Apple Q4 Revenues Miss Estimates As Supply Chain Issues Eat Into iPhone Sales

Apple, Inc. AAPL reported fourth-quarter earnings that came in line with estimates amid an improvement in gross margin. Revenues, however, trailed estimates, dragged by weaker-than-expected iPhone sales.

Component shortages apparently have taken a bite out of Apple, leading to weakness in its flagship product. China, which of late has been fueling Apple's strong performance, also sagged a bit.

Apple's Key Q4 Metrics: Apple reported fourth-quarter earnings per share of $1.24 on revenues of $83.4 billion, up 29% year-over-year. The bottom-line result came in line with the consensus, while revenues were shy of the consensus estimate of $84.55 billion.

A year ago, revenues and EPS were at 73 cents and $50.15 billion, respectively. In the third quarter ended June 26, 2021, the company reported revenues of $81.4 billion and EPS of $1.30.

Wedbush analyst Daniel Ives was estimating a $1-billion-plus beat on the top line, driven by the iPhone 13 launch.

Loup Funds Managing Partner Gene Munster had called for 1%-2% upside to the consensus estimate. Supply constraints along with recent power conservation measures in China may have reduced sales in the quarter by about 5%, he said.

The gross margin came in at 42.2% compared to the consensus estimate of 41%.

"Our record September quarter results capped off a remarkable fiscal year of strong double-digit growth, during which we set new revenue records in all of our geographic segments and product categories in spite of continued uncertainty in the macro environment," said Luca Maestri, Apple's CFO.

The combination of record sales performance, customer loyalty, and strength of the Apple ecosystem drove the active installed base of devices to a new all-time high.

The company returned $24 billion to shareholders during the quarter. Apple's board declared a dividend of 22 cents per share, payable on Nov. 11, to shareholders of record as of Nov. 8.

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Segmental Performance: Revenues from iPhone came in at $38.87 billion, shy of the consensus estimate of $41.2 billion. Notwithstanding the 47% year-over-year growth, iPhone revenues fell sequentially.

Mac, iPad and Services revenues exceeded expectations.

Apple hosted two fall hardware events this year. On Sept. 14, the company unveiled the iPhone 13, a new iPad, an improved iPad Mini, Apple Watch 7 Series, among other things.

Within a month, the company hosted the "Unleashed" event, wherein it announced the new MacBook Pro powered by the all-new M1 Pro and M1 Max — the first pro chips designed for the Mac. At the event, the company also announced the next-gen AirPods.

Geographically, Europe saw strong sequential growth and Americas turned in modest growth. On the other hand, China, one of Apple's strongest markets, Japan and the rest of the Asia-Pacific, all witnessed sequential declines.

On a year-over-year basis, all the regions saw strong double-digit growth.

Forward Outlook: For the December quarter, analysts, on average, estimate EPS of $1.88 on revenues of $119.7 billion.

Component shortages will likely render the December quarter guidance mixed, Ives said. He sees the softness as purely a timing issue that is well understood by the Street.

"With ASPs continuing to be very positive on Pro/ Pro Max and as of today roughly 250 million of 975 million iPhones worldwide not upgrading in 3.5 years, we view near-term supply chain issues as nothing more than a speed bump on a multi-year supercycle iPhone 12/13 that continues to play out with FY22 Street numbers looking conservative at this juncture," the analyst said.

Munster models a $6 billion to $8 billion headwind in the December quarter, stemming from supply constraints.

Related Link: Apple's 'Unleashed' Event: New MacBook Pro With Special Chips, AirPods 3 And Cheaper Music Voice Plan

Apple Stock: Apple shares have gained about 10.4% in the fourth quarter. In early September, the stock hit an all-time high of $157.26 but has come back from the level since then.

Out of 38 analysts covering the stock, 11 rate the stock a Strong Buy and 21 a Buy, while six analysts remain on the sidelines.

Apple shares closed Thursday's regular session up 2.5% at $152.57. The stock is down 2.8% to $148.31 in after-hours trading.