Apple sales and profit top estimates as hit from chip shortages eases

By Danielle Kaye, Paresh Dave and Nivedita Balu

(Reuters) -Apple Inc is overcoming the costly global shortage in computer chips, posting record sales over the holiday quarter, beating profit estimates and forecasting that its shortfall is narrowing.

The iPhone maker, which is world’s largest company by market capitalization, has handled supply-chain challenges such as factory shutdowns and shipping delays brought on by the pandemic better than any of its top peers, analysts said. Apple shares (NASDAQ:) rose about 5% in after-hours trading, erasing half their losses on the year. The gains came after the company teased its ambitions for augmented reality in the metaverse https://www.reuters.com/technology/apple-teases-metaverse-ar-plans-stock-jumps-2022-01-28.

More people wanted iPhones, iPads and other gadgets over the holiday quarter than Apple had to sell, costing the company over $6 billion in sales, or in line with what it feared. Yet, Apple, which is many part suppliers’ biggest client, used its buying power to squeeze those vendors to ship enough gadgets to power record sales in its iPhones, Mac and wearables and accessories segments. Apple executives said chip shortages are mostly affecting older models of its products and particularly slowed iPad sales.

“They’ve navigated the supply chain better than everybody, and it’s showing in the results,” said Ryan Reith, who studies the smartphone market for industry tracker IDC.

The four best-selling phones in urban China were all iPhone models, Apple said, as competitors struggled to manufacture rival offerings. It was the top-selling vendor in China for the first time in six years, research firm Counterpoint Research reported on Wednesday.

Apple’s growing sales of services such as music, TV and fitness subscriptions also are helping soften the blow of low device supply. The company said it now has 785 million paying subscribers across its at least seven subscription offerings, up by 40 million from last quarter and soothing investors concerned about slowing growth at rivals such as Netflix Inc (NASDAQ:).

Even better, Apple Chief Financial Officer Luca Maestri told Reuters that easing chip shortages should mean less than $6 billion in lost revenue in the current quarter. But he declined to estimate further in the future.

“The level of constraint will depend a lot on other companies, what will be the demand for chips from other companies and other industries,” he said.

RECORD IPHONE UPGRADES

The iPhone 13, which started shipping days before the quarter began, led to worldwide phone sales revenue https://tmsnrt.rs/3o4nuGc for Apple of $71.6 billion, a 9% increase from the 2020 holiday season that handily beat Wall Street targets, according to Refinitiv data. Maestri attributed the sales bump to a record number of upgrades from older…