After a year of rapid sales growth, Apple showed that it has a more robust business than many of its tech counterparts, even though it cooled off in the first three months of the year.
The company reported Thursday that profits rose 6 percent to $ 25 billion in its second quarter, a slowdown from double-digit growth in each of the previous five quarters. Sales rose 9 percent to $ 97.29 billion, exceeding analysts’ expectations as pandemic-driven purchases of iPads and Macs declined from a year earlier.
That results added to a week of uneven financial reports from leading technology companies that have struggled to sustain last year’s explosive growth. Google’s parent company, Alphabet, and Facebook’s parent company, Meta, had reported declining profits from a year earlier, while Microsoft had an increase in profits.
The pandemic has been a double-edged sword for Apple. Remote schools and work spurred demand for computer equipment, and government stimulus checks and cuts in travel and leisure expenses gave a boost to the company’s all-important iPhone business, analysts said. But the same forces sowed supply chain problems and triggered a global chip shortage that has cost Apple billions of dollars in lost sales.
The company’s challenges have been exacerbated by Russia’s war against Ukraine and rising coronavirus cases in China. Apple reckons Russia accounts for 1 percent of its sales and a slightly larger percentage of its profits, analysts estimate. In China, where most of Apple’s products are assembled, one of the company’s key suppliers had to close production outside Shanghai.
During the January-March quarter, sales of iPhones, iPads and other devices rose 6.6 percent to $ 77.5 billion, Apple said.
The bigger problem for Apple could come in the coming months as the financial strains from the war in Ukraine spread to Europe, said Gene Munster, longtime Apple analyst and managing partner at venture capital firm Loup Ventures. “People are on edge,” he said. “They pay more for fuel. If you live in Germany, does that affect your decision to buy the next iPhone?”
To diversify beyond device sales, Tim Cook, Apple’s CEO, has pushed a growing range of software and services across Apple products worldwide. Last year, people who were sequestered at home jumped out with apps, video games and subscriptions such as HBO Max. But in the midst of returning to work and school, Apple said, it slowed sales growth in its so-called service business and raised $ 19.82 billion in revenue for the quarter.
The company said it would increase its cash dividend to shareholders by 5 percent and increase its share buybacks by $ 90 billion.