Apple Q4 Post-Earnings: What you Need to Know

By Duncan Ferris

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Apple (NASDAQ: AAPL) reported disappointing results for its fourth quarter after being dogged by supply issues

Revenues fell short of expectations but there was a bright side in the performance of the company’s services segment.

The road ahead may also be bumpy for the company as continued supply issues will impact some of its products. However, Apple’s newly released iPhone 13 models are expected to propel revenue growth in the next quarter. The smartphones are likely to escape the issues which ail the production of the company’s iPads and Macs.

The numbers

Apple reported revenue of $83.4bn, a record for the three-month period. Though this amounted to a 29% increase on the same period last year it still fell short of expectations, with projected revenue for the period having stood at $84.6bn. Meanwhile, earnings per share (EPS) for the period came in right on target at $1.24.

The increase in revenue was driven by a 47% growth in iPhone sales to $38.87bn. However, this was still below consensus expectations. The company’s services segment also enjoyed growth during the period. Its revenue beat expectations as it increased by 25.6% to $18.28bn.

The performance of the company’s other product lines was less spectacular. Perhaps most troubling though, was the lack of growth in revenue for the Apple Mac. Sales of the computer brought in $9.18bn during the period. This was just below expectations and an increase of just 1.6% compared to the same quarter in 2021. It is worth noting that the company’s Macs and iPads are the products most sorely affected by the current supply chain issues.

Finally, the company declared a cash dividend of $0.22 per share. This is payable on November 11 to shareholders of record as of the close of business on November 8, 2021.

The road ahead

There are signs that the company is not out of the woods yet when it comes to supply chain issues. While Apple CEO, Tim Cook, said that COVID related manufacturing disruptions had “improved greatly”, he also admitted that “chip shortages linger on”.

Cook warned that this shortage, which has forced the company to compete with others for a steady supply of chips, could continue on into 2022. Additionally, CFO Luca Maestri warned that iPad sales were set to decline in the next quarter.

However, there are still reasons to be positive. The company released a new generation of its wildly popular iPhones at the end of September. These new models are unlikely to be so badly impacted by the chip shortage. This is because the chip shortage is largely in ‘legacy nodes’, which are not a component of the new series of phones.

Indeed, reports suggest that lead times on orders of the new phones have already dropped in the United States. Supply issues are still expected to impact the production of Macs and iPads. However, these products make a far smaller contribution to Apple’s overall revenue than the iPhone.

Is Apple a good investment?

The company has had an unspectacular period, but the chip shortage is certainly a mitigating factor. The company’s own CEO admits that the problem could rumble on for some time. However, a new generation of iPhones hitting the stores should ensure that revenue keeps growing, at least in the near term.

The outperformance of Apple’s services revenue is a key point for anyone eyeing up the company as an investment. iPhone sales are a massive chunk of the company’s revenues and with Mac and iPad sales set to have their growth inhibited by the chip issues, they don’t look like shouldering any of the burden in the near future.

However, the services segment put in an impressive performance during the fourth quarter and is looking like it might be able to help propel the company forward. The company’s supply issues have shown how difficult it can be to solely rely on physical sales for revenue. As such, Apple’s efforts to bring in new subscribers to Apple TV+ and its other services are a smart move.

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In this article:

Topics:
Quarterly Earnings
Consumer Electronics
Industries:
Information Technology
Consumer Discretionary

Author: Duncan Ferris

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Duncan Ferris does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Duncan Ferris has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.