iPhone 13 and Mac Sales Remain Strong, but COVID and Chip Shortages Strain Apple

Apple says COVID-related disruptions and silicon shortages are hitting its business, though apparently less than at other tech giants.

Ian Sherr Contributor and Former Editor at Large / News
Ian Sherr (he/him/his) grew up in the San Francisco Bay Area, so he's always had a connection to the tech world. As an editor at large at CNET, he wrote about Apple, Microsoft, VR, video games and internet troubles. Aside from writing, he tinkers with tech at home, is a longtime fencer -- the kind with swords -- and began woodworking during the pandemic.
Ian Sherr
3 min read
An Apple iPhone

Though Apple's Macs and iPads are selling well, the iPhone is still its most important product.

Sarah Tew/CNET

At nearly 15 years old, Apple's iPhone remains one of the most popular consumer products of all time. During the holidays, the device helped Apple ring up record revenues and profits. And even now, with war overseas and nagging inflation at home, Apple's fortunes are still largely tied to the its phones.

The good news: People still keep buying them.

For its second fiscal quarter, covering the three months ending in March, Apple notched $50.6 billion in sales of iPhones, up more than 5% from the year prior. Its Mac computers, wearables and accessories continued to sell strongly as well.

But Apple warned that manufacturing and trade disruptions from COVID-19, combined with the ongoing silicon shortage, means things will likely get worse over the next few months.

"These times remind us that we cannot know what the future may hold," Apple CEO  Tim Cook  said during a conference call with analysts Thursday. COVID disruptions, he noted, have been difficult to predict. He noted that disruptions from recent health lockdowns in China, among other issues, will add up to between $4 billion and $8 billion in unsold products because of lack of inventory. And that's "substantially worse" than what happened over the past three months.

Apple's stock closed regular trading up nearly 5% to $163.64 per share. The company's shares have fallen about 10% so far this year.

Apple's announcement is the latest sign of the tech giant's staying power in a time of economic uncertainty. Major Wall Street indexes have lost value this month, with notable drops among tech stocks. Google parent Alphabet reported lower than expected sales and profit Tuesday, disappointing investors. The next day, Facebook parent Meta reported widening losses in its Reality Labs division, which makes virtual reality headsets and other associated technologies. CEO Mark Zuckerberg has said he believes Reality Labs is key to the company's future.

Other tech companies have released concerning data as well. Netflix told investors last week that it actually lost subscribers, and expected to lose 2 million more. And Amazon on Thursday said fuel prices ate into its profits.

More broadly, Russia's invasion of and subsequent war with Ukraine has rippled across the world, rattling markets for oil, wheat and other items that both countries contribute to the world economy. Meanwhile, surging COVID-19 cases in China have prompted extended lockdowns in manufacturing facilities and at ports, disrupting food supplies and upsetting residents, leading to slowed manufacturing and trade.

Apple, though, continues to navigate those challenges enough to continue growing its business.

Mac Studio and Mac Studio Display

Apple's Mac Studio, its newest computer for professionals, was released in March.

Dan Ackerman/CNET

Non-iPhone business growing

The company reported increased sales for its Mac division, for which about half of customers were new to its computers. 

Apple's wearables business, meanwhile, grew to the size of a Fortune 100 company, the company noted, with more than two-thirds of people buying Apple Watches being new to the product. 

Apple's services, which won its first Oscar with the Apple TV Plus movie CODA, rose more than 17% to $19.8 billion. That makes services, which also include subscriptions like Apple Music streaming and Apple Arcade gaming, its second-largest division behind the iPhone. Apple said it counted 825 million accounts with paid subscriptions on its platform, an increase of 17% from the year prior. 

"We've added a lot of new services, and we plan to add new services and new features that we believe that our customers will love," Apple CFO Luca Maestri told analysts Thursday.

Overall, Apple said it recorded profits of $25 billion, up nearly 6% from last year. That translates to $1.52 per share in profit, off $97.28 billion in overall revenue, which itself was up 9% from the $89.58 billion reported last year. It also beat analyst estimates, which were $1.43 in profit per share on $93.9 billion in sales for the three months ended in March, according to surveys published by Yahoo Finance.