What changed in this filing

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Item 1. Financial Statements

2023-08-04 compared with 2023-05-05 · 72 added, 80 removed, 381 unchanged (29% of the section changed)

2 unchanged sentences

(In millions, except number of shares which are reflected in thousands and per share amounts)

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

Three Months Ended Nine Months Ended

2023 June 25,

Products $ 60,584 $ 63,355 $ 230,901 $ 245,241

25 unchanged sentences

(In millions)

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

Three Months Ended Nine Months Ended

2023 June 25,

$ 19,881 $ 19,442 $ 74,039 $ 79,082

11 unchanged sentences

Adjustment for net (gains)/losses realized and included in net income

58 95 185 140

Total change in unrealized gains/losses on marketable debt securities

52 unchanged sentences

(In millions, except per share amounts)

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

Three Months Ended Nine Months Ended

2023 June 25,

Total shareholders’ equity, beginning balances $ 62,158 $ 67,399 $ 50,672 $ 63,090

2 unchanged sentences

Common stock issued

690 593 690 593

Common stock withheld related to net share settlement of equity awards

20 unchanged sentences

(In millions)

Six Months Ended

2023 March 26,

Nine Months Ended

2023 June 25,

Cash, cash equivalents and restricted cash, beginning balances $ 24,977 $ 35,929

24 unchanged sentences

Repurchases of common stock ( 56,547 ) ( 64,974 )

Proceeds from issuance of term debt, net 5,228 —

Repayments of term debt ( 11,151 ) ( 6,750 )

26 unchanged sentences

Earnings Per Share

The following table shows the computation of basic and diluted earnings per share for the three- and six-month periods ended April 1, 2023 and March 26, 2022 (net income in millions and shares in thousands):

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

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

2023 June 25,

Net income $ 19,881 $ 19,442 $ 74,039 $ 79,082

4 unchanged sentences

Diluted earnings per share $ 1.26 $ 1.20 $ 4.67 $ 4.82

Approximately 48 million restricted stock units (“RSUs”) were excluded from the computation of diluted earnings per share for the six months ended April 1, 2023 because their effect would have been antidilutive.

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.

| Q3 2023 Form 10-Q | 6

Note 2 – Revenue

Net sales disaggregated by significant products and services for the three- and six-month periods ended April 1, 2023 and March 26, 2022 were as follows (in millions):

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

Net sales disaggregated by significant products and services for the three- and nine-month periods ended July 1, 2023 and June 25, 2022 were as follows (in millions):

Three Months Ended Nine Months Ended

2023 June 25,

$ 39,669 $ 40,665 $ 156,778 $ 162,863

4 unchanged sentences

Total net sales $ 81,797 $ 82,959 $ 293,787 $ 304,182

Total net sales include $ 3.5 billion of revenue recognized in the three months ended April 1, 2023 that was included in deferred revenue as of December 31, 2022, $ 3.0 billion of revenue recognized in the three months ended March 26, 2022 that was included in deferred revenue as of December 25, 2021, $ 5.5 billion of revenue recognized in the six months ended April 1, 2023 that was included in deferred revenue as of September 24, 2022, and $ 4.8 billion of revenue recognized in the six months ended March 26, 2022 that was included in deferred revenue as of September 25, 2021.

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 six-month periods ended April 1, 2023 and March 26, 2022, except in Greater China, where iPhone revenue represented a moderately higher proportion of net sales.

As of April 1, 2023 and September 24, 2022, the Company had total deferred revenue of $ 12.5 billion and $ 12.4 billion, respectively.

As of April 1, 2023, the Company expects 65 % of total deferred revenue to be realized in less than a year, 26 % within one-to-two years, 7 % within two-to-three years and 2 % in greater than three years.

Total net sales include $ 3.3 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, 2023 that was included in deferred revenue as of September 24, 2022, and $ 6.3 billion of revenue recognized in the nine months ended June 25, 2022 that was included in deferred revenue as of September 25, 2021.

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 periods ended July 1, 2023 and June 25, 2022, except in Greater China, where iPhone revenue represented a moderately higher proportion of net sales.

As of July 1, 2023 and September 24, 2022, the Company had total deferred revenue of $ 12.2 billion and $ 12.4 billion, respectively.

As of July 1, 2023, the Company expects 67 % of total deferred revenue to be realized in less than a year, 26 % within one-to-two years, 6 % within two-to-three years and 1 % in greater than three years.

Note 3 – 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 April 1, 2023 and September 24, 2022 (in millions):

April 1, 2023

The following tables show the Company’s cash, cash equivalents and marketable securities by significant investment category as of July 1, 2023 and September 24, 2022 (in millions):

Cost Unrealized

48 unchanged sentences

(2) Level 2 fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical 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.

(3) As of April 1, 2023 and September 24, 2022, total marketable securities included $ 13.1 billion and $ 12.7 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 5, “Income Taxes”) and other agreements.

The following table shows the fair value of the Company’s non-current marketable debt securities, by contractual maturity, as of April 1, 2023 (in millions):

(3) As of July 1, 2023 and September 24, 2022, total marketable securities included $ 14.1 billion and $ 12.7 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 5, “Income Taxes”) 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, 2023 (in millions):

Due after 1 year through 5 years $ 76,267

11 unchanged sentences

The Company designates these instruments as either cash flow or fair value hedges.

As of April 1, 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.

As of July 1, 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.

| Q3 2023 Form 10-Q | 8

3 unchanged sentences

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 April 1, 2023 and September 24, 2022 were as follows (in millions):

The notional amounts of the Company’s outstanding derivative instruments as of July 1, 2023 and September 24, 2022 were as follows (in millions):

2023 September 24,

22 unchanged sentences

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.

The carrying amounts of the Company’s hedged items in fair value hedges as of April 1, 2023 and September 24, 2022 were as follows (in millions):

The carrying amounts of the Company’s hedged items in fair value hedges as of July 1, 2023 and September 24, 2022 were as follows (in millions):

2023 September 24,

11 unchanged sentences

As such, the Company generally does not assume any recourse or credit risk sharing related to any of these arrangements.

As of both April 1, 2023 and September 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 32 % and 44 % of total trade receivables as of April 1, 2023 and September 24, 2022, respectively.

As of September 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 % of total trade receivables as of September 24, 2022.

Vendor Non-Trade Receivables

1 unchanged sentence

The Company purchases these components directly from suppliers.

As of April 1, 2023, the Company had three vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 43 %, 19 % and 13 %.

As of July 1, 2023, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 54 % and 14 % .

As of September 24, 2022, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 54 % and 13 %.

Note 4 – Condensed Consolidated Financial Statement Details

The following tables show the Company’s condensed consolidated financial statement details as of April 1, 2023 and September 24, 2022 (in millions):

The following tables show the Company’s condensed consolidated financial statement details as of July 1, 2023 and September 24, 2022 (in millions):

2023 September 24,

8 unchanged sentences

Other Income/(Expense), Net

The following table shows the detail of other income/(expense), net for the three- and six-month periods ended April 1, 2023 and March 26, 2022 (in millions):

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

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

2023 June 25,

Interest and dividend income $ 980 $ 722 $ 2,766 $ 2,072

Interest expense ( 998 ) ( 719 ) ( 2,931 ) ( 2,104 )

Other income/(expense), net 76 151 ( 182 ) ( 52 )

Other expense, net ( 247 ) ( 13 ) ( 429 ) ( 65 )

Total other income/(expense), net $ ( 265 ) $ ( 10 ) $ ( 594 ) $ ( 97 )

7 unchanged sentences

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 and a hearing has been scheduled for May 23, 2023.

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.

4 unchanged sentences

The Company uses net proceeds from the commercial paper program for general corporate purposes, including dividends and share repurchases.

As of April 1, 2023 and September 24, 2022, the Company had $ 2.0 billion and $ 10.0 billion of Commercial Paper outstanding, respectively.

The following table provides a summary of cash flows associated with the issuance and maturities of Commercial Paper for the six months ended April 1, 2023 and March 26, 2022 (in millions):

Six Months Ended

2023 March 26,

As of July 1, 2023 and September 24, 2022, the Company had $ 4.0 billion and $ 10.0 billion of Commercial Paper outstanding, respectively.

The following table provides a summary of cash flows associated with the issuance and maturities of Commercial Paper for the nine months ended July 1, 2023 and June 25, 2022 (in millions):

Nine Months Ended

2023 June 25,

Maturities 90 days or less:

3 unchanged sentences

Repayments of commercial paper ( 2,645 ) ( 5,144 )

Repayments of commercial paper, net ( 2,645 ) ( 3,953 )

Proceeds from/(Repayments of) commercial paper, net ( 2,645 ) 587

Total proceeds from/(repayments of) commercial paper, net $ ( 5,971 ) $ 4,970

As of April 1, 2023 and September 24, 2022, the Company had outstanding fixed-rate notes with varying maturities for an aggregate carrying amount of $ 107.6 billion and $ 110.1 billion, respectively (collectively the “Notes”).

As of April 1, 2023 and September 24, 2022, the fair value of the Company’s Notes, based on Level 2 inputs, was $ 98.4 billion and $ 98.8 billion, respectively.

As of July 1, 2023 and September 24, 2022, the Company had outstanding fixed-rate notes with varying maturities for an aggregate carrying amount of $ 105.3 billion and $ 110.1 billion, respectively (collectively the “Notes”).

As of July 1, 2023 and September 24, 2022, the fair value of the Company’s Notes, based on Level 2 inputs, was $ 95.3 billion and $ 98.8 billion, respectively.

Note 7 – Shareholders’ Equity

Share Repurchase Program

During the six months ended April 1, 2023, the Company repurchased 262 million shares of its common stock under an authorized share repurchase program for $ 38.1 billion, excluding excise tax due under the Inflation Reduction Act of 2022.

The program does not obligate the Company to acquire a minimum amount of shares.

Under the 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.

During the nine months ended July 1, 2023, the Company repurchased 365 million shares of its common stock for $ 56.1 billion, excluding excise tax due under the Inflation Reduction Act of 2022.

The Company’s share repurchase programs do not obligate the Company to acquire a minimum amount of shares.

Under the programs, 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.

| Q3 2023 Form 10-Q | 11

1 unchanged sentence

Restricted Stock Units

A summary of the Company’s RSU activity and related information for the six months ended April 1, 2023 is as follows:

A summary of the Company’s RSU activity and related information for the nine months ended July 1, 2023 is as follows:

(in thousands)

7 unchanged sentences

RSUs canceled ( 7,000 ) $ 126.48

Balance as of April 1, 2023 226,937 $ 129.76 $ 37,422

The fair value as of the respective vesting dates of RSUs was $ 1.1 billion and $ 8.0 billion for the three- and six-month periods ended April 1, 2023, respectively, and was $ 1.0 billion and $ 9.5 billion for the three- and six-month periods ended March 26, 2022, respectively.

Balance as of July 1, 2023 184,716 $ 135.08 $ 35,829

The fair value as of the respective vesting dates of RSUs was $ 7.0 billion and $ 14.9 billion for the three- 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, 2022, respectively.

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 six-month periods ended April 1, 2023 and March 26, 2022 (in millions):

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

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 periods ended July 1, 2023 and June 25, 2022 (in millions):

Three Months Ended Nine Months Ended

2023 June 25,

Share-based compensation expense $ 2,617 $ 2,243 $ 8,208 $ 6,760

Income tax benefit related to share-based compensation expense $ ( 993 ) $ ( 1,231 ) $ ( 2,791 ) $ ( 3,416 )

As of April 1, 2023, the total unrecognized compensation cost related to outstanding RSUs and stock options was $ 23.2 billion, which the Company expects to recognize over a weighted-average period of 2.8 years.

As of July 1, 2023, the total unrecognized compensation cost related to outstanding RSUs and stock options was $ 20.9 billion, which the Company expects to recognize over a weighted-average period of 2.7 years.

Note 9 – Commitments and Contingencies

1 unchanged sentence

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 content and distribution rights.

Future payments under noncancelable unconditional purchase obligations with a remaining term in excess of one year as of April 1, 2023, are as follows (in millions):

2023 (remaining six months) $ 2,263

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

Thereafter 8,198

6 unchanged sentences

Note 10 – Segment Information and Geographic Data

The following table shows information by reportable segment for the three- and six-month periods ended April 1, 2023 and March 26, 2022 (in millions):

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

The following table shows information by reportable segment for the three- and nine-month periods ended July 1, 2023 and June 25, 2022 (in millions):

Three Months Ended Nine Months Ended

2023 June 25,

Net sales $ 35,383 $ 37,472 $ 122,445 $ 129,850

10 unchanged sentences

Operating income $ 2,328 $ 2,367 $ 9,447 $ 9,185

A reconciliation of the Company’s segment operating income to the Condensed Consolidated Statements of Operations for the three- and six-month periods ended April 1, 2023 and March 26, 2022 is as follows (in millions):

Three Months Ended Six Months Ended

2023 March 26,

2022 April 1,

2023 March 26,

A reconciliation of the Company’s segment operating income to the Condensed Consolidated Statements of Operations for the three- and nine-month periods ended July 1, 2023 and June 25, 2022 is as follows (in millions):

Three Months Ended Nine Months Ended

2023 June 25,

Segment operating income $ 32,090 $ 31,583 $ 114,983 $ 119,455

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements