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Apple stock swings to a loss after executives warn of billions in added costs

Apple Inc. topped earnings expectations and set a new record for March-quarter revenue to start 2022, but executives expect to see steeper pressure and billions in additional costs from challenges in the current period, sending shares lower in after-hours trading.

“Supply constraints caused by COVID-related disruptions and industry-wide silicon shortages are impacting our ability to meet customer demand for our products,” Chief Financial Officer Luca Maestri said on a conference call related to Apple’s
AAPL,
+4.52%

earnings report Thursday.

The company anticipates that it will see $4 billion to $8 billion in negative impacts related to the constraints in its June quarter, which Maestri added was “substantially larger” than what Apple experienced during its March quarter.

While Apple fell some sting from silicon shortages in the March period, it now faces new challenges brought on by temporary factory closures in China related to COVID-19 outbreaks, Chief Executive Tim Cook noted. He expects that the pressures will impact “most of the product categories,” even though some factories have now reopened.

Shares were off 4% in after-hours trading after originally moving higher on strong results. Apple beat expectations on both earnings and revenue thanks to particular strength in its iPhone and Mac categories.

The company posted fiscal second-quarter net income of $25 billion, or $1.52 a share, up from $23.6 billion, or $1.40 a share, in the year-earlier quarter. Analysts tracked by FactSet were anticipating $1.42 in earnings per share. Apple’s revenue rose to $97.3 billion from $89.6 billion, while analysts had been expecting $94.0 billion.

Apple generated $50.6 billion in revenue from its iPhone business, up from $47.9 billion a year before and ahead of the FactSet consensus, which was for $48.4 billion.

The company saw $7.6 billion in iPad revenue, down from $7.8 billion a year prior, as well as $10.4 billion in Mac revenue, which was up from $9.1 billion. The FactSet consensus was for revenue of $7.2 billion from iPads and $9.1 billion from the Mac.

Cook noted that Apple was ” continuing to see such a strong demand for [the] iPad even while navigating the significant supply constraints we predicted at the start of the quarter.”

Apple’s wearables, home, and accessories category brought in $8.8 billion in revenue, up from $7.8 billion a year earlier, while analysts had been looking for $8.9 billion.

The company’s services business added $19.8 billion, compared with $16.9 billion a year. before. The FactSet consensus was for $19.7 billion.

Apple executives announced alongside their latest results that they are adding $90 billion to their stock-repurchase authorization, while also boosting the quarterly dividend by 5% to 23 cents a share. The dividend will be payable May 12 to shareholders of record as of the end of business on May 9. Apple typically provides updates on its capital-return plans with its March-quarter report.

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