Tech Giants Signal Unhappy Holiday Season

Apple Inc. and Amazon.com Inc. reported disappointing quarterly results in a sign that the global supply-chain crisis is hobbling even the mightiest companies, erasing hundreds of billions of dollars from their combined market valuations, reports Bloomberg. 

Amazon, the world’s largest e-commerce company, is suffering because of a surge in the cost of labor and fulfillment. Apple, meanwhile, is taking a hit because it can’t meet demand for its products. 

But added together, the tech giants delivered a clear message to investors: This holiday season is going to be difficult. As the economy emerges from the worst pandemic in a century, getting enough products to consumers is a daunting challenge for nearly everyone. 

In its latest quarter, Apple reported lower revenue than projected, sending its shares down as much as 5.3% in late trading Thursday. Chief Executive Officer Tim Cook told investors that sales would have been $6 billion higher without supply constraints -- most notably, a lack of semiconductors.

The shortage is affecting “most of our products,” he said on a conference call. “Demand is very robust.”

The company has a slew of new devices that it needs to get into consumers’ hands before the holidays, a period that’s expected to set sales records. In addition to the iPhone upgrade, Apple has rolled out new watches, iPads, Mac computers and other items.

Supply-chain constraints will make many of those items harder to get. Cook expects the problem to eclipse the $6 billion toll it took last quarter. 

At Amazon, preparing for the holidays will be a costly endeavor. The company warned Wall Street that it will have to spend billions of dollars hiring workers, paying them more and even speeding partly empty trucks to their destinations -- all to ensure that supply-chain snarls don’t derail the holiday shopping season. 

The massive outlays could wipe out Amazon’s profit during the last three months of the year, executives said. The company also reported third-quarter revenue and earnings that fell short of projections. The shares declined about 4% in extended trading.

Revenue will be $130 billion to $140 billion in the period ending in December, the Seattle company said, a lower forecast than analysts were expected. Operating income could be as low as zero, Amazon said, a setback for a company that’s reaped billions of dollars in profit each quarter going back to early 2018.

Amazon had signaled that slower sales growth -- and high spending in areas such as wages and new warehouses -- would persist through the end of the year.