What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-01-31 compared with 2024-08-02 · 69 added, 74 removed, 90 unchanged (61% of the section changed)

19 unchanged sentences

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

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

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 53 weeks, respectively.

During the first quarter of 2025, the Company announced the following product updates:

• MacBook Pro ®

• iPad mini ®

Macroeconomic Conditions

2 unchanged sentences

Segment Operating Performance

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:

The following table shows net sales by reportable segment for the three months ended December 28, 2024 and December 30, 2023 (dollars in millions):

Three Months Ended

2024 December 30,

Americas $ 52,648 $ 50,430 4 %

4 unchanged sentences

Total net sales $ 124,300 $ 119,575 4 %

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 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.

Americas net sales increased during the first quarter of 2025 compared to the same quarter in 2024 due primarily to higher net sales of Services and iPhone.

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 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.

dollar had an unfavorable year-over-year impact on Americas net sales during the first quarter of 2025.

Europe net sales increased during the first quarter of 2025 compared to the same quarter in 2024 due primarily to higher net sales of Services and 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 first quarter of 2025.

Greater China

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 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 third quarter and first nine months of 2024.

Greater China net sales decreased during the first quarter of 2025 compared to the same quarter in 2024 due to lower net sales of iPhone.

The strength in the renminbi relative to the U.S.

dollar had a favorable year-over-year impact on Greater China net sales during the first quarter of 2025.

Japan net sales increased during the first quarter of 2025 compared to the same quarter in 2024 due primarily to higher net sales of iPhone and Services.

Rest of Asia Pacific

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.

Rest of Asia Pacific net sales were relatively flat during the first quarter of 2025 compared to the same quarter in 2024.

| Q1 2025 Form 10-Q | 13

Products and Services Performance

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:

The following table shows net sales by category for the three months ended December 28, 2024 and December 30, 2023 (dollars in millions):

Three Months Ended

2024 December 30,

iPhone $ 69,138 $ 69,702 (1) %

4 unchanged sentences

Total net sales $ 124,300 $ 119,575 4 %

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.

iPhone net sales were relatively flat during the first quarter of 2025 compared to the same quarter in 2024.

Mac net sales increased during the first quarter of 2025 compared to the same quarter in 2024 due primarily to higher net sales of laptops.

iPad net sales increased during the first quarter of 2025 compared to the same quarter in 2024 due primarily to higher net sales of iPad Air ® .

Wearables, Home and Accessories

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.

Wearables, Home and Accessories net sales decreased during the first quarter of 2025 compared to the same quarter in 2024 due primarily to lower net sales of Wearables.

Services net sales increased during the first quarter of 2025 compared to the same quarter in 2024 due primarily to higher net sales from advertising, the App Store ® and cloud services.

| Q1 2025 Form 10-Q | 14

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,

Products and Services gross margin and gross margin percentage for the three months ended December 28, 2024 and December 30, 2023 were as follows (dollars in millions):

Three Months Ended

2024 December 30,

Gross margin:

7 unchanged sentences

Products Gross Margin

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.

Products gross margin and Products gross margin percentage were relatively flat during the first quarter of 2025 compared to the same quarter in 2024.

Services Gross Margin

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.

Services gross margin increased during the first quarter of 2025 compared to the same quarter in 2024 due primarily to higher Services net sales and a different Services mix.

Services gross margin percentage increased during the first quarter of 2025 compared to the same quarter in 2024 due primarily to a different Services mix, partially offset by higher Services costs.

The Company’s future gross margins can be impacted by a variety of factors, as discussed in Part I, Item 1A of the 2024 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 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,

Operating expenses for the three months ended December 28, 2024 and December 30, 2023 were as follows (dollars in millions):

Three Months Ended

2024 December 30,

Research and development $ 8,268 $ 7,696

5 unchanged sentences

Research and Development

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

The growth in research and development expense during the first quarter of 2025 compared to the same quarter in 2024 was driven primarily by increases in headcount-related expenses and infrastructure-related costs.

Selling, General and Administrative

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.

The growth in selling, general and administrative expense during the first quarter of 2025 compared to the same quarter in 2024 was driven primarily by higher variable selling expenses and increases in headcount-related expenses.

| Q1 2025 Form 10-Q | 15

Provision for Income Taxes

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, effective tax rate and statutory federal income tax rate for the three months ended December 28, 2024 and December 30, 2023 were as follows (dollars in millions):

Three Months Ended

2024 December 30,

Provision for income taxes $ 6,254 $ 6,407

1 unchanged sentence

Statutory federal income tax rate 21 % 21 %

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 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.

The Company’s effective tax rate for the first quarter of 2025 was lower than the statutory federal income tax rate due primarily to a lower effective tax rate on foreign earnings, tax benefits from share-based compensation, the impact of foreign currency loss regulations issued by the U.S.

Department of the Treasury in December 2024, and the tax impact from foreign currency revaluations related to the State Aid Decision.

The Company’s effective tax rate for the first quarter of 2025 was lower compared to the same quarter in 2024 due primarily to the impact of foreign currency loss regulations issued by the U.S.

Department of the Treasury in December 2024 and the tax impact from foreign currency revaluations related to the State Aid Decision, partially offset by a higher effective tax rate on foreign earnings.

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 2023 Form 10-K, except for manufacturing purchase obligations.

The Company believes its balances of unrestricted cash, cash equivalents and 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 2024 Form 10-K, except for commercial paper, manufacturing purchase obligations and the State Aid Decision tax payable.

Commercial Paper

The Company issues unsecured short-term promissory notes pursuant to a commercial paper program.

As of December 28, 2024, the Company had $2.0 billion of commercial paper outstanding, which was payable within 12 months.

Manufacturing Purchase Obligations

1 unchanged sentence

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

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

As of December 28, 2024, the Company had manufacturing purchase obligations of $39.8 billion, which were payable within 12 months.

State Aid Decision Tax Payable

During the first quarter of 2025, the Company paid €11.0 billion or $11.9 billion to Ireland in connection with the State Aid Decision.

As of December 28, 2024, the Company had a remaining obligation to pay €3.3 billion or $3.4 billion, which was expected to be paid within 12 months.

The funds necessary to settle the remaining obligation were held in escrow as of December 28, 2024, and restricted from general use.

Capital Return Program

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.

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

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

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

As of December 28, 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 third quarter of 2024, the Company repurchased $26.0 billion of its common stock and paid dividends and dividend equivalents of $3.9 billion.

During the first quarter of 2025, the Company repurchased $23.3 billion of its common stock and paid dividends and dividend equivalents of $3.9 billion.

| Q1 2025 Form 10-Q | 16

Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No.

Disaggregation of Income Statement Expenses

In November 2024, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No.

2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses (“ASU 2024-03”) and in January 2025, the FASB issued ASU No.

2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Clarifying the Effective Date , which clarified the effective date of ASU 2024-03.

ASU 2024-03 will require the Company to disclose the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization, as applicable, included in certain expense captions in the Consolidated Statements of Operations, as well as qualitatively describe remaining amounts included in those captions.

ASU 2024-03 will also require the Company to disclose both the amount and the Company’s definition of selling expenses.

The Company will adopt ASU 2024-03 in its fourth quarter of 2028 using a prospective transition method.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

2 unchanged sentences

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 nine months of 2024.

There have been no material changes to the Company’s market risk during the first three months of 2025.

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 2024 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