Apple's shares fell significantly following a forecast that revenue growth for the current quarter would be 9% to 11%, below Wall Street's expectation of about 12%. This dip is attributed to supply constraints affecting iPhones, Macs, and iPads, with CEO Tim Cook citing an industry-wide shortage of advanced chipmaking capacity and high demand for AI-driven technologies as the primary culprits. Cook also highlighted rising memory costs, likening the situation to a "100-year flood," and noted that the shortages were fueled by higher-than-expected demand for products like the iPhone 17 line and the new MacBook Neo.
Despite the conservative outlook, Apple reported strong financial results for the prior quarter, with total sales climbing 16% to $109.4 billion, exceeding analyst estimates. iPhone sales, a major revenue driver, surged 21.7% to $54.25 billion, marking the best-ever third-quarter for the product. Mac revenue also saw impressive growth, up 29% to $10.4 billion, far surpassing Wall Street's expectations. However, iPad sales declined by 5.9% to $6.19 billion, falling short of projections.
The services segment, Apple's second-largest revenue area, grew 12.1% to $30.74 billion, but this was below the estimated $31.22 billion. Analysts expressed concerns about the deceleration of services growth, particularly given the strong iPhone sales, suggesting that if iPhone sales normalize, services growth could slow even further. Regulatory changes impacting the App Store business model in the EU and softer gaming revenue also contributed to the services' underperformance.
Market analysts, such as J.P. Morgan's Samik Chatterjee, believe that the supply constraints are more likely to defer sales rather than destroy them, with revenue expected to be realized in future quarters. However, the projected mid-teens percentage growth for iPhone revenue also lagged analyst estimates. TD Cowen analysts suggested that upcoming iPhone cycles, AI-powered Siri features, and Apple's upgrade programs might allow the company to increase prices without significant demand destruction, a move widely anticipated later this year.
The broader industry is grappling with challenges as AI-driven demand tightens supplies of advanced chips and memory, leading to increased costs and prolonged supply-chain bottlenecks across the technology sector. The outlook led to a significant drop in Apple's market value, with the company on track to shed approximately $361.6 billion if the losses hold.
