborating.

In addition, the suspension of sales in Russia, in response to the invasion of Ukraine, should reduce the company’s annual growth by about 1.5 percentage points, Luca Maestri said.

It is a blow to the Cupertino (California) giant, which has so far managed to mitigate the supply problems affecting the entire electronics sector, especially in the semiconductor industry. In e-commerce following the Wall Street shutdown, Apple shares lost nearly 3%.

First signs of slowdown

Even before the lockdowns in China, Apple showed signs of slowing down during the second quarter of its staggered fiscal year (January to March). Sales reached $97.2 billion, up 9% over the year, significantly ahead of expectations (93.8 billion). This marks the first time since the quarter ended September 2020 that Apple has posted single-digit quarterly growth.

In January, the California group said it expected less impressive growth in the first three months of 2022 than in previous quarters. The error, according to Apple, of an unfavorable comparison effect with the same period of 2021, marked by lockdowns that limit the use of electronic devices and digital services. If they weigh more than half of sales, iPhone sales rose just 5.4% over the same period of 2021.

Geographically, it was the US zone that continued to grow, with sales up 19% over the year. The group’s other areas of activity were much less dynamic, in particular Asia-Pacific excluding China and Japan, which showed a decline in sales. Net income was $25 billion, up 5.8%. Reported by action, an indicator tracked by Wall Street, it is higher than analysts’ forecasts.

In addition to the logistical tensions, the apple company also faces challenges to its integrated model, especially its application store, a mandatory crossroads for publishers.

Apple’s services business, including the App Store in particular, continued to grow significantly ahead of the group’s other businesses (17%) in the quarter.

European Union member states, the Commission and the European Parliament reached an agreement in late March that aims to regulate the practices of US technology leaders. In particular, it provides for the free choice of application stores, which in particular make it possible to circumvent the App Store.

A law, which came into effect in South Korea in mid-March, goes in the same direction, prohibiting Apple and Google from forcing developers to use their mobile application stores, specifically to receive payments from users.

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