Apple's growth forecast misses Wall Street target amid supply shortage
Apple on Thursday forecast slower revenue growth for the July-September quarter than Wall Street expected, citing persistent supply constraints that have hit the technology industry. The company's shares fell 5.5% in after-hours trading.
The iPhone maker said it expects revenue to grow 9% to 11% from a year earlier in the fiscal fourth quarter, compared with the 12% rise analysts had projected, according to LSEG data. Chief Financial Officer Kevan Parekh forecast iPhone revenue growth at a mid-teens percentage rate, below Wall Street's target of 17.6%. He also guided for gross profit margins between 47% and 48%.
Chief Executive Tim Cook attributed the softer outlook to supply constraints rather than weakening demand. "We're seeing some very significant constraints currently with limited flexibility in the supply chain to remedy it," he said during a conference call. Apple is evaluating all options for alternative suppliers of memory chips, Cook added. He also pointed to an industry shortage of advanced chipmaking technology used to produce Apple's silicon processors, which particularly affected the Mac lineup.
The cautious forecast came despite a strong fiscal third quarter, which ended June 27. Revenue rose 16.4% to $109.42 billion, beating expectations of a 15.5% increase. Profits were $2.02 per share, including 11 cents from tariff refunds by the US government. Excluding those refunds, earnings still surpassed Wall Street's estimate of $1.89 per share. Gross margin was 50.1%, including two points from the tariff refunds; excluding them, margins were 48.1%, above the 47.92% analysts expected.
iPhone sales jumped 21.7% to $54.25 billion, above estimates of $53.86 billion. It was Apple's best-ever third-quarter iPhone revenue, even though phone sales typically slow in that period as customers await new models. This year, customers purchased aggressively after Apple raised prices on Macs and iPads due to a global memory-chip crunch. Apple has so far refrained from increasing iPhone prices, but analysts increasingly expect a hike around the September launch.
Mac sales rose 28.7% to $10.35 billion, also beating estimates. Cook said demand for the entry-level MacBook Neo and high-end MacBook Pro was strong despite price increases. The "incredibly strong product cycle" had outpaced expectations, and the chip supply chain "fundamentally has less flexibility in it to meet the high levels of demand," he told Reuters.
The technology industry broadly has been scrambling to secure high-end processors and memory chips to meet demand for new products. Apple's warning adds to evidence that supply shortages are persisting even as consumer demand remains robust.
Some investors were concerned about relatively soft services growth and whether the burst of demand can continue if Apple raises prices further. Bob O'Donnell, chief analyst at TECHnalysis Research, said the quarter may reflect a buying flurry that might not carry through. "I do think it's possible people are going to continue to buy the existing phones because of the price increases," he said. "The big question is, what's going to happen on Macs in this quarter, when the new prices are fully there?"
Apple recently regained its position as the world's most valuable company, overtaking AI chip leader Nvidia. Its shares have risen more than 22% this year. The services business, which includes the App Store and subscriptions, grew at a slower pace than some analysts had hoped, adding to investor caution. The company's guidance typically falls on the conservative side, but the gap with Wall Street this time was wider than usual, reflecting the severity of supply problems.
