Apple weathered the supply chain snarls at the end of 2021 that tripped up the global electronics market and other industries, announcing on Thursday an 11 percent increase in revenue and a 20 percent jump in profit in its most recent quarter while offering optimism that the worst of the problems were behind it.
Apple, the world’s most valuable public company, beat Wall Street analysts’ expectations with its record results, easing fears that the tech industry’s long period of fast growth may be coming to an end. It made $34.6 billion in profit off revenue of $123.9 billion in the three months ending in December, though its revenue growth continued to slow.
As usual, the iPhone drove sales for Apple, which briefly crossed $3 trillion in market value earlier in January before sliding back to about $2.6 trillion by Thursday. Sales of iPhones totaled $71.6 billion, up 9 percent from a year earlier. Demand for the newest iPhone 13 juiced sales, but the company has been warning for months that computer chip shortages and pandemic-related manufacturing problems in Asia were likely to limit supply and hamper revenue.
A global chip shortage has hurt a wide range of industries, including consumer electronics and cars. On Monday, Gina M. Raimondo, the secretary of commerce, said the U.S. was facing an “alarming” shortage of semiconductors.
Chip shortages have forced some factories to slow or suspend production. That has dented U.S. economic growth and led to soaring inflation in the United States.
Understand the Supply Chain Crisis
Tim Cook, Apple’s chief executive, said in October that supply constraints had cost his company $6 billion in revenue during its fall quarter. During a call with investors on Thursday, he said Apple “experienced supply constraints that were higher than the September quarter” during the holidays, but he declined to give a specific number.
Mr. Cook said he saw light at the end of the tunnel for Apple: He expected supply problems in the current quarter to be less than they were during the holidays.
“We pride ourselves in getting products to customers who really want them, and we try to do that on a fast basis, and so it’s frustrating that we can’t always do that at the speed we would like,” he said during the earnings call. “However, March is better than December, and so there’s some encouraging signs there.”
Mr. Cook said much of the difficulty stemmed from procuring a particular type of computer chip, but he did not think the struggles necessitated Apple re-evaluating how it operated its supply chain.
“I think our supply chain actually does very good considering the shortages, because it’s a fast-moving supply chain,” he said.
Apple saw sales growth around the world, led by a 20 percent year-over-year increase in China and 19 percent in the rest of the Asia-Pacific region, though sales in Japan dropped by 14 percent from the same quarter the prior year. iPad sales were particularly constrained by the supply chain problems, Mr. Cook said; the company reported a 14 percent decrease in sales of the tablets from the same time the prior year.
Apple announced a slate of new hardware products in the fall, including new models of its MacBook Pro laptop computer, AirPods, the iPad and the Apple Watch. It is working on an augmented reality headset that could compete with offerings from companies like Meta, Facebook’s parent, as technology companies increasing jockey for influence in the budding metaverse, a futuristic online universe.
Mr. Cook sidestepped a question about how Apple is thinking about the metaverse on the earnings call, saying, “We see a lot of potential in this space and are investing accordingly.”
How the Supply Chain Crisis Unfolded
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The pandemic sparked the problem. The highly intricate and interconnected global supply chain is in upheaval. Much of the crisis can be traced to the outbreak of Covid-19, which triggered an economic slowdown, mass layoffs and a halt to production. Here’s what happened next:
A reduction in shipping. With fewer goods being made and fewer people with paychecks to spend at the start of the pandemic, manufacturers and shipping companies assumed that demand would drop sharply. But that proved to be a mistake, as demand for some items would surge.
Demand for protective gear spiked. In early 2020, the entire planet suddenly needed surgical masks and gowns. Most of these goods were made in China. As Chinese factories ramped up production, cargo vessels began delivering gear around the globe.
Then, a shipping container shortage. Shipping containers piled up in many parts of the world after they were emptied. The result was a shortage of containers in the one country that needed them the most: China, where factories would begin pumping out goods in record volumes
Demand for durable goods increased. The pandemic shifted Americans’ spending from eating out and attending events to office furniture, electronics and kitchen appliances – mostly purchased online. The spending was also encouraged by government stimulus programs.
Strained supply chains. Factory goods swiftly overwhelmed U.S. ports. Swelling orders further outstripped the availability of shipping containers, and the cost of shipping a container from Shanghai to Los Angeles skyrocketed tenfold.
Apple also benefited from strong growth in its services business, including its App Store, which Mr. Cook described as an “economic miracle for developers around the world” even as it continues to face accusations that it stifles competition and levies onerous fees on app developers. The services business was up nearly 24 percent in the quarter from a year ago, to $19.5 billion.
Apple also said it planned to use nearly $27 billion of its cash to pay dividends to shareholders. Shares of Apple stock jumped more than 4 percent in after-hours trading on Thursday evening.
Apple’s positive results came near the end of a week of wild trading on the stock market that was due in part to fears about how quickly the Federal Reserve might raise interest rates in an attempt to curb inflation. Higher interest rates make riskier investment, like technology stocks, less appealing, adding to concerns that the pandemic-fueled boost to technology companies could soon be ending.
But Microsoft and Tesla, despite dealing with supply chain woes of their own, posted record profits this week and beat industry expectations. Next week, Alphabet, Google’s parent, and Amazon will report their results for the last three months of 2021, providing insight into the health of online advertising and retail.