Despite Shortages, Apple Has Record 1Q

Apple Inc. grew faster than expected last quarter, generating record sales for a non-holiday period, but the company still had to contend with chip shortages and inflationary pressure that threatened profit margins, reports Bloomberg citing an inteview with Chief Executive Officer Tim Cook. 

Though supply constraints in the March quarter were significantly lower than in the holiday period, they still affected several products, including the iPad, Cook said in an interview with Bloomberg Television. Cook blamed the tight supply on industrywide chip shortages.

“We grew in each of our categories except for iPad, where we had very significant supply constraints,” Cook said.

Apple warned of more headwinds Thursday, with supply constraints costing the company $4 billion to $8 billion in the current period. Covid-19 lockdowns in China are again roiling supply chains, forcing tech giants like Apple to adjust.

Sales of the iPad declined 2.1% to $7.65 billion last quarter, though that wasn’t quite as severe a drop as Wall Street was projecting. Apple has said that the device is getting especially hard hit by shortages.

Even with the problems, the tablet line reached an all-time high in terms of its user base, Cook said. And half of iPad customers in the quarter were new to the device. The iPad Air, which was updated with 5G in March, also has been well received, he said.

Cook, 61, added that the company is seeing inflationary pressure. Rising costs have taken a toll on operating expenses and gross margins, he said, but Apple is “navigating that the best we can.”

Demand for the iPhone 13 and SE models helped that business grow 5% last quarter, Cook said. And the company had a record number of iPhone upgraders in the period. 

Despite setbacks for video streaming services like Netflix Inc., Cook said he remains very upbeat about his company’s Apple TV+ platform, citing recent Oscar wins for “CODA” and a strong response to original shows, such as “Severance.” 

“We’re very bullish,” he said. “Our philosophy for TV+ from the beginning -- and it continues unchanged -- is to create high-quality original content that aligns well with our values and to be one of the most desired platforms for storytellers, and I feel we are doing a pretty good job of that.”