UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 1,December 30, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number: 001-36743
Apple Inc.
(Exact name of Registrant as specified in its charter)
| | | | | | | | |
California | | 94-2404110 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | |
One Apple Park Way | | |
Cupertino, California | | 95014 |
(Address of principal executive offices) | | (Zip Code) |
(408) 996-1010
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Common Stock, $0.00001 par value per share | AAPL | The Nasdaq Stock Market LLC |
1.375% Notes due 2024 | — | The Nasdaq Stock Market LLC |
0.000% Notes due 2025 | — | The Nasdaq Stock Market LLC |
0.875% Notes due 2025 | — | The Nasdaq Stock Market LLC |
1.625% Notes due 2026 | — | The Nasdaq Stock Market LLC |
2.000% Notes due 2027 | — | The Nasdaq Stock Market LLC |
1.375% Notes due 2029 | — | The Nasdaq Stock Market LLC |
3.050% Notes due 2029 | — | The Nasdaq Stock Market LLC |
0.500% Notes due 2031 | — | The Nasdaq Stock Market LLC |
3.600% Notes due 2042 | — | The Nasdaq Stock Market LLC |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | | | | |
Large accelerated filer | | ☒ | | Accelerated filer | | ☐ |
Non-accelerated filer | | ☐ | | Smaller reporting company | | ☐ |
| | | | Emerging growth company | | ☐ |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
15,634,232,00015,441,881,000 shares of common stock were issued and outstanding as of July 21, 2023January 19, 2024.
Apple Inc.
Form 10-Q
For the Fiscal Quarter Ended July 1,December 30, 2023
TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Apple Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In millions, except number of shares, which are reflected in thousands, and per shareper-share amounts)
| | Three Months Ended | | Nine Months Ended |
| July 1, 2023 | | June 25, 2022 | | July 1, 2023 | | June 25, 2022 |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| December 30, 2023 | |
| December 30, 2023 | |
| December 30, 2023 | |
Net sales: | |
Net sales: | |
Net sales: | Net sales: | | | | | | | |
Products | Products | $ | 60,584 | | | $ | 63,355 | | | $ | 230,901 | | | $ | 245,241 | |
Products | |
Products | |
Services | Services | 21,213 | | | 19,604 | | | 62,886 | | | 58,941 | |
Services | |
Services | |
Total net sales | |
Total net sales | |
Total net sales | Total net sales | 81,797 | | | 82,959 | | | 293,787 | | | 304,182 | |
| Cost of sales: | Cost of sales: | |
| Cost of sales: | |
| Cost of sales: | |
Products | |
Products | |
Products | Products | 39,136 | | | 41,485 | | | 146,696 | | | 155,084 | |
Services | Services | 6,248 | | | 5,589 | | | 18,370 | | | 16,411 | |
Services | |
Services | |
Total cost of sales | Total cost of sales | 45,384 | | | 47,074 | | | 165,066 | | | 171,495 | |
Total cost of sales | |
Total cost of sales | |
Gross margin | |
Gross margin | |
Gross margin | Gross margin | 36,413 | | | 35,885 | | | 128,721 | | | 132,687 | |
| Operating expenses: | Operating expenses: | |
| Operating expenses: | |
| Operating expenses: | |
Research and development | |
Research and development | |
Research and development | Research and development | 7,442 | | | 6,797 | | | 22,608 | | | 19,490 | |
Selling, general and administrative | Selling, general and administrative | 5,973 | | | 6,012 | | | 18,781 | | | 18,654 | |
Selling, general and administrative | |
Selling, general and administrative | |
Total operating expenses | |
Total operating expenses | |
Total operating expenses | Total operating expenses | 13,415 | | | 12,809 | | | 41,389 | | | 38,144 | |
| Operating income | Operating income | 22,998 | | | 23,076 | | | 87,332 | | | 94,543 | |
| Operating income | |
| Operating income | |
Other income/(expense), net | |
Other income/(expense), net | |
Other income/(expense), net | Other income/(expense), net | (265) | | | (10) | | | (594) | | | (97) | |
Income before provision for income taxes | Income before provision for income taxes | 22,733 | | | 23,066 | | | 86,738 | | | 94,446 | |
Income before provision for income taxes | |
Income before provision for income taxes | |
Provision for income taxes | Provision for income taxes | 2,852 | | | 3,624 | | | 12,699 | | | 15,364 | |
Provision for income taxes | |
Provision for income taxes | |
Net income | |
Net income | |
Net income | Net income | $ | 19,881 | | | $ | 19,442 | | | $ | 74,039 | | | $ | 79,082 | |
| Earnings per share: | Earnings per share: | |
| Earnings per share: | |
| Earnings per share: | |
Basic | Basic | $ | 1.27 | | | $ | 1.20 | | | $ | 4.69 | | | $ | 4.86 | |
Basic | |
Basic | |
Diluted | |
Diluted | |
Diluted | Diluted | $ | 1.26 | | | $ | 1.20 | | | $ | 4.67 | | | $ | 4.82 | |
| Shares used in computing earnings per share: | Shares used in computing earnings per share: | |
| Shares used in computing earnings per share: | |
| Shares used in computing earnings per share: | |
Basic | |
Basic | |
Basic | Basic | 15,697,614 | | | 16,162,945 | | | 15,792,497 | | | 16,277,824 | |
Diluted | Diluted | 15,775,021 | | | 16,262,203 | | | 15,859,263 | | | 16,394,937 | |
Diluted | |
Diluted | |
See accompanying Notes to Condensed Consolidated Financial Statements.
Apple Inc. | Q3 2023Q1 2024 Form 10-Q | 1
Apple Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In millions)
| | Three Months Ended | | Nine Months Ended |
| July 1, 2023 | | June 25, 2022 | | July 1, 2023 | | June 25, 2022 |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| December 30, 2023 | |
| December 30, 2023 | |
| December 30, 2023 | |
Net income | |
Net income | |
Net income | Net income | $ | 19,881 | | | $ | 19,442 | | | $ | 74,039 | | | $ | 79,082 | |
Other comprehensive income/(loss): | Other comprehensive income/(loss): | | | | | | | |
Other comprehensive income/(loss): | |
Other comprehensive income/(loss): | |
Change in foreign currency translation, net of tax | |
Change in foreign currency translation, net of tax | |
Change in foreign currency translation, net of tax | Change in foreign currency translation, net of tax | (385) | | | (721) | | | (494) | | | (1,102) | |
| Change in unrealized gains/losses on derivative instruments, net of tax: | Change in unrealized gains/losses on derivative instruments, net of tax: | |
| Change in unrealized gains/losses on derivative instruments, net of tax: | |
| Change in unrealized gains/losses on derivative instruments, net of tax: | |
Change in fair value of derivative instruments | |
Change in fair value of derivative instruments | |
Change in fair value of derivative instruments | Change in fair value of derivative instruments | 509 | | | 852 | | | (492) | | | 1,548 | |
Adjustment for net (gains)/losses realized and included in net income | Adjustment for net (gains)/losses realized and included in net income | 103 | | | 121 | | | (1,854) | | | (87) | |
Adjustment for net (gains)/losses realized and included in net income | |
Adjustment for net (gains)/losses realized and included in net income | |
Total change in unrealized gains/losses on derivative instruments | |
Total change in unrealized gains/losses on derivative instruments | |
Total change in unrealized gains/losses on derivative instruments | Total change in unrealized gains/losses on derivative instruments | 612 | | | 973 | | | (2,346) | | | 1,461 | |
| Change in unrealized gains/losses on marketable debt securities, net of tax: | Change in unrealized gains/losses on marketable debt securities, net of tax: | |
| Change in unrealized gains/losses on marketable debt securities, net of tax: | |
| Change in unrealized gains/losses on marketable debt securities, net of tax: | |
Change in fair value of marketable debt securities | |
Change in fair value of marketable debt securities | |
Change in fair value of marketable debt securities | Change in fair value of marketable debt securities | (340) | | | (3,150) | | | 1,963 | | | (9,959) | |
Adjustment for net (gains)/losses realized and included in net income | Adjustment for net (gains)/losses realized and included in net income | 58 | | | 95 | | | 185 | | | 140 | |
Adjustment for net (gains)/losses realized and included in net income | |
Adjustment for net (gains)/losses realized and included in net income | |
Total change in unrealized gains/losses on marketable debt securities | |
Total change in unrealized gains/losses on marketable debt securities | |
Total change in unrealized gains/losses on marketable debt securities | Total change in unrealized gains/losses on marketable debt securities | (282) | | | (3,055) | | | 2,148 | | | (9,819) | |
| Total other comprehensive income/(loss) | Total other comprehensive income/(loss) | (55) | | | (2,803) | | | (692) | | | (9,460) | |
| Total other comprehensive income/(loss) | |
| Total other comprehensive income/(loss) | |
Total comprehensive income | Total comprehensive income | $ | 19,826 | | | $ | 16,639 | | | $ | 73,347 | | | $ | 69,622 | |
Total comprehensive income | |
Total comprehensive income | |
See accompanying Notes to Condensed Consolidated Financial Statements.
Apple Inc. | Q3 2023Q1 2024 Form 10-Q | 2
Apple Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In millions, except number of shares, which are reflected in thousands, and par value)
| | July 1, 2023 | | September 24, 2022 |
| December 30, 2023 | | | December 30, 2023 | | September 30, 2023 |
ASSETS: | ASSETS: | ASSETS: |
Current assets: | Current assets: | |
Cash and cash equivalents | Cash and cash equivalents | $ | 28,408 | | | $ | 23,646 | |
Cash and cash equivalents | |
Cash and cash equivalents | |
Marketable securities | Marketable securities | 34,074 | | | 24,658 | |
Accounts receivable, net | Accounts receivable, net | 19,549 | | | 28,184 | |
Vendor non-trade receivables | |
Inventories | Inventories | 7,351 | | | 4,946 | |
Vendor non-trade receivables | 19,637 | | | 32,748 | |
Other current assets | Other current assets | 13,640 | | | 21,223 | |
Total current assets | Total current assets | 122,659 | | | 135,405 | |
| Non-current assets: | Non-current assets: | |
Non-current assets: | |
Non-current assets: | |
Marketable securities | |
Marketable securities | |
Marketable securities | Marketable securities | 104,061 | | | 120,805 | |
Property, plant and equipment, net | Property, plant and equipment, net | 43,550 | | | 42,117 | |
Other non-current assets | Other non-current assets | 64,768 | | | 54,428 | |
Total non-current assets | Total non-current assets | 212,379 | | | 217,350 | |
Total assets | Total assets | $ | 335,038 | | | $ | 352,755 | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY: | LIABILITIES AND SHAREHOLDERS’ EQUITY: | |
LIABILITIES AND SHAREHOLDERS’ EQUITY: | |
Current liabilities: | Current liabilities: | |
Accounts payable | |
Accounts payable | |
Accounts payable | Accounts payable | $ | 46,699 | | | $ | 64,115 | |
Other current liabilities | Other current liabilities | 58,897 | | | 60,845 | |
Deferred revenue | Deferred revenue | 8,158 | | | 7,912 | |
Commercial paper | Commercial paper | 3,993 | | | 9,982 | |
Term debt | Term debt | 7,216 | | | 11,128 | |
Total current liabilities | Total current liabilities | 124,963 | | | 153,982 | |
| Non-current liabilities: | Non-current liabilities: | |
Non-current liabilities: | |
Non-current liabilities: | |
Term debt | |
Term debt | |
Term debt | Term debt | 98,071 | | | 98,959 | |
Other non-current liabilities | Other non-current liabilities | 51,730 | | | 49,142 | |
Total non-current liabilities | Total non-current liabilities | 149,801 | | | 148,101 | |
Total liabilities | Total liabilities | 274,764 | | | 302,083 | |
| Commitments and contingencies | Commitments and contingencies | |
Commitments and contingencies | |
Commitments and contingencies | | | | |
| Shareholders’ equity: | Shareholders’ equity: | |
Common stock and additional paid-in capital, $0.00001 par value: 50,400,000 shares authorized; 15,647,868 and 15,943,425 shares issued and outstanding, respectively | 70,667 | | | 64,849 | |
Shareholders’ equity: | |
Shareholders’ equity: | |
Common stock and additional paid-in capital, $0.00001 par value: 50,400,000 shares authorized; 15,460,223 and 15,550,061 shares issued and outstanding, respectively | |
Common stock and additional paid-in capital, $0.00001 par value: 50,400,000 shares authorized; 15,460,223 and 15,550,061 shares issued and outstanding, respectively | |
Common stock and additional paid-in capital, $0.00001 par value: 50,400,000 shares authorized; 15,460,223 and 15,550,061 shares issued and outstanding, respectively | |
Retained earnings/(Accumulated deficit) | Retained earnings/(Accumulated deficit) | 1,408 | | | (3,068) | |
Accumulated other comprehensive income/(loss) | (11,801) | | | (11,109) | |
Accumulated other comprehensive loss | |
Total shareholders’ equity | Total shareholders’ equity | 60,274 | | | 50,672 | |
Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 335,038 | | | $ | 352,755 | |
See accompanying Notes to Condensed Consolidated Financial Statements.
Apple Inc. | Q3 2023Q1 2024 Form 10-Q | 3
Apple Inc.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(In millions, except per shareper-share amounts)
| | Three Months Ended | | Nine Months Ended |
| July 1, 2023 | | June 25, 2022 | | July 1, 2023 | | June 25, 2022 |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| December 30, 2023 | |
| December 30, 2023 | |
| December 30, 2023 | |
Total shareholders’ equity, beginning balances | |
Total shareholders’ equity, beginning balances | |
Total shareholders’ equity, beginning balances | Total shareholders’ equity, beginning balances | $ | 62,158 | | | $ | 67,399 | | | $ | 50,672 | | | $ | 63,090 | |
| Common stock and additional paid-in capital: | Common stock and additional paid-in capital: | |
| Common stock and additional paid-in capital: | |
| Common stock and additional paid-in capital: | |
Beginning balances | Beginning balances | 69,568 | | | 61,181 | | | 64,849 | | | 57,365 | |
Common stock issued | — | | | — | | | 690 | | | 593 | |
Beginning balances | |
Beginning balances | |
| Common stock withheld related to net share settlement of equity awards | |
| Common stock withheld related to net share settlement of equity awards | |
| Common stock withheld related to net share settlement of equity awards | Common stock withheld related to net share settlement of equity awards | (1,595) | | | (1,371) | | | (3,310) | | | (2,783) | |
Share-based compensation | Share-based compensation | 2,694 | | | 2,305 | | | 8,438 | | | 6,940 | |
Share-based compensation | |
Share-based compensation | |
Ending balances | |
Ending balances | |
Ending balances | Ending balances | 70,667 | | | 62,115 | | | 70,667 | | | 62,115 | |
| Retained earnings/(Accumulated deficit): | Retained earnings/(Accumulated deficit): | |
| Retained earnings/(Accumulated deficit): | |
| Retained earnings/(Accumulated deficit): | |
Beginning balances | |
Beginning balances | |
Beginning balances | Beginning balances | 4,336 | | | 12,712 | | | (3,068) | | | 5,562 | |
Net income | Net income | 19,881 | | | 19,442 | | | 74,039 | | | 79,082 | |
Net income | |
Net income | |
Dividends and dividend equivalents declared | |
Dividends and dividend equivalents declared | |
Dividends and dividend equivalents declared | Dividends and dividend equivalents declared | (3,811) | | | (3,760) | | | (11,207) | | | (11,058) | |
Common stock withheld related to net share settlement of equity awards | Common stock withheld related to net share settlement of equity awards | (858) | | | (1,403) | | | (1,988) | | | (3,323) | |
Common stock withheld related to net share settlement of equity awards | |
Common stock withheld related to net share settlement of equity awards | |
Common stock repurchased | Common stock repurchased | (18,140) | | | (21,702) | | | (56,368) | | | (64,974) | |
Common stock repurchased | |
Common stock repurchased | |
Ending balances | |
Ending balances | |
Ending balances | Ending balances | 1,408 | | | 5,289 | | | 1,408 | | | 5,289 | |
| Accumulated other comprehensive income/(loss): | Accumulated other comprehensive income/(loss): | |
| Accumulated other comprehensive income/(loss): | |
| Accumulated other comprehensive income/(loss): | |
Beginning balances | |
Beginning balances | |
Beginning balances | Beginning balances | (11,746) | | | (6,494) | | | (11,109) | | | 163 | |
Other comprehensive income/(loss) | Other comprehensive income/(loss) | (55) | | | (2,803) | | | (692) | | | (9,460) | |
Other comprehensive income/(loss) | |
Other comprehensive income/(loss) | |
Ending balances | |
Ending balances | |
Ending balances | Ending balances | (11,801) | | | (9,297) | | | (11,801) | | | (9,297) | |
| Total shareholders’ equity, ending balances | Total shareholders’ equity, ending balances | $ | 60,274 | | | $ | 58,107 | | | $ | 60,274 | | | $ | 58,107 | |
| Total shareholders’ equity, ending balances | |
| Total shareholders’ equity, ending balances | |
| Dividends and dividend equivalents declared per share or RSU | Dividends and dividend equivalents declared per share or RSU | $ | 0.24 | | | $ | 0.23 | | | $ | 0.70 | | | $ | 0.67 | |
| Dividends and dividend equivalents declared per share or RSU | |
| Dividends and dividend equivalents declared per share or RSU | |
See accompanying Notes to Condensed Consolidated Financial Statements.
Apple Inc. | Q3 2023Q1 2024 Form 10-Q | 4
Apple Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)
| | Nine Months Ended |
| July 1, 2023 | | June 25, 2022 |
| Three Months Ended | | | Three Months Ended |
| December 30, 2023 | | | December 30, 2023 | | December 31, 2022 |
Cash, cash equivalents and restricted cash, beginning balances | Cash, cash equivalents and restricted cash, beginning balances | $ | 24,977 | | | $ | 35,929 | |
| Operating activities: | Operating activities: | |
Operating activities: | |
Operating activities: | |
Net income | |
Net income | |
Net income | Net income | 74,039 | | | 79,082 | |
Adjustments to reconcile net income to cash generated by operating activities: | Adjustments to reconcile net income to cash generated by operating activities: | |
Depreciation and amortization | |
Depreciation and amortization | |
Depreciation and amortization | Depreciation and amortization | 8,866 | | | 8,239 | |
Share-based compensation expense | Share-based compensation expense | 8,208 | | | 6,760 | |
| Other | Other | (1,651) | | | 2,695 | |
Other | |
Other | |
Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | |
Accounts receivable, net | Accounts receivable, net | 7,609 | | | 4,561 | |
Accounts receivable, net | |
Accounts receivable, net | |
Vendor non-trade receivables | |
Inventories | Inventories | (2,570) | | | 1,049 | |
Vendor non-trade receivables | 13,111 | | | 4,789 | |
Other current and non-current assets | Other current and non-current assets | (4,863) | | | (3,289) | |
Accounts payable | Accounts payable | (16,790) | | | (6,108) | |
| Other current and non-current liabilities | Other current and non-current liabilities | 2,986 | | | 246 | |
Cash generated by operating activities | Cash generated by operating activities | 88,945 | | | 98,024 | |
| Investing activities: | Investing activities: | |
Investing activities: | |
Investing activities: | |
Purchases of marketable securities | |
Purchases of marketable securities | |
Purchases of marketable securities | Purchases of marketable securities | (20,956) | | | (70,178) | |
Proceeds from maturities of marketable securities | Proceeds from maturities of marketable securities | 27,857 | | | 24,203 | |
Proceeds from sales of marketable securities | Proceeds from sales of marketable securities | 3,959 | | | 33,609 | |
Payments for acquisition of property, plant and equipment | Payments for acquisition of property, plant and equipment | (8,796) | | | (7,419) | |
| Other | Other | (753) | | | (1,352) | |
Other | |
Other | |
Cash generated by/(used in) investing activities | Cash generated by/(used in) investing activities | 1,311 | | | (21,137) | |
| Financing activities: | Financing activities: | |
Financing activities: | |
Financing activities: | |
Payments for taxes related to net share settlement of equity awards | |
Payments for taxes related to net share settlement of equity awards | |
Payments for taxes related to net share settlement of equity awards | Payments for taxes related to net share settlement of equity awards | (5,119) | | | (5,915) | |
Payments for dividends and dividend equivalents | Payments for dividends and dividend equivalents | (11,267) | | | (11,138) | |
Repurchases of common stock | Repurchases of common stock | (56,547) | | | (64,974) | |
Proceeds from issuance of term debt, net | 5,228 | | | — | |
| Repayments of term debt | Repayments of term debt | (11,151) | | | (6,750) | |
Proceeds from/(Repayments of) commercial paper, net | (5,971) | | | 4,970 | |
Repayments of term debt | |
Repayments of term debt | |
Repayments of commercial paper, net | |
Other | Other | (508) | | | (148) | |
Cash used in financing activities | Cash used in financing activities | (85,335) | | | (83,955) | |
| Increase/(Decrease) in cash, cash equivalents and restricted cash | Increase/(Decrease) in cash, cash equivalents and restricted cash | 4,921 | | | (7,068) | |
Increase/(Decrease) in cash, cash equivalents and restricted cash | |
Increase/(Decrease) in cash, cash equivalents and restricted cash | |
Cash, cash equivalents and restricted cash, ending balances | Cash, cash equivalents and restricted cash, ending balances | $ | 29,898 | | | $ | 28,861 | |
| Supplemental cash flow disclosure: | Supplemental cash flow disclosure: | |
Supplemental cash flow disclosure: | |
Supplemental cash flow disclosure: | |
Cash paid for income taxes, net | Cash paid for income taxes, net | $ | 7,020 | | | $ | 12,251 | |
Cash paid for interest | $ | 2,590 | | | $ | 1,910 | |
Cash paid for income taxes, net | |
Cash paid for income taxes, net | |
|
See accompanying Notes to Condensed Consolidated Financial Statements.
Apple Inc. | Q3 2023Q1 2024 Form 10-Q | 5
Apple Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1 – Summary of Significant Accounting Policies
Basis of Presentation and Preparation
The condensed consolidated financial statements include the accounts of Apple Inc. and its wholly owned subsidiaries (collectively “Apple” or the “Company”). Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these condensed consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from thoseuse of management estimates. Certain prior period amounts in the condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the fiscal year ended September 24, 2022.30, 2023 (the “2023 Form 10-K”).
The Company’s fiscal year is the 52- or 53-week period that ends on the last Saturday of September. An additional week is included in the first fiscal quarter every five or six years to realign the Company’s fiscal quarters with calendar quarters, which occurred in the first fiscal quarter of 2023. The Company’s fiscal years 2024 and 2023 span 52 and 2022 span 53 and 52 weeks, respectively. Unless otherwise stated, references to particular years, quarters, months and periods refer to the Company’s fiscal years ended in September and the associated quarters, months and periods of those fiscal years.
Earnings Per Share
The following table shows the computation of basic and diluted earnings per share for the three- and nine-month periods ended July 1, 2023 and June 25, 2022 (net income in millions and shares in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| July 1, 2023 | | June 25, 2022 | | July 1, 2023 | | June 25, 2022 |
Numerator: | | | | | | | |
Net income | $ | 19,881 | | | $ | 19,442 | | | $ | 74,039 | | | $ | 79,082 | |
| | | | | | | |
Denominator: | | | | | | | |
Weighted-average basic shares outstanding | 15,697,614 | | | 16,162,945 | | | 15,792,497 | | | 16,277,824 | |
Effect of dilutive securities | 77,407 | | | 99,258 | | | 66,766 | | | 117,113 | |
Weighted-average diluted shares | 15,775,021 | | | 16,262,203 | | | 15,859,263 | | | 16,394,937 | |
| | | | | | | |
Basic earnings per share | $ | 1.27 | | | $ | 1.20 | | | $ | 4.69 | | | $ | 4.86 | |
Diluted earnings per share | $ | 1.26 | | | $ | 1.20 | | | $ | 4.67 | | | $ | 4.82 | |
Approximately 32 million restricted stock units (“RSUs”) were excluded from the computation of diluted earnings per share for the nine months ended July 1, 2023 because their effect would have been antidilutive.
Apple Inc. | Q3 2023 Form 10-Q | 6
Note 2 – Revenue
Net sales disaggregated by significant products and services for the three- and nine-month periodsthree months ended July 1,December 30, 2023 and June 25,December 31, 2022 were as follows (in millions):
| | Three Months Ended | | Nine Months Ended |
| July 1, 2023 | | June 25, 2022 | | July 1, 2023 | | June 25, 2022 |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| December 30, 2023 | |
| December 30, 2023 | |
| December 30, 2023 | |
iPhone® | |
iPhone® | |
iPhone® | iPhone® | $ | 39,669 | | | $ | 40,665 | | | $ | 156,778 | | | $ | 162,863 | |
Mac® | Mac® | 6,840 | | | 7,382 | | | 21,743 | | | 28,669 | |
Mac® | |
Mac® | |
iPad® | |
iPad® | |
iPad® | iPad® | 5,791 | | | 7,224 | | | 21,857 | | | 22,118 | |
Wearables, Home and Accessories | Wearables, Home and Accessories | 8,284 | | | 8,084 | | | 30,523 | | | 31,591 | |
Wearables, Home and Accessories | |
Wearables, Home and Accessories | |
Services | |
Services | |
Services | Services | 21,213 | | | 19,604 | | | 62,886 | | | 58,941 | |
Total net sales | Total net sales | $ | 81,797 | | | $ | 82,959 | | | $ | 293,787 | | | $ | 304,182 | |
Total net sales | |
Total net sales | |
Total net sales include $3.3$3.5 billion of revenue recognized in the three months ended July 1, 2023 that was included in deferred revenue as of April 1, 2023, $3.1 billion of revenue recognized in the three months ended June 25, 2022 that was included in deferred revenue as of March 26, 2022, $7.0 billion of revenue recognized in the nine months ended July 1,December 30, 2023 that was included in deferred revenue as of September 24, 2022,30, 2023 and $6.3$3.4 billion of revenue recognized in the ninethree months ended June 25,December 31, 2022 that was included in deferred revenue as of September 25, 2021.24, 2022.
The Company’s proportion of net sales by disaggregated revenue source was generally consistent for each reportable segment in Note 10, “Segment Information and Geographic Data” for the three- and nine-month periodsthree months ended July 1,December 30, 2023 and June 25,December 31, 2022, except in Greater China, where iPhone revenue represented a moderately higher proportion of net sales.
As of July 1,December 30, 2023 and September 24, 2022,30, 2023, the Company had total deferred revenue of $12.2$12.5 billion and $12.4$12.1 billion, respectively. As of July 1,December 30, 2023, the Company expects 67%66% of total deferred revenue to be realized in less than a year, 26% within one-to-two years, 6%7% within two-to-three years and 1% in greater than three years.
Apple Inc. | Q1 2024 Form 10-Q | 6
Note 3 – Earnings Per Share
The following table shows the computation of basic and diluted earnings per share for the three months ended December 30, 2023 and December 31, 2022 (net income in millions and shares in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended | | |
| December 30, 2023 | | December 31, 2022 | | | | |
Numerator: | | | | | | | |
Net income | $ | 33,916 | | | $ | 29,998 | | | | | |
| | | | | | | |
Denominator: | | | | | | | |
Weighted-average basic shares outstanding | 15,509,763 | | | 15,892,723 | | | | | |
Effect of dilutive share-based awards | 66,878 | | | 62,995 | | | | | |
Weighted-average diluted shares | 15,576,641 | | | 15,955,718 | | | | | |
| | | | | | | |
Basic earnings per share | $ | 2.19 | | | $ | 1.89 | | | | | |
Diluted earnings per share | $ | 2.18 | | | $ | 1.88 | | | | | |
Approximately 89 million restricted stock units (“RSUs”) were excluded from the computation of diluted earnings per share for the three months ended December 31, 2022 because their effect would have been antidilutive.
Note 34 – Financial Instruments
Cash, Cash Equivalents and Marketable Securities
The following tables show the Company’s cash, cash equivalents and marketable securities by significant investment category as of July 1,December 30, 2023 and September 24, 202230, 2023 (in millions):
| | July 1, 2023 |
| Adjusted Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value | | Cash and Cash Equivalents | | Current Marketable Securities | | Non-Current Marketable Securities |
| December 30, 2023 | | | December 30, 2023 |
| Adjusted Cost | | | Adjusted Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value | | Cash and Cash Equivalents | | Current Marketable Securities | | Non-Current Marketable Securities |
Cash | Cash | $ | 25,337 | | | $ | — | | | $ | — | | | $ | 25,337 | | | $ | 25,337 | | | $ | — | | | $ | — | |
Level 1 (1): | |
Level 1: | |
Money market funds | |
Money market funds | |
Money market funds | Money market funds | 1,108 | | | — | | | — | | | 1,108 | | | 1,108 | | | — | | | — | |
Mutual funds | Mutual funds | 366 | | | 15 | | | (19) | | | 362 | | | — | | | 362 | | | — | |
Subtotal | Subtotal | 1,474 | | | 15 | | | (19) | | | 1,470 | | | 1,108 | | | 362 | | | — | |
Level 2 (2): | | | | | | | | | | | | | |
Level 2 (1): | |
U.S. Treasury securities | |
U.S. Treasury securities | |
U.S. Treasury securities | U.S. Treasury securities | 22,274 | | | — | | | (1,354) | | | 20,920 | | | — | | | 8,076 | | | 12,844 | |
U.S. agency securities | U.S. agency securities | 5,709 | | | — | | | (594) | | | 5,115 | | | 3 | | | 272 | | | 4,840 | |
Non-U.S. government securities | Non-U.S. government securities | 17,588 | | | 19 | | | (927) | | | 16,680 | | | — | | | 11,262 | | | 5,418 | |
Certificates of deposit and time deposits | Certificates of deposit and time deposits | 2,315 | | | — | | | — | | | 2,315 | | | 1,960 | | | 355 | | | — | |
Commercial paper | Commercial paper | 364 | | | — | | | — | | | 364 | | | — | | | 364 | | | — | |
Corporate debt securities | Corporate debt securities | 79,621 | | | 22 | | | (6,079) | | | 73,564 | | | — | | | 13,005 | | | 60,559 | |
Municipal securities | Municipal securities | 713 | | | — | | | (23) | | | 690 | | | — | | | 213 | | | 477 | |
Mortgage- and asset-backed securities | Mortgage- and asset-backed securities | 22,383 | | | 4 | | | (2,299) | | | 20,088 | | | — | | | 165 | | | 19,923 | |
Subtotal | Subtotal | 150,967 | | | 45 | | | (11,276) | | | 139,736 | | | 1,963 | | | 33,712 | | | 104,061 | |
Total (3) | $ | 177,778 | | | $ | 60 | | | $ | (11,295) | | | $ | 166,543 | | | $ | 28,408 | | | $ | 34,074 | | | $ | 104,061 | |
Total (2) | |
|
Apple Inc. | Q3 2023Q1 2024 Form 10-Q | 7
| | September 24, 2022 |
| Adjusted Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value | | Cash and Cash Equivalents | | Current Marketable Securities | | Non-Current Marketable Securities |
| September 30, 2023 | | | September 30, 2023 |
| Adjusted Cost | | | Adjusted Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value | | Cash and Cash Equivalents | | Current Marketable Securities | | Non-Current Marketable Securities |
Cash | Cash | $ | 18,546 | | | $ | — | | | $ | — | | | $ | 18,546 | | | $ | 18,546 | | | $ | — | | | $ | — | |
Level 1 (1): | |
Level 1: | |
Money market funds | Money market funds | 2,929 | | | — | | | — | | | 2,929 | | | 2,929 | | | — | | | — | |
Mutual funds | 274 | | | — | | | (47) | | | 227 | | | — | | | 227 | | | — | |
Money market funds | |
Money market funds | |
Mutual funds and equity securities | |
Subtotal | Subtotal | 3,203 | | | — | | | (47) | | | 3,156 | | | 2,929 | | | 227 | | | — | |
Level 2 (2): | | | | | | | | | | | | | |
Level 2 (1): | |
U.S. Treasury securities | |
U.S. Treasury securities | |
U.S. Treasury securities | U.S. Treasury securities | 25,134 | | | — | | | (1,725) | | | 23,409 | | | 338 | | | 5,091 | | | 17,980 | |
U.S. agency securities | U.S. agency securities | 5,823 | | | — | | | (655) | | | 5,168 | | | — | | | 240 | | | 4,928 | |
Non-U.S. government securities | Non-U.S. government securities | 16,948 | | | 2 | | | (1,201) | | | 15,749 | | | — | | | 8,806 | | | 6,943 | |
Certificates of deposit and time deposits | Certificates of deposit and time deposits | 2,067 | | | — | | | — | | | 2,067 | | | 1,805 | | | 262 | | | — | |
Commercial paper | Commercial paper | 718 | | | — | | | — | | | 718 | | | 28 | | | 690 | | | — | |
Corporate debt securities | Corporate debt securities | 87,148 | | | 9 | | | (7,707) | | | 79,450 | | | — | | | 9,023 | | | 70,427 | |
Municipal securities | Municipal securities | 921 | | | — | | | (35) | | | 886 | | | — | | | 266 | | | 620 | |
Mortgage- and asset-backed securities | Mortgage- and asset-backed securities | 22,553 | | | — | | | (2,593) | | | 19,960 | | | — | | | 53 | | | 19,907 | |
Subtotal | Subtotal | 161,312 | | | 11 | | | (13,916) | | | 147,407 | | | 2,171 | | | 24,431 | | | 120,805 | |
Total (3) | $ | 183,061 | | | $ | 11 | | | $ | (13,963) | | | $ | 169,109 | | | $ | 23,646 | | | $ | 24,658 | | | $ | 120,805 | |
Total (2) | |
(1)The valuation techniques used to measure the fair values of the Company’s Level 1 fair value estimates2 financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices in active markets for identical assets or liabilities.
(2)Level 2 fair value estimates are based on observablemodel-driven valuations using significant inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identicalderived from or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.data.
(3)(2)As of July 1,December 30, 2023 and September 24, 2022,30, 2023, total marketable securities included $14.1$13.9 billion and $12.7$13.8 billion, respectively, that were restricted from general use, related to the State Aid Decision (referEuropean Commission decision finding that Ireland granted state aid to Note 5, “Income Taxes”)the Company, and other agreements.
The following table shows the fair value of the Company’s non-current marketable debt securities, by contractual maturity, as of July 1,December 30, 2023 (in millions):
| | | | | |
Due after 1 year through 5 years | $ | 76,26772,994 | |
Due after 5 years through 10 years | 11,1489,368 | |
Due after 10 years | 16,64617,113 | |
Total fair value | $ | 104,06199,475 | |
Derivative Instruments and Hedging
The Company may use derivative instruments to partially offset its business exposure to foreign exchange and interest rate risk. However, the Company may choose not to hedge certain exposures for a variety of reasons, including accounting considerations or the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign exchange or interest rates.
Foreign Exchange Rate Risk
To protect gross margins from fluctuations in foreign currency exchange rates, the Company may enter into forward contracts, option contractsuse forwards, options or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases, typically for up to 12 months.
To protect the Company’s foreign currency–denominated term debt or marketable securities from fluctuations in foreign currency exchange rates, the Company may enter into forward contracts,use forwards, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value hedges. As of July 1,December 30, 2023, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for term debt–related foreign currency transactions is 19 years.
Apple Inc. | Q3 2023 Form 10-Q | 8
The Company may also enter intouse derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in foreign currency exchange rates, as well as to offset a portion of the foreign currency exchange gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.
Apple Inc. | Q1 2024 Form 10-Q | 8
Interest Rate Risk
To protect the Company’s term debt or marketable securities from fluctuations in interest rates, the Company may enter intouse interest rate swaps, options or other instruments. The Company designates these instruments as either cash flow or fair value hedges.
The notional amounts of the Company’s outstanding derivative instruments as of July 1,December 30, 2023 and September 24, 202230, 2023 were as follows (in millions):
| | | | | | | | | | | |
| July 1, 2023 | | September 24, 2022 |
Derivative instruments designated as accounting hedges: | | | |
Foreign exchange contracts | $ | 45,425 | | | $ | 102,670 | |
Interest rate contracts | $ | 19,375 | | | $ | 20,125 | |
| | | |
Derivative instruments not designated as accounting hedges: | | | |
Foreign exchange contracts | $ | 90,977 | | | $ | 185,381 | |
The gross fair values of the Company’s derivative assets and liabilities as of September 24, 2022 were as follows (in millions):
| | | | | | | | | | | | | | | | | |
| September 24, 2022 |
| Fair Value of Derivatives Designated as Accounting Hedges | | Fair Value of Derivatives Not Designated as Accounting Hedges | | Total Fair Value |
Derivative assets (1): | | | | | |
Foreign exchange contracts | $ | 4,317 | | | $ | 2,819 | | | $ | 7,136 | |
| | | | | |
| | | | | |
Derivative liabilities (2): | | | | | |
Foreign exchange contracts | $ | 2,205 | | | $ | 2,547 | | | $ | 4,752 | |
Interest rate contracts | $ | 1,367 | | | $ | — | | | $ | 1,367 | |
(1)Derivative assets are measured using Level 2 fair value inputs and are included in other current assets and other non-current assets in the Condensed Consolidated Balance Sheet.
(2)Derivative liabilities are measured using Level 2 fair value inputs and are included in other current liabilities and other non-current liabilities in the Condensed Consolidated Balance Sheet.
The derivative assets above represent the Company’s gross credit exposure if all counterparties failed to perform. To mitigate credit risk, the Company generally enters into collateral security arrangements that provide for collateral to be received or posted when the net fair values of certain derivatives fluctuate from contractually established thresholds. To further limit credit risk, the Company generally enters into master netting arrangements with the respective counterparties to the Company’s derivative contracts, under which the Company is allowed to settle transactions with a single net amount payable by one party to the other. As of September 24, 2022, the potential effects of these rights of set-off associated with the Company’s derivative contracts, including the effects of collateral, would be a reduction to both derivative assets and derivative liabilities of $7.8 billion, resulting in a net derivative asset of $412 million. | | | | | | | | | | | |
| December 30, 2023 | | September 30, 2023 |
Derivative instruments designated as accounting hedges: | | | |
Foreign exchange contracts | $ | 66,735 | | | $ | 74,730 | |
Interest rate contracts | $ | 19,375 | | | $ | 19,375 | |
| | | |
Derivative instruments not designated as accounting hedges: | | | |
Foreign exchange contracts | $ | 102,108 | | | $ | 104,777 | |
The carrying amounts of the Company’s hedged items in fair value hedges as of July 1,December 30, 2023 and September 24, 202230, 2023 were as follows (in millions):
| | | | | | | | | | | |
| July 1, 2023 | | September 24, 2022 |
Hedged assets/(liabilities): | | | |
Current and non-current marketable securities | $ | 14,863 | | | $ | 13,378 | |
Current and non-current term debt | $ | (17,986) | | | $ | (18,739) | |
Apple Inc. | Q3 2023 Form 10-Q | 9
| | | | | | | | | | | |
| December 30, 2023 | | September 30, 2023 |
Hedged assets/(liabilities): | | | |
Current and non-current marketable securities | $ | 15,102 | | | $ | 14,433 | |
Current and non-current term debt | $ | (18,661) | | | $ | (18,247) | |
Accounts Receivable
Trade Receivables
The Company has considerable trade receivables outstanding with itsCompany’s third-party cellular network carriers, wholesalers, retailers, resellers, small and mid-sized businesses and education, enterprise and government customers. The Company generally does not require collateral from its customers; however, the Company will require collateral or third-party credit support in certain instances to limit credit risk. In addition, when possible, the Company attempts to limit credit risk on trade receivables with credit insurance for certain customers or by requiring third-party financing, loans or leases to support credit exposure. These credit-financing arrangements are directly between the third-party financing company and the end customer. As such, the Company generally does not assume any recourse or credit risk sharing related to any of these arrangements.
As ofSeptember 24, 2022, the Company had one customer that represented 10% or more of total trade receivables, which accounted for 10%. The Company’s cellular network carriers accounted for 44%34% and 41% of total trade receivables as of December 30, 2023 and September 24, 2022.30, 2023, respectively. The Company requires third-party credit support or collateral from certain customers to limit credit risk.
Vendor Non-Trade Receivables
The Company has non-trade receivables from certain of its manufacturing vendors resulting from the sale of components to these vendors who manufacture subassemblies or assemble final products for the Company. The Company purchases these components directly from suppliers. The Company does not reflect the sale of these components in products net sales. Rather, the Company recognizes any gain on these sales as a reduction of products cost of sales when the related final products are sold by the Company. As of July 1,December 30, 2023, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 54%50% and 14%20%. As of September 24, 2022,30, 2023, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 54%48% and 13%23%.
Note 45 – Condensed Consolidated Financial Statement Details
The following tables showtable shows the Company’s condensed consolidated financial statement details as of July 1,December 30, 2023 and September 24, 202230, 2023 (in millions):
Inventories
| | | | | | | | | | | |
| July 1, 2023 | | September 24, 2022 |
Components | $ | 3,788 | | | $ | 1,637 | |
Finished goods | 3,563 | | | 3,309 | |
Total inventories | $ | 7,351 | | | $ | 4,946 | |
Property, Plant and Equipment, Net
| | | | | | | | | | | |
| July 1, 2023 | | September 24, 2022 |
Gross property, plant and equipment | $ | 114,337 | | | $ | 114,457 | |
Accumulated depreciation and amortization | (70,787) | | | (72,340) | |
Total property, plant and equipment, net | $ | 43,550 | | | $ | 42,117 | |
Other Income/(Expense), Net
The following table shows the detail of other income/(expense), net for the three- and nine-month periods ended July 1, 2023 and June 25, 2022 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| July 1, 2023 | | June 25, 2022 | | July 1, 2023 | | June 25, 2022 |
Interest and dividend income | $ | 980 | | | $ | 722 | | | $ | 2,766 | | | $ | 2,072 | |
Interest expense | (998) | | | (719) | | | (2,931) | | | (2,104) | |
Other expense, net | (247) | | | (13) | | | (429) | | | (65) | |
Total other income/(expense), net | $ | (265) | | | $ | (10) | | | $ | (594) | | | $ | (97) | |
| | | | | | | | | | | |
| December 30, 2023 | | September 30, 2023 |
Gross property, plant and equipment | $ | 116,176 | | | $ | 114,599 | |
Accumulated depreciation | (72,510) | | | (70,884) | |
Total property, plant and equipment, net | $ | 43,666 | | | $ | 43,715 | |
Apple Inc. | Q3 2023Q1 2024 Form 10-Q | 109
Note 5 – Income Taxes
European Commission State Aid Decision
On August 30, 2016, the European Commission announced its decision that Ireland granted state aid to the Company by providing tax opinions in 1991 and 2007 concerning the tax allocation of profits of the Irish branches of two subsidiaries of the Company (the “State Aid Decision”). The State Aid Decision ordered Ireland to calculate and recover additional taxes from the Company for the period June 2003 through December 2014. Irish legislative changes, effective as of January 2015, eliminated the application of the tax opinions from that date forward. The Company and Ireland appealed the State Aid Decision to the General Court of the Court of Justice of the European Union (the “General Court”). On July 15, 2020, the General Court annulled the State Aid Decision. On September 25, 2020, the European Commission appealed the General Court’s decision to the European Court of Justice (the “ECJ”) and a hearing was held on May 23, 2023. A decision from the ECJ is expected in calendar year 2024. The Company believes it would be eligible to claim a U.S. foreign tax credit for a portion of any incremental Irish corporate income taxes potentially due related to the State Aid Decision.
Note 6 – Debt
Commercial Paper
The Company issues unsecured short-term promissory notes (“Commercial Paper”) pursuant to a commercial paper program. The Company uses net proceeds from the commercial paper program for general corporate purposes, including dividends and share repurchases. As of July 1,December 30, 2023 and September 24, 2022,30, 2023, the Company had $4.0$2.0 billion and $10.0$6.0 billion of Commercial Papercommercial paper outstanding, respectively. The following table provides a summary of cash flows associated with the issuance and maturities of Commercial Papercommercial paper for the ninethree months ended July 1,December 30, 2023 and June 25,December 31, 2022 (in millions):
| | | | | | | | | | | |
| Nine Months Ended |
| July 1, 2023 | | June 25, 2022 |
Maturities 90 days or less: | | | |
Proceeds from/(Repayments of) commercial paper, net | $ | (3,326) | | | $ | 4,383 | |
| | | |
Maturities greater than 90 days: | | | |
Proceeds from commercial paper | — | | | 5,731 | |
Repayments of commercial paper | (2,645) | | | (5,144) | |
Proceeds from/(Repayments of) commercial paper, net | (2,645) | | | 587 | |
| | | |
Total proceeds from/(repayments of) commercial paper, net | $ | (5,971) | | | $ | 4,970 | |
| | | | | | | | | | | |
| Three Months Ended |
| December 30, 2023 | | December 31, 2022 |
Maturities 90 days or less: | | | |
Repayments of commercial paper, net | $ | (3,984) | | | $ | (5,569) | |
| | | |
Maturities greater than 90 days: | | | |
| | | |
Repayments of commercial paper | — | | | (2,645) | |
| | | |
| | | |
Total repayments of commercial paper, net | $ | (3,984) | | | $ | (8,214) | |
Term Debt
As of July 1,December 30, 2023 and September 24, 2022,30, 2023, the Company had outstanding fixed-rate notes with varying maturities for an aggregate carrying amount of $105.3$106.0 billion and $110.1$105.1 billion, respectively (collectively the “Notes”). As of July 1,December 30, 2023 and September 24, 2022,30, 2023, the fair value of the Company’s Notes, based on Level 2 inputs, was $95.396.7 billion and $98.8$90.8 billion, respectively.
Note 7 – Shareholders’ Equity
Share Repurchase Program
During the ninethree months ended July 1,December 30, 2023, the Company repurchased 365118 million shares of its common stock for $56.1 billion, excluding excise tax due under the Inflation Reduction Act of 2022.$20.5 billion. The Company’s share repurchase programs doprogram does not obligate the Company to acquire a minimum amount of shares. Under the programs,program, shares may be repurchased in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.amended (the “Exchange Act”).
Apple Inc. | Q3 2023 Form 10-Q | 11
Note 8 – Benefit PlansShare-Based Compensation
Restricted Stock Units
A summary of the Company’s RSU activity and related information for the ninethree months ended July 1,December 30, 2023 is as follows:
| | Number of RSUs (in thousands) | | Weighted-Average Grant Date Fair Value Per RSU | | Aggregate Fair Value (in millions) |
Balance as of September 24, 2022 | 201,501 | | | $ | 109.48 | | | |
| Number of RSUs (in thousands) | | | Number of RSUs (in thousands) | | Weighted-Average Grant Date Fair Value Per RSU | | Aggregate Fair Value (in millions) |
Balance as of September 30, 2023 | |
RSUs granted | |
RSUs granted | |
RSUs granted | RSUs granted | 86,896 | | | $ | 150.23 | | |
RSUs vested | RSUs vested | (96,681) | | | $ | 95.97 | | |
RSUs vested | |
RSUs vested | |
RSUs canceled | RSUs canceled | (7,000) | | | $ | 126.48 | | |
Balance as of July 1, 2023 | 184,716 | | | $ | 135.08 | | | $ | 35,829 | |
RSUs canceled | |
RSUs canceled | |
Balance as of December 30, 2023 | |
Balance as of December 30, 2023 | |
Balance as of December 30, 2023 | |
The fair value as of the respective vesting dates of RSUs was $7.0$7.7 billion and $14.9$6.8 billion for the three-three months ended December 30, 2023 and nine-month periods ended July 1, 2023, respectively, and was $7.8 billion and $17.3 billion for the three- and nine-month periods ended June 25,December 31, 2022, respectively.
Apple Inc. | Q1 2024 Form 10-Q | 10
Share-Based Compensation
The following table shows share-based compensation expense and the related income tax benefit included in the Condensed Consolidated Statements of Operations for the three- and nine-month periodsthree months ended July 1,December 30, 2023 and June 25,December 31, 2022 (in millions):
| | Three Months Ended | | Nine Months Ended |
| July 1, 2023 | | June 25, 2022 | | July 1, 2023 | | June 25, 2022 |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| December 30, 2023 | |
| December 30, 2023 | |
| December 30, 2023 | |
Share-based compensation expense | |
Share-based compensation expense | |
Share-based compensation expense | Share-based compensation expense | $ | 2,617 | | | $ | 2,243 | | | $ | 8,208 | | | $ | 6,760 | |
Income tax benefit related to share-based compensation expense | Income tax benefit related to share-based compensation expense | $ | (993) | | | $ | (1,231) | | | $ | (2,791) | | | $ | (3,416) | |
Income tax benefit related to share-based compensation expense | |
Income tax benefit related to share-based compensation expense | |
As of July 1,December 30, 2023, the total unrecognized compensation cost related to outstanding RSUs and stock options was $20.9$27.4 billion, which the Company expects to recognize over a weighted-average period of 2.72.9 years.
Note 9 – Commitments and Contingencies
Unconditional Purchase Obligations
The Company has entered into certain off–balance sheet commitments that require the future purchase of goods or services (“unconditional purchase obligations”). The Company’s unconditional purchase obligations primarily consist of supplier arrangements, licensed intellectual property and content, and distribution rights. Future payments under noncancelable unconditional purchase obligations with a remaining term in excess of one year as of July 1, 2023, are as follows (in millions):
| | | | | |
2023 (remaining three months) | $ | 1,260 | |
2024 | 3,417 | |
2025 | 1,990 | |
2026 | 3,079 | |
2027 | 1,013 | |
Thereafter | 8,198 | |
Total | $ | 18,957 | |
Contingencies
The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business and that have not been fully resolved. The outcome of litigation is inherently uncertain. In the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss, or a material loss greater than a recorded accrual, concerning loss contingencies for asserted legal and other claims.
Apple Inc. | Q3 2023 Form 10-Q | 12
Note 10 – Segment Information and Geographic Data
The following table shows information by reportable segment for the three- and nine-month periodsthree months ended July 1,December 30, 2023 and June 25,December 31, 2022 (in millions):
| | Three Months Ended | | Nine Months Ended |
| July 1, 2023 | | June 25, 2022 | | July 1, 2023 | | June 25, 2022 |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| December 30, 2023 | |
| December 30, 2023 | |
| December 30, 2023 | |
Americas: | |
Americas: | |
Americas: | Americas: | | | | | | | |
Net sales | Net sales | $ | 35,383 | | | $ | 37,472 | | | $ | 122,445 | | | $ | 129,850 | |
Net sales | |
Net sales | |
Operating income | |
Operating income | |
Operating income | Operating income | $ | 13,117 | | | $ | 13,914 | | | $ | 44,908 | | | $ | 48,778 | |
| Europe: | Europe: | |
| Europe: | |
| Europe: | |
Net sales | Net sales | $ | 20,205 | | | $ | 19,287 | | | $ | 71,831 | | | $ | 72,323 | |
Net sales | |
Net sales | |
Operating income | |
Operating income | |
Operating income | Operating income | $ | 7,995 | | | $ | 7,124 | | | $ | 27,380 | | | $ | 27,174 | |
| Greater China: | Greater China: | |
| Greater China: | |
| Greater China: | |
Net sales | Net sales | $ | 15,758 | | | $ | 14,604 | | | $ | 57,475 | | | $ | 58,730 | |
Net sales | |
Net sales | |
Operating income | |
Operating income | |
Operating income | Operating income | $ | 6,207 | | | $ | 5,760 | | | $ | 24,175 | | | $ | 25,055 | |
| Japan: | Japan: | |
| Japan: | |
| Japan: | |
Net sales | Net sales | $ | 4,821 | | | $ | 5,446 | | | $ | 18,752 | | | $ | 20,277 | |
Net sales | |
Net sales | |
Operating income | |
Operating income | |
Operating income | Operating income | $ | 2,443 | | | $ | 2,418 | | | $ | 9,073 | | | $ | 9,263 | |
| Rest of Asia Pacific: | Rest of Asia Pacific: | |
| Rest of Asia Pacific: | |
| Rest of Asia Pacific: | |
Net sales | |
Net sales | |
Net sales | Net sales | $ | 5,630 | | | $ | 6,150 | | | $ | 23,284 | | | $ | 23,002 | |
Operating income | Operating income | $ | 2,328 | | | $ | 2,367 | | | $ | 9,447 | | | $ | 9,185 | |
Operating income | |
Operating income | |
Apple Inc. | Q1 2024 Form 10-Q | 11
A reconciliation of the Company’s segment operating income to the Condensed Consolidated Statements of Operations for the three- and nine-month periodsthree months ended July 1,December 30, 2023 and June 25,December 31, 2022 is as follows (in millions):
| | Three Months Ended | | Nine Months Ended |
| July 1, 2023 | | June 25, 2022 | | July 1, 2023 | | June 25, 2022 |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| December 30, 2023 | |
| December 30, 2023 | |
| December 30, 2023 | |
Segment operating income | |
Segment operating income | |
Segment operating income | Segment operating income | $ | 32,090 | | | $ | 31,583 | | | $ | 114,983 | | | $ | 119,455 | |
Research and development expense | Research and development expense | (7,442) | | | (6,797) | | | (22,608) | | | (19,490) | |
Research and development expense | |
Research and development expense | |
Other corporate expenses, net | |
Other corporate expenses, net | |
Other corporate expenses, net | Other corporate expenses, net | (1,650) | | | (1,710) | | | (5,043) | | | (5,422) | |
Total operating income | Total operating income | $ | 22,998 | | | $ | 23,076 | | | $ | 87,332 | | | $ | 94,543 | |
Total operating income | |
Total operating income | |
Apple Inc. | Q3 2023Q1 2024 Form 10-Q | 1312
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This sectionItem and other partssections of this Quarterly Report on Form 10-Q (“Form 10-Q”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. For example, statements in this Form 10-Q regarding the potential future impact of macroeconomic conditions on the Company’s business and results of operations are forward-looking statements. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the Company’s Annual Report on2023 Form 10-K for the fiscal year ended September 24, 2022 (the “2022 Form 10-K”) under the heading “Risk Factors.” The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Unless otherwise stated, all information presented herein is based on the Company’s fiscal calendar, and references to particular years, quarters, months or periods refer to the Company’s fiscal years ended in September and the associated quarters, months and periods of those fiscal years. Each of the terms the “Company” and “Apple” as used herein refers collectively to Apple Inc. and its wholly owned subsidiaries, unless otherwise stated.
The following discussion should be read in conjunction with the 20222023 Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.
Available Information
The Company periodically provides certain information for investors on its corporate website, www.apple.com, and its investor relations website, investor.apple.com. This includes press releases and other information about financial performance, information on environmental, social and governance matters, and details related to the Company’s annual meeting of shareholders. The information contained on the websites referenced in this Form 10-Q is not incorporated by reference into this filing. Further, the Company’s references to website URLs are intended to be inactive textual references only.
Business Seasonality and Product Introductions
The Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in part to seasonal holiday demand. Additionally, new product and service introductions can significantly impact net sales, cost of sales and operating expenses. The timing of product introductions can also impact the Company’s net sales to its indirect distribution channels as these channels are filled with new inventory following a product launch, and channel inventory of an older product often declines as the launch of a newer product approaches. Net sales can also be affected when consumers and distributors anticipate a product introduction.
Fiscal Period
The Company’s fiscal year is the 52- or 53-week period that ends on the last Saturday of September. An additional week is included in the first fiscal quarter every five or six years to realign the Company’s fiscal quarters with calendar quarters, which occurred in the first quarter of 2023. The Company’s fiscal years 2024 and 2023 span 52 and 2022 span 53 and 52 weeks, respectively.
Quarterly Highlights
Weakness in foreign currencies relativeThe Company’s first quarter of 2024 included 13 weeks, compared to 14 weeks during the U.S. dollar had an unfavorable impact on thefirst quarter of 2023.
The Company’s total net sales which decreased 1%increased 2% or $1.2$2.4 billion during the thirdfirst quarter of 20232024 compared to the same quarter in 2022. The year-over-year2023, driven primarily by higher net sales decrease consisted primarily of iPhone and Services, partially offset by lower net sales of iPad and iPhone, partially offset by higher net sales of Services.Wearables, Home and Accessories.
During the thirdfirst quarter of 2023,2024, the Company announced the following new products:
•15-inchan updated MacBook Air®, powered by the M2 chip;
•Mac Studio™, powered by the M2 Max chip and the new M2 Ultra chip;
•Mac Pro® 14-in., powered by the new M2 Ultra chip;MacBook Pro 16-in. and
•Apple Vision Pro™, the Company’s first spatial computer featuring its new visionOS™, expected to be available in early calendar year 2024.
The Company also announced iOS 17, macOS iMac®.Sonoma, iPadOS® 17, tvOS® 17 and watchOS® 10, updates to its operating systems that are expected to be available in the fall of 2023.
Apple Inc. | Q3 2023 Form 10-Q | 14
The Company repurchased $18.0$20.5 billion of its common stock and paid dividends and dividend equivalents of $3.8 billion during the thirdfirst quarter of 2023.2024.
Macroeconomic Conditions
Macroeconomic conditions, including inflation, changes in interest rates, and currency fluctuations, have directly and indirectly impacted, and could in the future materially impact, the Company’s results of operations and financial condition.
Apple Inc. | Q1 2024 Form 10-Q | 13
Segment Operating Performance
The following table shows net sales by reportable segment for the three- and nine-month periodsthree months ended July 1,December 30, 2023 and June 25,December 31, 2022 (dollars in millions):
| | Three Months Ended | | Nine Months Ended |
| July 1, 2023 | | June 25, 2022 | | Change | | July 1, 2023 | | June 25, 2022 | | Change |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| December 30, 2023 | |
| December 30, 2023 | |
| December 30, 2023 | |
Net sales by reportable segment: | |
Net sales by reportable segment: | |
Net sales by reportable segment: | Net sales by reportable segment: | | | | | | | | | | | |
Americas | Americas | $ | 35,383 | | | $ | 37,472 | | | (6) | % | | $ | 122,445 | | | $ | 129,850 | | | (6) | % |
Americas | |
Americas | |
Europe | |
Europe | |
Europe | Europe | 20,205 | | | 19,287 | | | 5 | % | | 71,831 | | | 72,323 | | | (1) | % |
Greater China | Greater China | 15,758 | | | 14,604 | | | 8 | % | | 57,475 | | | 58,730 | | | (2) | % |
Greater China | |
Greater China | |
Japan | |
Japan | |
Japan | Japan | 4,821 | | | 5,446 | | | (11) | % | | 18,752 | | | 20,277 | | | (8) | % |
Rest of Asia Pacific | Rest of Asia Pacific | 5,630 | | | 6,150 | | | (8) | % | | 23,284 | | | 23,002 | | | 1 | % |
Rest of Asia Pacific | |
Rest of Asia Pacific | |
Total net sales | Total net sales | $ | 81,797 | | | $ | 82,959 | | | (1) | % | | $ | 293,787 | | | $ | 304,182 | | | (3) | % |
Total net sales | |
Total net sales | |
Americas
Americas net sales decreasedincreased 2% or $1.2 billion during the thirdfirst quarter and first nine months of 20232024 compared to the same periodsquarter in 20222023 due primarily to higher net sales of Services and iPhone, partially offset by lower net sales of iPhone and Mac, partially offset by higher net sales of Services.
Europe
iPad. The weaknessstrength in foreign currencies relative to the U.S. dollar had a net unfavorablefavorable year-over-year impact on Americas net sales during the first quarter of 2024.
Europe
Europe net sales increased 10% or $2.7 billion during the first quarter of 2024 compared to the same quarter in 2023 due primarily to higher net sales of iPhone. The strength in foreign currencies relative to the U.S. dollar had a net favorable year-over-year impact on Europe net sales during the third quarter and first nine months of 2023. During the third quarter of 2023, the Europe2024.
Greater China
Greater China net sales increase consisted primarily of higher net sales of iPhone. Duringdecreased 13% or $3.1 billion during the first nine monthsquarter of 2024 compared to the same quarter in 2023 the Europe net sales decrease consisteddue primarily ofto lower net sales of Mac, partially offset by higher net sales of iPhone.
Greater China
iPhone, iPad and Wearables, Home and Accessories. The weakness in the renminbi relative to the U.S. dollar had an unfavorable year-over-year impact on Greater China net sales during the third quarter and first nine months of 2023. During the third quarter of 2023, the Greater China2024.
Japan
Japan net sales increase consistedincreased 15% or $1.0 billion during the first quarter of 2024 compared to the same quarter in 2023 due primarily ofto higher net sales of iPhone. During the first nine months of 2023, the Greater China net sales decrease consisted primarily of lower net sales of iPhone.
Japan
The weakness in the yen relative to the U.S. dollar had an unfavorable year-over-year impact on Japan net sales during the third quarter and first nine months of 2023. During the third quarter of 2023, the Japan net sales decrease consisted primarily of lower net sales of iPhone. During the first nine months of 2023, the Japan net sales decrease consisted primarily of lower net sales of iPhone, Services and Wearables, Home and Accessories.2024.
Rest of Asia Pacific
The weakness in foreign currencies relative to the U.S. dollar had a net unfavorable year-over-year impact on Rest of Asia Pacific net sales increased 7% or $627 million during the third quarter and first nine months of 2023. During the third quarter of 2024 compared to the same quarter in 2023 the Rest of Asia Pacific net sales decrease consisteddue primarily of lower net sales of iPhone and iPad. During the first nine months of 2023, the Rest of Asia Pacific net sales increase consisted primarily ofto higher net sales of iPhone, partially offset by lower net sales of Mac.Wearables, Home and Accessories.
Apple Inc. | Q3 2023Q1 2024 Form 10-Q | 1514
Products and Services Performance
The following table shows net sales by category for the three- and nine-month periodsthree months ended July 1,December 30, 2023 and June 25,December 31, 2022 (dollars in millions):
| | Three Months Ended | | Nine Months Ended |
| July 1, 2023 | | June 25, 2022 | | Change | | July 1, 2023 | | June 25, 2022 | | Change |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| December 30, 2023 | |
| December 30, 2023 | |
| December 30, 2023 | |
Net sales by category: | |
Net sales by category: | |
Net sales by category: | Net sales by category: | | | | | | | | | | | |
iPhone | iPhone | $ | 39,669 | | | $ | 40,665 | | | (2) | % | | $ | 156,778 | | | $ | 162,863 | | | (4) | % |
iPhone | |
iPhone | |
Mac | |
Mac | |
Mac | Mac | 6,840 | | | 7,382 | | | (7) | % | | 21,743 | | | 28,669 | | | (24) | % |
iPad | iPad | 5,791 | | | 7,224 | | | (20) | % | | 21,857 | | | 22,118 | | | (1) | % |
iPad | |
iPad | |
Wearables, Home and Accessories | |
Wearables, Home and Accessories | |
Wearables, Home and Accessories | Wearables, Home and Accessories | 8,284 | | | 8,084 | | | 2 | % | | 30,523 | | | 31,591 | | | (3) | % |
Services | Services | 21,213 | | | 19,604 | | | 8 | % | | 62,886 | | | 58,941 | | | 7 | % |
Services | |
Services | |
Total net sales | Total net sales | $ | 81,797 | | | $ | 82,959 | | | (1) | % | | $ | 293,787 | | | $ | 304,182 | | | (3) | % |
Total net sales | |
Total net sales | |
iPhone
iPhone net sales decreasedincreased 6% or $3.9 billion during the thirdfirst quarter and first nine months of 20232024 compared to the same periodsquarter in 20222023 due primarily to lowerhigher net sales from certain iPhoneof Pro models, partially offset by higher net sales of iPhone 14 Pro models.
Mac
Mac net sales decreased during the third quarter and first nine months of 2023 compared to the same periods in 2022 due primarily to lower net sales of laptops.other models.
iPadMac
iPad net sales decreased during the third quarter of 2023 compared to the third quarter of 2022 due primarily to lower net sales across most iPad models. Year-over-year iPadMac net sales were relatively flat during the first nine monthsquarter of 2024 compared to the same quarter in 2023.
iPad
iPad net sales decreased 25% or $2.4 billion during the first quarter of 2024 compared to the same quarter in 2023 due primarily to lower net sales of iPad Pro, iPad 9th generation and iPad Air.
Wearables, Home and Accessories
Wearables, Home and Accessories net sales increased during the third quarter of 2023 compared to the third quarter of 2022 due primarily to higher net sales of Wearables, which includes AirPods®, Apple Watch® and Beats® products, partially offset by lower net sales of accessories. Year-over-year Wearables, Home and Accessories net sales decreased 11% or $1.5 billion during the first nine monthsquarter of 2024 compared to the same quarter in 2023 due primarily to lower net sales of Wearables and accessories.Accessories.
Services
Services net sales increased 11% or $2.4 billion during the thirdfirst quarter of 20232024 compared to the thirdsame quarter of 2022in 2023 due primarily to higher net sales from advertising, video and cloud services and the App Store®. Year-over-year Services net sales increased during the first nine months of 2023 due primarily to higher net sales from cloud services, advertising and music.services.
Apple Inc. | Q3 2023Q1 2024 Form 10-Q | 1615
Gross Margin
Products and Services gross margin and gross margin percentage for the three- and nine-month periodsthree months ended July 1,December 30, 2023 and June 25,December 31, 2022 were as follows (dollars in millions):
| | Three Months Ended | | Nine Months Ended |
| July 1, 2023 | | June 25, 2022 | | July 1, 2023 | | June 25, 2022 |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| December 30, 2023 | |
| December 30, 2023 | |
| December 30, 2023 | |
Gross margin: | |
Gross margin: | |
Gross margin: | Gross margin: | | | | | | | |
Products | Products | $ | 21,448 | | | $ | 21,870 | | | $ | 84,205 | | | $ | 90,157 | |
Products | |
Products | |
Services | |
Services | |
Services | Services | 14,965 | | | 14,015 | | | 44,516 | | | 42,530 | |
Total gross margin | Total gross margin | $ | 36,413 | | | $ | 35,885 | | | $ | 128,721 | | | $ | 132,687 | |
Total gross margin | |
Total gross margin | |
| Gross margin percentage: | Gross margin percentage: | |
Gross margin percentage: | |
Gross margin percentage: | |
Products | |
Products | |
Products | Products | 35.4 | % | | 34.5 | % | | 36.5 | % | | 36.8 | % |
Services | Services | 70.5 | % | | 71.5 | % | | 70.8 | % | | 72.2 | % |
Services | |
Services | |
Total gross margin percentage | Total gross margin percentage | 44.5 | % | | 43.3 | % | | 43.8 | % | | 43.6 | % |
Total gross margin percentage | |
Total gross margin percentage | |
Products Gross Margin
Products gross margin decreasedincreased during the thirdfirst quarter and first nine months of 20232024 compared to the same periodsquarter in 2022 due primarily to the weakness in foreign currencies relative to the U.S. dollar and lower Products volume, partially offset by cost savings and a different Products mix.
Products gross margin percentage increased during the third quarter of 2023 compared to the third quarter of 2022 due primarily to cost savings and a different Products mix, partially offset by the weakness in foreign currencies relative to the U.S. dollar and decreased leverage. Year-over-year lower Products volume.
Products gross margin percentage decreasedincreased during the first nine monthsquarter of 2024 compared to the same quarter in 2023 due primarily to the weakness in foreign currencies relative to the U.S. dollar and decreased leverage, partially offset by cost savings and a different Products mix.
Services Gross Margin
Services gross margin increased during the third quarter and first nine months of 2023 compared to the same periods in 2022 due primarily to higher Services net sales,mix, partially offset by the weakness in foreign currencies relative to the U.S. dollar and higher dollar.
Services costs.Gross Margin
Services gross margin percentage decreasedincreased during the thirdfirst quarter of 20232024 compared to the thirdsame quarter of 2022 due primarily to higher Services costs, partially offset by improved leverage. Year-over-year Services gross margin percentage decreased during the first nine months ofin 2023 due primarily to higher Services costsnet sales and a different Services mix.
Services gross margin percentage increased during the weakness in foreign currencies relativefirst quarter of 2024 compared to the U.S. dollar, partially offset by improved leverage.same quarter in 2023 due primarily to a different Services mix.
The Company’s future gross margins can be impacted by a variety of factors, as discussed in Part I, Item 1A of the 20222023 Form 10-K under the heading “Risk Factors.” As a result, the Company believes, in general, gross margins will be subject to volatility and downward pressure.
Apple Inc. | Q3 2023Q1 2024 Form 10-Q | 1716
Operating Expenses
Operating expenses for the three- and nine-month periodsthree months ended July 1,December 30, 2023 and June 25,December 31, 2022 were as follows (dollars in millions):
| | Three Months Ended | | Nine Months Ended |
| July 1, 2023 | | June 25, 2022 | | July 1, 2023 | | June 25, 2022 |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| December 30, 2023 | |
| December 30, 2023 | |
| December 30, 2023 | |
Research and development | |
Research and development | |
Research and development | Research and development | $ | 7,442 | | | $ | 6,797 | | | $ | 22,608 | | | $ | 19,490 | |
Percentage of total net sales | Percentage of total net sales | 9 | % | | 8 | % | | 8 | % | | 6 | % |
Percentage of total net sales | |
Percentage of total net sales | |
Selling, general and administrative | |
Selling, general and administrative | |
Selling, general and administrative | Selling, general and administrative | $ | 5,973 | | | $ | 6,012 | | | $ | 18,781 | | | $ | 18,654 | |
Percentage of total net sales | Percentage of total net sales | 7 | % | | 7 | % | | 6 | % | | 6 | % |
Percentage of total net sales | |
Percentage of total net sales | |
Total operating expenses | |
Total operating expenses | |
Total operating expenses | Total operating expenses | $ | 13,415 | | | $ | 12,809 | | | $ | 41,389 | | | $ | 38,144 | |
Percentage of total net sales | Percentage of total net sales | 16 | % | | 15 | % | | 14 | % | | 13 | % |
Percentage of total net sales | |
Percentage of total net sales | |
Research and Development
The growth in researchResearch and development (“R&D”) expense was relatively flat during the thirdfirst quarter and first nine months of 20232024 compared to the same periodsquarter in 2022 was driven primarily by increases in headcount-related expenses.2023.
Selling, General and Administrative
Selling, general and administrative expense was relatively flatincreased 3% or $179 million during the thirdfirst quarter and first nine months of 20232024 compared to the same periodsquarter in 2022.2023.
Provision for Income Taxes
Provision for income taxes, effective tax rate and statutory federal income tax rate for the three- and nine-month periodsthree months ended July 1,December 30, 2023 and June 25,December 31, 2022 were as follows (dollars in millions):
| | Three Months Ended | | Nine Months Ended |
| July 1, 2023 | | June 25, 2022 | | July 1, 2023 | | June 25, 2022 |
| Three Months Ended | |
| Three Months Ended | |
| Three Months Ended | |
| December 30, 2023 | |
| December 30, 2023 | |
| December 30, 2023 | |
Provision for income taxes | |
Provision for income taxes | |
Provision for income taxes | Provision for income taxes | $ | 2,852 | | | $ | 3,624 | | | $ | 12,699 | | | $ | 15,364 | |
Effective tax rate | Effective tax rate | 12.5 | % | | 15.7 | % | | 14.6 | % | | 16.3 | % |
Effective tax rate | |
Effective tax rate | |
Statutory federal income tax rate | Statutory federal income tax rate | 21 | % | | 21 | % | | 21 | % | | 21 | % |
Statutory federal income tax rate | |
Statutory federal income tax rate | |
The Company’s effective tax rate for the thirdfirst quarter and first nine months of 20232024 was lower than the statutory federal income tax rate due primarily to a lower effective tax rate on foreign earnings, including the favorable impact of changes in unrecognized tax benefits, tax benefits from share-based compensation, and the impact of the U.S. federal R&D credit, partially offset by state income taxes.
The Company’s effective tax rate for the thirdfirst quarter of 20232024 was lower compared to the third quarter of 2022 due primarily to a lower effective tax rate on foreign earnings, including the favorable impact of changes in unrecognized tax benefits, partially offset by lower tax benefits from share-based compensation. The Company’s effective tax rate for the first nine months of 2023 was lowerrelatively flat compared to the same periodquarter in 2022 due primarily to a lower effective tax rate on foreign earnings and the impact of U.S. foreign tax credit regulations issued by the U.S. Department of the Treasury in 2022, partially offset by lower tax benefits from share-based compensation.2023.
Apple Inc. | Q3 2023 Form 10-Q | 18
Liquidity and Capital Resources
The Company believes its balances of cash, cash equivalents and unrestricted marketable securities, along with cash generated by ongoing operations and continued access to debt markets, will be sufficient to satisfy its cash requirements and capital return program over the next 12 months and beyond.
The Company’s contractual cash requirements have not changed materially since the 20222023 Form 10-K, except for manufacturing purchase obligations.
Manufacturing Purchase Obligations
The Company utilizes several outsourcing partners to manufacture subassemblies for the Company’s products and to perform final assembly and testing of finished products. The Company also obtains individual components for its products from a wide variety of individual suppliers. Outsourcing partners acquire components and build product based on demand information supplied by the Company, which typically covers periods up to 150 days. As of July 1,December 30, 2023, the Company had manufacturing purchase obligations of $38.4$38.0 billion, with $38.1$37.9 billion payable within 12 months. The Company’s manufacturing purchase obligations are primarily noncancelable.
Apple Inc. | Q1 2024 Form 10-Q | 17
Capital Return Program
In addition to its contractual cash requirements, the Company hadhas an authorized share repurchase programs as of July 1, 2023.program. The programs doprogram does not obligate the Company to acquire a minimum amount of shares. As of July 1,December 30, 2023, the Company’s quarterly cash dividend was $0.24 per share. The Company intends to increase its dividend on an annual basis, subject to declaration by the Board of Directors.
Recent Accounting Pronouncements
Income Taxes
In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. The Company will adopt ASU 2023-09 in its fourth quarter of 2026. ASU 2023-09 allows for adoption using either a prospective or retrospective transition method.
Segment Reporting
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which will require the Company to disclose segment expenses that are significant and regularly provided to the Company’s chief operating decision maker (“CODM”). In addition, ASU 2023-07 will require the Company to disclose the title and position of its CODM and how the CODM uses segment profit or loss information in assessing segment performance and deciding how to allocate resources. The Company will adopt ASU 2023-07 in its fourth quarter of 2025 using a retrospective transition method.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principlesGAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Note 1, “Summary of Significant Accounting Policies” of the Notes to condensed consolidatedCondensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 20222023 Form 10-K describe the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements. There have been no material changes to the Company’s critical accounting estimates since the 20222023 Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to the Company’s market risk during the first ninethree months of 2023.2024. For a discussion of the Company’s exposure to market risk, refer to the Company’s market risk disclosures set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of the 20222023 Form 10-K.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) were effective as of July 1,December 30, 2023 to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the thirdfirst quarter of 2023,2024, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Apple Inc. | Q3 2023Q1 2024 Form 10-Q | 1918
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
Epic Games
Epic Games, Inc. (“Epic”) filed a lawsuit in the U.S. District Court for the Northern District of California (the “District Court”) against the Company alleging violations of federal and state antitrust laws and California’s unfair competition law based upon the Company’s operation of its App Store.Store®. On September 10, 2021, the District Court ruled in favor of the Company with respect to nine out of the ten counts included in Epic’s claim. The District Court found that certain provisions of the Company’s App Store Review Guidelines violate California’s unfair competition law and issued an injunction enjoining the Company from prohibiting developers from including in their apps external links that direct customers to purchasing mechanisms other than Apple in-app purchasing. The injunction applies to apps on the U.S. storefront of the iOS and iPadOS® App Store. On April 24, 2023, the U.S. Court of Appeals for the Ninth Circuit (the “Circuit Court”) affirmed the District Court’s ruling. On June 7, 2023, the Company and Epic filed petitions with the Circuit Court requesting further review of the decision. On June 30, 2023, the Circuit Court denied both petitions. On July 17, 2023, the Circuit Court granted Apple’s motion to stay enforcement of the injunction pending appeal to the U.S. Supreme Court (the “Supreme Court”). On January 16, 2024, the Supreme Court denied both the Company’s and Epic’s petitions and the stay terminated. The Supreme Court’s denial of Epic’s petition confirms the District Court’s ruling in favor of the Company with respect to all of the antitrust claims. Following termination of the stay, the Company implemented a plan to comply with the injunction and filed a statement of compliance with the District Court. On January 31, 2024, Epic hasfiled a notice with the District Court indicating its intent to dispute the Company’s compliance plan.
Masimo
Masimo Corporation and Cercacor Laboratories, Inc. (together, “Masimo”) filed a complaint before the U.S. International Trade Commission (the “ITC”) alleging infringement by the Company of five patents relating to the functionality of the blood oxygen feature in Apple Watch® Series 6 and 7. In its complaint, Masimo sought a permanent exclusion order prohibiting importation to the U.S. of certain Apple Watch models that include blood oxygen sensing functionality. On October 26, 2023, the ITC entered a limited exclusion order (the “Order”) prohibiting importation and sales in the U.S. of Apple Watch models with blood oxygen sensing functionality, which includes Apple Watch Series 9 and Apple Watch Ultra™ 2. The Company subsequently proposed a redesign of Apple Watch Series 9 and Apple Watch Ultra 2 to the U.S. Customs and Border Protection (the “CBP”) and appealed the Circuit Court’s stayOrder. On January 12, 2024, the CBP found that the Company’s proposed redesign of Apple Watch Series 9 and Apple Watch Ultra 2 falls outside the scope of the injunction. IfOrder, permitting the U.S. Supreme Court reversesCompany to import and sell the Circuit Court’s stay ofmodels in the injunction or declines Apple’s petition, the injunction will take effect.U.S.
Other Legal Proceedings
The Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The Company settled certain matters during the thirdfirst quarter of 20232024 that did not individually or in the aggregate have a material impact on the Company’s financial condition or operating results. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected.
Item 1A. Risk Factors
The Company’s business, reputation, results of operations, financial condition and stock price can be affected by a number of factors, whether currently known or unknown, including those described in Part I, Item 1A of the 20222023 Form 10-K under the heading “Risk Factors.” When any one or more of these risks materialize from time to time, the Company’s business, reputation, results of operations, financial condition and stock price can be materially and adversely affected. ThereExcept as set forth below, there have been no material changes to the Company’s risk factors since the 20222023 Form 10-K.
The technology industry, including, in some instances, the Company, is subject to intense media, political and regulatory scrutiny, which exposes the Company to increasing regulation, government investigations, legal actions and penalties.
From time to time, the Company has made changes to its App Store, including actions taken in response to litigation, competition, market conditions and legal and regulatory requirements. The Company expects to make further business changes in the future. For example, in the U.S. the Company has implemented changes to how developers communicate with consumers within apps on the U.S. storefront of the iOS and iPadOS App Store regarding alternative purchasing mechanisms.
Apple Inc. | Q3 2023Q1 2024 Form 10-Q | 2019
In January 2024, the Company announced changes to iOS, the App Store and Safari® in the European Union to comply with the Digital Markets Act (the “DMA”), including new business terms and alternative fee structures for iOS apps, alternative methods of distribution for iOS apps, alternative payment processing for apps across the Company’s operating systems, and additional tools and application programming interfaces (“APIs”) for developers. Although the Company’s compliance plan is intended to address the DMA’s obligations, it is still subject to potential challenge by the European Commission or private litigants. In addition, other jurisdictions may seek to require the Company to make changes to its business. While the changes introduced by the Company in the European Union are intended to reduce new privacy and security risks the DMA poses to European Union users, many risks will remain.
The Company is also currently subject to antitrust investigations in various jurisdictions around the world, which can result in legal proceedings and claims against the Company that could, individually or in the aggregate, have a materially adverse impact on the Company’s business, results of operations and financial condition. For example, the Company is the subject of investigations in Europe and other jurisdictions relating to App Store terms and conditions. If such investigations result in adverse findings against the Company, the Company could be exposed to significant fines and may be required to make further changes to its App Store business, all of which could materially adversely affect the Company’s business, results of operations and financial condition.
Further, the Company has commercial relationships with other companies in the technology industry that are or may become subject to investigations and litigation that, if resolved against those other companies, could materially adversely affect the Company’s commercial relationships with those business partners and materially adversely affect the Company’s business, results of operations and financial condition. For example, the Company earns revenue from licensing arrangements with other companies to offer their search services on the Company’s platforms and applications, and certain of these arrangements are currently subject to government investigations and legal proceedings.
There can be no assurance the Company’s business will not be materially adversely affected, individually or in the aggregate, by the outcomes of such investigations, litigation or changes to laws and regulations in the future. Changes to the Company’s business practices to comply with new laws and regulations or in connection with other legal proceedings can negatively impact the reputation of the Company’s products for privacy and security and otherwise adversely affect the experience for users of the Company’s products and services, and result in harm to the Company’s reputation, loss of competitive advantage, poor market acceptance, reduced demand for products and services, and lost sales.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity Securities
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Share repurchase activity during the three months ended July 1,December 30, 2023 was as follows (in millions, except number of shares, which are reflected in thousands, and per shareper-share amounts):
| Periods | Periods | | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) | Periods | | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) |
April 2, 2023 to May 6, 2023: | | | | | | | | |
October 1, 2023 to November 4, 2023: | |
August 2023 ASRs | |
August 2023 ASRs | |
August 2023 ASRs | |
Open market and privately negotiated purchases | |
Open market and privately negotiated purchases | |
Open market and privately negotiated purchases | Open market and privately negotiated purchases | | 38,121 | | | $ | 165.46 | | | 38,121 | | |
| May 7, 2023 to June 3, 2023: | |
November 5, 2023 to December 2, 2023: | |
| November 5, 2023 to December 2, 2023: | |
| November 5, 2023 to December 2, 2023: | |
Open market and privately negotiated purchases | |
Open market and privately negotiated purchases | |
Open market and privately negotiated purchases | Open market and privately negotiated purchases | | 21,876 | | | $ | 174.91 | | | 21,876 | | |
| June 4, 2023 to July 1, 2023: | |
December 3, 2023 to December 30, 2023: | |
| December 3, 2023 to December 30, 2023: | |
| December 3, 2023 to December 30, 2023: | |
Open market and privately negotiated purchases | |
Open market and privately negotiated purchases | |
Open market and privately negotiated purchases | Open market and privately negotiated purchases | | 42,676 | | | $ | 184.34 | | | 42,676 | | |
Total | Total | | 102,673 | | | $ | 94,569 | |
Total | |
Total | |
(1)On April 28, 2022,As of December 30, 2023, the Company was authorized by the Board of Directors authorized theto purchase of an additionalup to $90 billion of the Company’s common stock under a share repurchase program. As of July 1, 2023, remaining availability under the April 2022 authorization was $4.6 billion. Onprogram announced on May 4, 2023, the Board of Directors authorized an additionalwhich $36.4 billion had been utilized. The program to repurchase up to $90 billion of the Company’s common stock. The programs dodoes not obligate the Company to acquire a minimum amount of shares. Under the programs,program, shares may be repurchased in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.
(2)In August 2023, the Company entered into accelerated share repurchase agreements (“ASRs”) to purchase up to a total of $5.0 billion of the Company’s common stock. In October 2023, the purchase periods for these ASRs ended and an additional 6 million shares were delivered and retired. In total, 29 million shares were delivered under these ASRs at an average repurchase price of $174.93 per share.
Apple Inc. | Q1 2024 Form 10-Q | 20
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.Insider Trading Arrangements
Apple Inc. | Q3On November 11, 2023 Form 10-Q | 21
and November 27, 2023, respectively, Luca Maestri, the Company’s Senior Vice President and Chief Financial Officer, and Katherine L. Adams, the Company’s Senior Vice President and General Counsel, each entered into a trading plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. The plans provide for the sale of all shares vested during the duration of the plans pursuant to certain equity awards granted to Mr. Maestri and Ms. Adams, respectively, excluding any shares withheld by the Company to satisfy income tax withholding and remittance obligations. Mr. Maestri’s plan will expire on December 31, 2024, and Ms. Adams’s plan will expire on November 1, 2024, subject to early termination for certain specified events set forth in the plans.
Item 6. Exhibits
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Incorporated by Reference |
Exhibit Number | | Exhibit Description | | Form | | Exhibit | | Filing Date/ Period End Date |
4.1 | | | | 8-K | | 4.1 | | 5/10/23 |
31.1* | | | | | | | | |
31.2* | | | | | | | | |
32.1** | | | | | | | | |
101* | | Inline XBRL Document Set for the condensed consolidated financial statements and accompanying notes in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q. | | | | | | |
104* | | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set. | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Incorporated by Reference |
Exhibit Number | | Exhibit Description | | Form | | Exhibit | | Filing Date/ Period End Date |
31.1* | | | | | | | | |
31.2* | | | | | | | | |
32.1** | | | | | | | | |
101* | | Inline XBRL Document Set for the condensed consolidated financial statements and accompanying notes in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q. | | | | | | |
104* | | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set. | | | | | | |
* Filed herewith.
** Furnished herewith.
Apple Inc. | Q3 2023Q1 2024 Form 10-Q | 2221
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | |
Date: August 3, 2023February 1, 2024 | Apple Inc. |
| | | |
| By: | | /s/ Luca Maestri |
| | | Luca Maestri |
| | | Senior Vice President, Chief Financial Officer |
Apple Inc. | Q3 2023Q1 2024 Form 10-Q | 2322