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Amazon and Apple warn of supply chain problems

Amazon and Apple warn of supply chain problems

(CNN Business) – Even Amazon and Apple are dealing with a global supply chain crisis.

Both companies reported revenue results on Thursday that fell short of Wall Street analysts’ expectations and warned that supply chain issues could affect business in the December quarter.

Amazon did not meet Wall Street’s forecast for sales and profits for the three months ending September 30, a rare mistake for the internet giant. It posted net sales of $110.8 billion, up 15% from the same period last year, but less than analysts’ expectations of $111.6 billion. Net income for the prior-year quarter fell to $3.2 billion, well below the $4.6 billion analysts had expected.

Andy Gacy, Amazon CEO, warned in a statement that in the last quarter of next year, the company’s consumer business expects to incur several billion dollars in additional costs. These costs are emerging, he said, “as we deal with labor shortages, rising wage costs, global supply chain issues, and rising freight and freight costs, all while doing whatever it takes to minimize the impact on customers and sales partners this holiday season.”

Apple reported quarterly sales of $83.4 billion, slightly less than analysts had expected. iPhone sales were also below analysts’ expectations, coming in at $38.9 billion.

On a conference call with analysts after the results were reported, CEO Tim Cook focused on the fact that Apple was able to post record quarterly sales despite supply constraints. “Demand has been very strong,” he said, but also noted that “larger-than-expected supply constraints,” including silicon shortages and “related manufacturing disruption,” had a negative impact of $6 billion on the business.

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Amazon shares fell 5% and Apple shares fell more than 4% in after-hours trading on Thursday.

Supply chain disruptions and employee problems caused by the pandemic have intensified in recent months, affecting a wide range of industries. Many retailers, manufacturers and economists have warned that global supply chain restrictions will not only lead to fewer holiday cuts this year, but will also lead to potential product shortages on store shelves.

Apple has built a sophisticated supply chain over the years for its various hardware products, and Amazon has developed an advanced logistics process for deliveries. Supply concerns are also creeping into important periods for both companies: for Amazon, an important holiday shopping season, and for Apple, the launch of several new products, including the iPhone 13 line.

Amazon previously warned that the second half of 2021 could lead to slower growth compared to last year because more people are turning to face-to-face shopping compared to ordering online as vaccination begins. And things don’t seem to be getting better yet. Amazon now expects much slower-than-normal growth in the last three months of the year.

CFO Luca Maestri said during the company’s earnings call Thursday that Apple declined to provide revenue guidance for the December quarter, “given continued uncertainty around the world in the short term.” “We estimate that the impact of supply constraints will be greater during the December quarter. Despite this challenge, we are seeing higher demand for our products,” he said.