Apple said a global chip shortage that has bit into its ability to sell Macs and iPads will start to affect iPhone production and forecasted slowing revenue growth.
Apple executives said revenue for the current fiscal fourth quarter will grow by double-digits but be below the 36.4 percent growth rate in the just-ended third quarter. Growth will also slow in Apple’s closely watched services business.
Apple executives also said that the global chip shortage had a less severe impact than feared in the company’s third quarter but will worsen in the fourth quarter, extending to iPhone production.
Apple CEO Tim Cook said the affected chips are made with older technology but are needed to make the company’s flagship device.
“We do have some shortages,” Cook said, “where the demand has been so great and so beyond our own expectation that it’s difficult to get the entire set of parts within the lead times that we try to get those.”
Shares, which have more than doubled in value in about three years, dropped 2.3 percent to $143.38 in after-hours trading after the call.
Apple reported third-quarter sales and profits that beat analyst expectations as consumers bought premium versions of its 5G iPhones and signed up for its subscription services.
Apple’s total revenue hit $81.43 billion driven by iPhone sales. Apple’s profits were $21.74 billion, or $1.30 per share.
Apple’s strongest sales growth came from China, where customers are buying up accessories such as the Apple Watch to pair with their iPhones. China sales grew 58 percent to $14.76 billion in the fiscal third quarter ended June 26.
Apple said iPhone sales were $39.57 billion, up nearly 50 percent from a year earlier.
Cook said Apple’s iPhone 12 Pro and 12 Pro Max were strong sellers. That helped pushed gross margins to 43.3 percent.
The other major driver of Apple’s results was its services business, which includes paid subscriptions for television and music as well as its App Store. Services revenue reached a record high of $17.49 billion, up by a third from a year earlier. Cook said Apple has 700 million subscribers on its various platforms, up from 660 million a quarter earlier.
Last quarter, Apple had told investors that the global chip shortage could hold back sales by $3 billion to $4 billion.
Cook told Reuters that although Apple was limited in how many Macs and iPads it could sell because of the shortage, the hit to Apple’s overall revenue in the third quarter was “lower than the low end” of its previously forecasted range. Sales of iPads and Macs were $7.37 billion and $8.24 billion.
Apple’s services business faces regulatory risks. The company’s practice of charging commissions of 15 percent to 30 percent to developers who sell in its App Store and requiring them to use Apple’s payment system could face scrutiny from regulators in the United States and Europe.