Apple Holiday iPhone Sales Rise Despite Supply Shortages

Apple overcame supply shortages that reduced production of iPhones and other popular devices to deliver its most profitable holiday season yet.

The results released Thursday for the last three months of 2021 help illustrate why Apple looks even stronger at the end of the pandemic than when the crisis began two years ago.

At that time, Apple’s iPhone sales were down as consumers began to hold on to their older devices for longer periods of time. But now the Cupertino, Calif. company can’t seem to keep up with the growing demand for a device that’s become even more crucial in the burgeoning era of remote working.

Apple’s inability to fully satisfy the voracious appetite for iPhones stems from a pandemic-induced chip shortage that is affecting production of everything from automobiles to medical devices.

But so far, Apple has handled the shortcomings better than most companies. This skillful management helped Apple report iPhone sales of $71.6 billion for the October-December period, a 9% increase over the same period a year earlier.

Those sales gains likely would have been even more robust had Apple been able to secure all of the chips and other components needed to manufacture iPhones. That issue plagued Apple’s July-September quarter when management estimated supply shortages cut its iPhone sales by about $6 billion. The company could explain how supply shortages affected its performance over the past quarter during a conference call with analysts scheduled for later Thursday.

Despite the drag caused by the shortages, Apple still earned $34.63 billion, or $2.10 per share, a 20% increase over the same period a year earlier. Revenue increased 11% from a year earlier to $123.95 billion.

Apple’s continued success helped push the company’s market value above $3 trillion for the first time earlier this month. But its share price has fallen 13% since hitting that peak amid concerns over a planned interest rate hike aimed at tamping the runaway pace of inflation that has been fueled in part by supply shortages.

Its shares gained more than 3% in extended trading Thursday after the release of Apple’s fiscal first quarter numbers.

Supply issues looming around Apple’s devices have amplified the importance of the company’s services division, which is fueled by commissions from digital transactions on iPhone apps, music streaming subscriptions and videos and repair plans.

Commissions of up to 30% from apps distributed through Apple’s exclusive app store have become the focus of a fierce legal battle that unfolded during a high-stakes trial year, along with reform proposals recently introduced in the US Senate that break down corporate barriers that prevent consumers from using alternative payment systems.

For now, however, the services division is still thriving. Its revenue in the last quarter reached $19.52 billion, an increase of 24%.

Apple is widely believed to be maneuvering towards another potentially huge money-making opportunity with the introduction of an augmented reality headset that would project digital images and information while its users interact with other physical objects and people. True to its secret form, the company never said it was working on this kind of technology.

But Apple CEO Tim Cook has openly shared his excitement for the potential of augmented reality in public presentations, and analysts believe the long-talked-about headset could finally roll out later this year, unless that it is not delayed by supply shortages.

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