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Apple Slumps Lower as CEO Tim Cook Cautions Chip Shortage May Trim iPhone Sales

Apple says it sees 'very strong double-digit year-over-year revenue growth during the September quarter,'" but a nonetheless slower rate due to the global semiconductor shortage.

Apple Inc.  (AAPL) - Get Apple Inc. (AAPL) Report shares moved lower Wednesday after CEO Tim Cook said the global semiconductor shortage would slow the tech giant's iPhone sales growth in the coming months, clouding a record June quarter earnings report from the world's most-valuable tech company. 

Apple said it sees "very strong double digit year over year revenue growth during the September quarter", but noted it would be slower than that 36% gain recorded over the three months ending in June, which lifted the tech giant's top line to a Street-blasting $81.4 billion.

Supply constraints, Apple said, would likely hit both the iPhone and the iPad in terms of sales, as a shortage in global semiconductors blunts its ability to meet "jaw-dropping" consumer demand. The hit will trim a bit more than $3 billion from September quarter revenues, Apple said, modestly higher than the impact it forecast for the prior period.

"The majority of constraints we're seeing are of the variety that I think others are seeing ,that I would classify as industry shortage," Cook told investors on a conference call late Tuesday. "We do have some shortages in addition to that, where the demand has been so great and so beyond our own expectation that it's difficult to get the entire set of parts within the lead times that we try to get those."

"When we when we talked here three months ago, we said that we were expecting supply constraints for the June quarter between three and four billion dollars to affect primarily iPad and Mac," Cook said. "We were able to mitigate some of those constraints during the June quarter."

"And so we came in at the number that was slightly below the low end of that range that we had quoted at the beginning of the quarter," he added. "But we expect that number to be higher for the September quarter."

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Apple shares were marked 2.75% lower in early trading Wednesday to change hands at $142.85 each, a move that trims the stock's year-to-date gain to around 7.5%.

Still, even with the muted near-term outlook, Apple's June quarter earnings demonstrated the power of its iPhone sales -- as well as the installed base of 1.65 billion devices around the world -- in terms of revenue and profit generation.

iPhone revenues rose 49.8% from last year to $39.57 billion, well ahead of the $35.8 billion Street forecast of around 35.8 billion, while overall services revenues rose 33% to $17.49 billion. The group's overall gross margin also improved to a staggering 43.3%. 

Wearables, home and accessories sales were pegged at $8.78 billion, up 36.1% from last year, while work-from-home dynamics and enterprise demand for laptops helped boost Mac sales by 16.4% to $8.24 billion. iPad revenues rose 12% to $7.37 billion. 

Greater China revenues, Apple said, rose 58.2% from last year's pandemic trough to $14.76 billion

"Apple continues to demonstrate the strength of its product ecosystem with strong double-digit growth across all categories," said Canaccord Genuity analyst T. Michael Walkley, who carried a buy rating with a $185 price target on the stock. "Apple is well-positioned to continue to benefit from the 5G upgrade cycle and anticipate strong overall growth trends as 5G smartphones ramp and its installed base expands with higher-margins services revenue."

"Apple’s ecosystem approach, including an installed base that exceeds well over the 1.65B devices globally announced in January 2021 and now over 1 billion iPhone users, should continue to generate strong services revenue as evidenced by the 33% YoY growth in Q3/F21," he added. "Longer term, we expect the higher-margin services revenue growth to outpace total company growth and drive gross margin expansion."