Apple iPhone 13 sales power a big quarter but there may be trouble ahead

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Even with supply chain constraints, Covid lockdowns in Shanghai, and a war in Ukraine, Apple managed another record quarter, earning $97.3 billion mostly on the back of an apparently very well-received iPhone 13 line.

The Cupertino, California, company released earnings numbers late Thursday and followed with an earnings call with analysts that, while painting a mostly positive picture, did outline warning signs in the supply chain, Covid, inflation, and European headwinds.

Consumers bought into virtually every product category Apple has to offer, pushing the iPhone up to a total of $50.5 billion in total sales, the Mac to $10.4 billion, wearables to $8.8 billion, and the fast-growing services category (which now has 825M paying subscribers) to $19.8 billion. 

If there was one cautionary tale among the group, it's the iPad, which fell 2% year over year to $7.6 billion. "We’re continuing to see such a strong demand for iPad even while navigating strong supply constraint," said Apple CEO Tim Cook during the earnings call.

The story on the iPad, which recently saw the release of the iPad Air with an M1 chip is not that isn't selling poorly, but that getting components to build the product (for iPad and Macs) is more challenging than ever.

The question of supply constraints and, in particular, silicon shortages came up repeatedly during the call as analysis wondered if Apple should be doing something to shore up supplies.

Cook essentially dismissed the idea. "In today’s world, not possible for us to have a buffer on silicon. [It] rolls off the fab into a final assembly very quickly."

The Mac was another bright spot for Apple, which is crediting Apple Silicon (the M1 line of chips) for much of that growth. The commitment to Apple Silicon, noted Apple CFO Luca Maestri, shows up in the results. He said they've experienced the best eight quarters ever for Macs.

Tough road ahead?

Apple, like other corporations around the world, is starting to return to normal and Cook said Apple is excited to welcome employees back to offices but added that it's "still monitoring Covid-related disruptions in China."

The subject of Covid and disruption in the Shanghai factories that assemble many of Apple's products came up repeatedly. Cook tried to paint a positive picture. "On a positive front, almost all final assembly factories have restarted. Also encouraged that the Covid case count in Shanghai has decreased in recent days," he told investors.

Still, the lockdown had little effect on this quarter and seems to be part of a darker picture in the coming months. Apple is, like everyone else, dealing with inflation across the price of components (though Cook said some component prices are falling while others rise), shipping costs, the war in Ukraine, continue silicon shortages.

Talking about global challenges that we all face, Cook said, "We are not immune to these challenges, but we have great confidence in our people strategy and teams."

When pressed about how inflation might impact consumer product prices, Cook demured but made it clear that they're keeping an eye on how inflationary pressures impact sales.

"Obviously monitoring our daily sales very closely." Cook said Apple is seeing the impacts in sales and operating costs this past quarter and is assuming it will continue in the current one.  He added, "[We're] definitely seeing some level of inflation that I think everyone is seeing."

Cook and Maestri offered not a hint in the call of what is to come. There was scarcely a mention of AR, VR, new innovations, future iPhones, or wearables. The closest anyone came to offering a whiff of what consumers can expect from Apple in the coming months is in regard to services when Maestri told analysts, “We plan to add new services and new features that we think customers will love.”

Lance Ulanoff
Editor At Large

A 38-year industry veteran and award-winning journalist, Lance has covered technology since PCs were the size of suitcases and “on line” meant “waiting.” He’s a former Lifewire Editor-in-Chief, Mashable Editor-in-Chief, and, before that, Editor in Chief of and Senior Vice President of Content for Ziff Davis, Inc. He also wrote a popular, weekly tech column for Medium called The Upgrade.

Lance Ulanoff makes frequent appearances on national, international, and local news programs including Live with Kelly and Ryan, the Today Show, Good Morning America, CNBC, CNN, and the BBC.