What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-02 compared with 2024-05-03 · 62 added, 67 removed, 102 unchanged (56% of the section changed)

5 unchanged sentences

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 2023 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.

Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of the 2023 Form 10-K and Part II, Item 1A of this Form 10-Q, in each case 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.

11 unchanged sentences

Net sales can also be affected when consumers and distributors anticipate a product introduction.

During the second quarter of 2024, the Company announced an updated MacBook Air ® 13-in.

and MacBook Air 15-in.

During the third quarter of 2024, the Company announced the following product and operating system updates:

• iPad Air ® ;

• iPad Pro ® ;

• iOS 18, macOS ® Sequoia, iPadOS ® 18, watchOS ® 11, visionOS™ 2 and tvOS ® 18.

The Company also announced Apple Intelligence™, a personal intelligence system that uses generative models, which will be available on certain iPhone, Mac and iPad devices.

Apple Intelligence is deeply integrated into iOS 18, macOS Sequoia and iPadOS 18.

Fiscal Period

6 unchanged sentences

Segment Operating Performance

The following table shows net sales by reportable segment for the three- and six-month periods ended March 30, 2024 and April 1, 2023 (dollars in millions):

Three Months Ended Six Months Ended

2024 April 1,

2023 Change March 30,

2024 April 1,

The following table shows net sales by reportable segment for the three- and nine-month periods ended June 29, 2024 and July 1, 2023 (dollars in millions):

Three Months Ended Nine Months Ended

2023 Change June 29,

Net sales by reportable segment:

5 unchanged sentences

Total net sales $ 85,777 $ 81,797 5 % $ 296,105 $ 293,787 1 %

Americas net sales were relatively flat during the second quarter of 2024 compared to the second quarter of 2023, with lower net sales of iPhone and iPad offset by higher net sales of Services.

Year-over-year Americas net sales were relatively flat during the first six months of 2024, with higher net sales of Services offset by lower net sales of iPhone and iPad.

Americas net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of Services and iPad.

Year-over-year Americas net sales increased during the first nine months of 2024 due primarily to higher net sales of Services, partially offset by lower net sales of iPhone and Wearables, Home and Accessories.

The strength in foreign currencies relative to the U.S.

dollar had a net favorable year-over-year impact on Americas net sales during the second quarter and first six months of 2024.

Europe net sales were relatively flat during the second quarter of 2024 compared to the second quarter of 2023, with higher net sales of Services offset by lower net sales of iPhone.

dollar had a net favorable year-over-year impact on Americas net sales during the first nine months of 2024.

Europe net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of Services and iPad.

The weakness in foreign currencies relative to the U.S.

dollar had a net unfavorable year-over-year impact on Europe net sales during the second quarter of 2024.

Year-over-year Europe net sales increased during the first six months of 2024 due primarily to higher net sales of iPhone and Services, partially offset by lower net sales of iPad.

dollar had a net unfavorable year-over-year impact on Europe net sales during the third quarter of 2024.

Year-over-year Europe net sales increased during the first nine months of 2024 due primarily to higher net sales of Services and iPhone, partially offset by lower net sales of Wearables, Home and Accessories.

Greater China

Greater China net sales decreased during the second quarter and first six months of 2024 compared to the same periods in 2023 due primarily to lower net sales of iPhone and iPad.

Greater China net sales decreased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to lower net sales of iPhone.

Year-over-year Greater China net sales decreased during the first nine months of 2024 due primarily to lower net sales of iPhone and iPad.

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 second quarter and first six months of 2024.

Japan net sales decreased during the second quarter of 2024 compared to the second quarter of 2023 due primarily to lower net sales of iPhone.

Year-over-year Japan net sales during the first six months of 2024 were relatively flat.

dollar had an unfavorable year-over-year impact on Greater China net sales during the third quarter and first nine months of 2024.

Japan net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of iPhone and iPad.

Year-over-year Japan net sales increased during the first nine months of 2024 due primarily to higher net sales of iPhone, partially offset by lower net sales of Wearables, Home and Accessories.

The weakness in the yen relative to the U.S.

dollar had an unfavorable year-over-year impact on Japan net sales during the second quarter and first six months of 2024.

dollar had an unfavorable year-over-year impact on Japan net sales during the third quarter and first nine months of 2024.

Rest of Asia Pacific

Rest of Asia Pacific net sales decreased during the second quarter of 2024 compared to the second quarter of 2023 due primarily to lower net sales of iPhone.

Year-over-year Rest of Asia Pacific net sales decreased during the first six months of 2024 due primarily to lower net sales of Wearables, Home and Accessories and iPad.

Rest of Asia Pacific net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of Services, iPhone and iPad.

Year-over-year Rest of Asia Pacific net sales were relatively flat during the first nine months of 2024.

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 during the third quarter and first nine months of 2024.

| Q3 2024 Form 10-Q | 14

Products and Services Performance

The following table shows net sales by category for the three- and six-month periods ended March 30, 2024 and April 1, 2023 (dollars in millions):

Three Months Ended Six Months Ended

2024 April 1,

2023 Change March 30,

2024 April 1,

The following table shows net sales by category for the three- and nine-month periods ended June 29, 2024 and July 1, 2023 (dollars in millions):

Three Months Ended Nine Months Ended

2023 Change June 29,

Net sales by category:

5 unchanged sentences

Total net sales $ 85,777 $ 81,797 5 % $ 296,105 $ 293,787 1 %

iPhone net sales decreased during the second quarter of 2024 compared to the second quarter of 2023 due to lower net sales of Pro models.

Year-over-year iPhone net sales were relatively flat during the first six months of 2024.

Mac net sales increased during the second quarter and first six months of 2024 compared to the same periods in 2023 due to higher net sales of laptops.

iPad net sales decreased during the second quarter and first six months of 2024 compared to the same periods in 2023 due primarily to lower net sales of iPad Pro ® and iPad 9th generation.

iPhone net sales were relatively flat during the third quarter and first nine months of 2024 compared to the same periods in 2023.

Mac net sales increased during the third quarter and first nine months of 2024 compared to the same periods in 2023 due to higher net sales of laptops.

iPad net sales increased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to higher net sales of iPad Pro and iPad Air.

Year-over-year iPad net sales decreased during the first nine months of 2024 due primarily to lower net sales of iPad 9th generation and iPad Pro, partially offset by higher net sales of iPad 10th generation.

Wearables, Home and Accessories

Wearables, Home and Accessories net sales decreased during the second quarter and first six months of 2024 compared to the same periods in 2023 due primarily to lower net sales of Wearables and Accessories.

Services net sales increased during the second quarter and first six months of 2024 compared to the same periods in 2023 due primarily to higher net sales from advertising, the App Store ® and cloud services.

Wearables, Home and Accessories net sales decreased during the third quarter of 2024 compared to the third quarter of 2023 due primarily to lower net sales of Wearables.

Year-over-year Wearables, Home and Accessories net sales decreased during the first nine months of 2024 due primarily to lower net sales of Wearables and Accessories.

Services net sales increased during the third quarter and first nine months of 2024 compared to the same periods in 2023 due primarily to higher net sales from advertising, the App Store ® and cloud services.

| Q3 2024 Form 10-Q | 15

Products and Services gross margin and gross margin percentage for the three- and six-month periods ended March 30, 2024 and April 1, 2023 were as follows (dollars in millions):

Three Months Ended Six Months Ended

2024 April 1,

2023 March 30,

2024 April 1,

Products and Services gross margin and gross margin percentage for the three- and nine-month periods ended June 29, 2024 and July 1, 2023 were as follows (dollars in millions):

Three Months Ended Nine Months Ended

2023 June 29,

Gross margin:

7 unchanged sentences

Products Gross Margin

Products gross margin decreased during the second quarter of 2024 compared to the second quarter of 2023 due primarily to lower Products volume and the weakness in foreign currencies relative to the U.S.

Year-over-year Products gross margin was relatively flat during the first six months of 2024.

Products gross margin percentage was relatively flat during the second quarter of 2024 compared to the second quarter of 2023.

Year-over-year Products gross margin percentage increased during the first six months of 2024 due primarily to cost savings, partially offset by the weakness in foreign currencies relative to the U.S.

Products gross margin was relatively flat during the third quarter and first nine months of 2024 compared to the same periods in 2023.

Products gross margin percentage was relatively flat during the third quarter of 2024 compared to the third quarter of 2023.

Year-over-year Products gross margin percentage increased during the first nine months of 2024 due primarily to cost savings, partially offset by a different Products mix and the weakness in foreign currencies relative to the U.S.

Services Gross Margin

Services gross margin and Services gross margin percentage increased during the second quarter and first six months of 2024 compared to the same periods 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 2023 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.

Services gross margin increased during the third quarter and first nine months of 2024 compared to the same periods in 2023 due primarily to higher Services net sales.

Services gross margin percentage increased during the third quarter and first nine months of 2024 compared to the same periods 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 2023 Form 10-K and Part II, Item 1A of this Form 10-Q, in each case under the heading “Risk Factors.” As a result, the Company believes, in general, gross margins will be subject to volatility and downward pressure.

Operating Expenses

Operating expenses for the three- and six-month periods ended March 30, 2024 and April 1, 2023 were as follows (dollars in millions):

Three Months Ended Six Months Ended

2024 April 1,

2023 March 30,

2024 April 1,

Operating expenses for the three- and nine-month periods ended June 29, 2024 and July 1, 2023 were as follows (dollars in millions):

Three Months Ended Nine Months Ended

2023 June 29,

Research and development $ 8,006 $ 7,442 $ 23,605 $ 22,608

5 unchanged sentences

Research and Development

The growth in research and development (“R&D”) expense during the second quarter and first six months of 2024 compared to the same periods in 2023 was driven primarily by increases in headcount-related expenses.

The growth in research and development (“R&D”) expense during the third quarter and first nine months of 2024 compared to the same periods in 2023 was driven primarily by increases in headcount-related expenses.

| Q3 2024 Form 10-Q | 16

Selling, General and Administrative

The growth in selling, general and administrative expense during the second quarter and first six months of 2024 compared to the same periods in 2023 was driven in part by higher infrastructure-related costs.

Selling, general and administrative expense increased $347 million during the third quarter of 2024 and $793 million during the first nine months of 2024 compared to the same periods in 2023.

Provision for Income Taxes

Provision for income taxes, effective tax rate and statutory federal income tax rate for the three- and six-month periods ended March 30, 2024 and April 1, 2023 were as follows (dollars in millions):

Three Months Ended Six Months Ended

2024 April 1,

2023 March 30,

2024 April 1,

Provision for income taxes, effective tax rate and statutory federal income tax rate for the three- and nine-month periods ended June 29, 2024 and July 1, 2023 were as follows (dollars in millions):

Three Months Ended Nine Months Ended

2023 June 29,

Provision for income taxes $ 4,046 $ 2,852 $ 14,875 $ 12,699

1 unchanged sentence

Statutory federal income tax rate 21 % 21 % 21 % 21 %

The Company’s effective tax rate for the second quarter and first six months of 2024 was lower than the statutory federal income tax rate due primarily to a lower effective tax rate on foreign earnings, the impact of the U.S.

The Company’s effective tax rate for the third quarter and first nine months of 2024 was lower than the statutory federal income tax rate due primarily to a lower effective tax rate on foreign earnings, the impact of the U.S.

federal R&D credit, and tax benefits from share-based compensation, partially offset by state income taxes.

The Company’s effective tax rate for the second quarter and first six months of 2024 was higher compared to the same periods in 2023 due primarily to a higher effective tax rate on foreign earnings and a lower tax benefit from the U.S.

federal R&D credit.

The Company’s effective tax rate for the third quarter and first nine months of 2024 was higher compared to the same periods in 2023 due primarily to a higher effective tax rate on foreign earnings and lower tax benefits from share-based compensation, partially offset by lower state income taxes.

Liquidity and Capital Resources

4 unchanged sentences

The Company also obtains individual components for its products from a wide variety of individual suppliers.

As of March 30, 2024, the Company had manufacturing purchase obligations of $34.2 billion, with $34.1 billion payable within 12 months.

As of June 29, 2024, the Company had manufacturing purchase obligations of $38.4 billion, with $38.3 billion payable within 12 months.

Capital Return Program

In addition to its contractual cash requirements, the Company has an authorized share repurchase program, under which the remaining availability was $30.1 billion as of March 30, 2024.

On May 2, 2024, the Company announced the Board of Directors had authorized an additional program to repurchase up to $110 billion of the Company’s common stock.

In addition to its contractual cash requirements, the Company has authorized share repurchase programs.

The programs do not obligate the Company to acquire a minimum amount of shares.

On May 2, 2024, the Company also announced the Board of Directors raised the Company’s quarterly cash dividend from $0.24 to $0.25 per share, beginning with the dividend to be paid during the third quarter of 2024.

As of June 29, 2024, the Company’s quarterly cash dividend was $0.25 per share.

The Company intends to increase its dividend on an annual basis, subject to declaration by the Board of Directors.

During the second quarter of 2024, the Company repurchased $23.5 billion of its common stock and paid dividends and dividend equivalents of $3.7 billion.

| Q2 2024 Form 10-Q | 17

During the third quarter of 2024, the Company repurchased $26.0 billion of its common stock and paid dividends and dividend equivalents of $3.9 billion.

Recent Accounting Pronouncements

3 unchanged sentences

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.

The Company will adopt ASU 2023-09 in its fourth quarter of 2026 using a prospective transition method.

| Q3 2024 Form 10-Q | 17

Segment Reporting

9 unchanged sentences

Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the Company’s market risk during the first six months of 2024.

There have been no material changes to the Company’s market risk during the first nine months of 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 2023 Form 10-K.

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 2. Management’s Discussion and Analysis