Apple (AAPL) has been one of the big surprises of the current quarterly earnings season so far.
The maker of the iPhone and iPad managed to upset the most optimistic forecasts during the quarter ended September 30.
Apple said profit for the three months ending in September, the group’s fiscal fourth quarter, was set at $1.29, up 4% from the same period last year. Group revenue, Apple said, rose 2% from last year to an all-time high of $90.15 billion, just above analyst estimates of $88.9 billion.
The company said on Oct. 27 that iPhone revenue rose 9.6% from a year ago to $42.62 billion. Sales in China, one of its biggest markets, rose 6.25% to $15.47 billion. Mac net sales rose 25% to $11.51 billion, while sales of wearables, home devices and accessories, which include the Apple Watch, rose 9.8% to $9.65 billion.
apple stands out
These results were proof that Apple was not affected by the ongoing economic downturn. Investors feared that, like the rest of the tech industry, the Cupertino giant would be hit by a pullback in consumer purchases. Consumers are affected by inflation which is at its highest point in 40 years.
This inflation that the central banks are combating in the West with aggressive rises in interest rates could plunge the economy into recession, economists and business leaders have already warned. As a result, there is concern that consumers are delaying planned purchases of technology products.
For example, investors fear that consumers will postpone their desire to trade in new iPhones for better days. Additionally, Microsoft (MSFT) Alphabet (GOOGLE) Amazon (AMZN) and Metaplatforms (GOAL) Apple’s rivals had previously signaled that the deteriorating economy was hurting them.
But CEO Tim Cook suggested last week that Apple was playing in a league of its own.
“The iPhone grew 10% in the fourth quarter period to $42.6 billion,” Cook reminded analysts during the earnings call. “Customer demand was strong and better than we anticipated it would be.”
However, there is a problem, he added: supply.
“In terms of the new products, the 14, the 14 Pro and the Pro Max, it’s still very early days. But from the beginning, we’ve been limited on the 14 Pro and 14 Pro Max and we’re still limited today,” he said. the executive president.
“So, we’re working very hard to meet the demand. It’s hard to say what the mix will be until we can meet the demand because we can’t determine the precise mix until then. But we’re working very hard.” To do that.”
The Apple Watch has the same supply problem, Cook added.
“The Ultra is in tight supply and continues to be tight this quarter thus far. So we’re working hard to meet demand and get those products to customers,” Cook said.
New Covid outbreak in China
It seems that it will be more complicated than expected to meet the demand since cases of covid-19 have just been detected in a Foxconn factory in China. Foxconn is one of the largest suppliers to Apple. China has a zero covid policy that disrupts supply chains.
Social media videos show people, believed to be employees of Foxconn’s factory in the central Chinese city of Zhengzhou, jumping over company fences to go home.
BBC journalist Stephen McDonell posted several videos.
At the moment Foxconn has not yet said how many cases of covid-19 have been detected inside the factory. The company has 200,000 employees at its Zhengzhou complex.
Last week, nearly 200 Covid cases were reported in Zhengzhou, the capital of Henan province, which has a population of more than 10 million.
A partial closure has been decided, according to Reuters.
Foxconn said on Sunday that it would not prevent employees from leaving. He told the media that he was maintaining “normal production” as the company ramps up iPhone 14 production rates.
“The government has agreed to resume dining to improve employee comfort and life satisfaction,” Foxconn said.
And for those who want to go home, Foxconn “is cooperating with the government to organize staff and vehicles to provide an orderly point-to-point return service for employees starting today.”
It is difficult to know what the impact of this new outbreak will be. But according to ReutersCiting unnamed sources, the factory’s production of iPhones could drop by 30%.
Neither Apple nor Foxconn immediately responded to a request for comment.
China’s zero covid-19 policy pushes authorities to issue lockdowns as soon as cases are reported in a city or region. This disrupts the functioning of factories where companies are forced to be creative, with the green light from the authorities, to avoid devastating production stoppages.