Apple Inc. 10-Q

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-share amounts) Three Months Ended December 28, 2024 December 30, 2023 Net sales: Products $ 97,960 $ 96,458 Services 26,340 23,117 Total net sales 124,300 119,575 Cost of sales: Products 59,447 58,440 Services 6,578 6,280 Total cost of sales 66,025 64,720 Gross margin 58,275 54,855 Operating expenses: Research and development 8,268 7,696 Selling, general and administrative 7,175 6,786 Total operating expenses 15,443 14,482 Operating income 42,832 40,373 Other income/(expense), net ( 248 ) ( 50 ) Income before provision for income taxes 42,584 40,323 Provision for income taxes 6,254 6,407 Net income $ 36,330 $ 33,916 Earnings per share: Basic $ 2.41 $ 2.19 Diluted $ 2.40 $ 2.18 Shares used in computing earnings per share: Basic 15,081,724 15,509,763 Diluted 15,150,865 15,576,641 See accompanying Notes to Condensed Consolidated Financial Statements. Apple Inc. | Q1 2025 Form 10-Q | 1 Apple Inc. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (In millions) Three Months Ended December 28, 2024 December 30, 2023 Net income $ 36,330 $ 33,916 Other comprehensive income/(loss): Change in foreign currency translation, net of tax ( 625 ) 308 Change in unrealized gains/losses on derivative instruments, net of tax: Change in fair value of derivative instruments 1,651 ( 531 ) Adjustment for net (gains)/losses realized and included in net income 784 ( 823 ) Total change in unrealized gains/losses on derivative instruments 2,435 ( 1,354 ) Change in unrealized gains/losses on marketable debt securities, net of tax: Change in fair value of marketable debt securities ( 1,647 ) 3,045 Adjustment for net (gains)/losses realized and included in net income 220 75 Total change in unrealized gains/losses on marketable debt securities ( 1,427 ) 3,120 Total other comprehensive income 383 2,074 Total comprehensive income $ 36,713 $ 35,990 See accompanying Notes to Condensed Consolidated Financial Statements. Apple Inc. | Q1 2025 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) December 28, 2024 September 28, 2024 ASSETS: Current assets: Cash and cash equivalents $ 30,299 $ 29,943 Marketable securities 23,476 35,228 Accounts receivable, net 29,639 33,410 Vendor non-trade receivables 29,667 32,833 Inventories 6,911 7,286 Other current assets 13,248 14,287 Total current assets 133,240 152,987 Non-current assets: Marketable securities 87,593 91,479 Property, plant and equipment, net 46,069 45,680 Other non-current assets 77,183 74,834 Total non-current assets 210,845 211,993 Total assets $ 344,085 $ 364,980 LIABILITIES AND SHAREHOLDERS’ EQUITY: Current liabilities: Accounts payable $ 61,910 $ 68,960 Other current liabilities 61,151 78,304 Deferred revenue 8,461 8,249 Commercial paper 1,995 9,967 Term debt 10,848 10,912 Total current liabilities 144,365 176,392 Non-current liabilities: Term debt 83,956 85,750 Other non-current liabilities 49,006 45,888 Total non-current liabilities 132,962 131,638 Total liabilities 277,327 308,030 Commitments and contingencies Shareholders’ equity: Common stock and additional paid-in capital, $ 0.00001 par value: 50,400,000 shares authorized; 15,040,731 and 15,116,786 shares issued and outstanding, respectively 84,768 83,276 Accumulated deficit ( 11,221 ) ( 19,154 ) Accumulated other comprehensive loss ( 6,789 ) ( 7,172 ) Total shareholders’ equity 66,758 56,950 Total liabilities and shareholders’ equity $ 344,085 $ 364,980 See accompanying Notes to Condensed Consolidated Financial Statements. Apple Inc. | Q1 2025 Form 10-Q | 3 Apple Inc. CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited) (In millions, except per-share amounts) Three Months Ended December 28, 2024 December 30, 2023 Total shareholders’ equity, beginning balances $ 56,950 $ 62,146 Common stock and additional paid-in capital: Beginning balances 83,276 73,812 Common stock withheld related to net share settlement of equity awards ( 1,891 ) ( 1,660 ) Share-based compensation 3,383 3,084 Ending balances 84,768 75,236 Retained earnings/(Accumulated deficit): Beginning balances ( 19,154 ) ( 214 ) Net income 36,330 33,916 Dividends and dividend equivalents declared ( 3,819 ) ( 3,774 ) Common stock withheld related to net share settlement of equity awards ( 1,102 ) ( 1,018 ) Common stock repurchased ( 23,476 ) ( 20,668 ) Ending balances ( 11,221 ) 8,242 Accumulated other comprehensive loss: Beginning balances ( 7,172 ) ( 11,452 ) Other comprehensive income 383 2,074 Ending balances ( 6,789 ) ( 9,378 ) Total shareholders’ equity, ending balances $ 66,758 $ 74,100 Dividends and dividend equivalents declared per share or RSU $ 0.25 $ 0.24 See accompanying Notes to Condensed Consolidated Financial Statements. Apple Inc. | Q1 2025 Form 10-Q | 4 Apple Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In millions) Three Months Ended December 28, 2024 December 30, 2023 Cash, cash equivalents, and restricted cash and cash equivalents, beginning balances $ 29,943 $ 30,737 Operating activities: Net income 36,330 33,916 Adjustments to reconcile net income to cash generated by operating activities: Depreciation and amortization 3,080 2,848 Share-based compensation expense 3,286 2,997 Other ( 2,009 ) ( 989 ) Changes in operating assets and liabilities: Accounts receivable, net 3,597 6,555 Vendor non-trade receivables 3,166 4,569 Inventories 215 ( 137 ) Other current and non-current assets 939 ( 1,457 ) Accounts payable ( 6,671 ) ( 4,542 ) Other current and non-current liabilities ( 11,998 ) ( 3,865 ) Cash generated by operating activities 29,935 39,895 Investing activities: Purchases of marketable securities ( 6,124 ) ( 9,780 ) Proceeds from maturities of marketable securities 15,967 13,046 Proceeds from sales of marketable securities 3,492 1,337 Payments for acquisition of property, plant and equipment ( 2,940 ) ( 2,392 ) Other ( 603 ) ( 284 ) Cash generated by investing activities 9,792 1,927 Financing activities: Payments for taxes related to net share settlement of equity awards ( 2,921 ) ( 2,591 ) Payments for dividends and dividend equivalents ( 3,856 ) ( 3,825 ) Repurchases of common stock ( 23,606 ) ( 20,139 ) Repayments of term debt ( 1,009 ) — Repayments of commercial paper, net ( 7,944 ) ( 3,984 ) Other ( 35 ) ( 46 ) Cash used in financing activities ( 39,371 ) ( 30,585 ) Increase in cash, cash equivalents, and restricted cash and cash equivalents 356 11,237 Cash, cash equivalents, and restricted cash and cash equivalents, ending balances $ 30,299 $ 41,974 Supplemental cash flow disclosure: Cash paid for income taxes, net $ 18,651 $ 7,255 See accompanying Notes to Condensed Consolidated Financial Statements. Apple Inc. | Q1 2025 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”). 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 the use of management estimates. 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 28, 2024 (the “2024 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. The Company’s fiscal years 2025 and 2024 span 52 weeks each. 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. Note 2 – Revenue Net sales disaggregated by significant products and services for the three months ended December 28, 2024 and December 30, 2023 were as follows (in millions): Three Months Ended December 28, 2024 December 30, 2023 iPhone ® $ 69,138 $ 69,702 Mac ® 8,987 7,780 iPad ® 8,088 7,023 Wearables, Home and Accessories 11,747 11,953 Services 26,340 23,117 Total net sales $ 124,300 $ 119,575 Total net sales include $ 3.7 billion of revenue recognized in the three months ended December 28, 2024 that was included in deferred revenue as of September 28, 2024 and $ 3.5 billion of revenue recognized in the three months ended December 30, 2023 that was included in deferred revenue as of September 30, 2023. 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 months ended December 28, 2024 and December 30, 2023, except in Greater China, where iPhone revenue represented a moderately higher proportion of net sales. As of December 28, 2024 and September 28, 2024, the Company had total deferred revenue of $ 13.2 billion and $ 12.8 billion, respectively. As of December 28, 2024, the Company expects 64 % of total deferred revenue to be realized in less than a year, 25 % within one-to-two years, 9 % within two-to-three years and 2 % in greater than three years. Apple Inc. | Q1 2025 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 28, 2024 and December 30, 2023 (net income in millions and shares in thousands): Three Months Ended December 28, 2024 December 30, 2023 Numerator: Net income $ 36,330 $ 33,916 Denominator: Weighted-average basic shares outstanding 15,081,724 15,509,763 Effect of dilutive share-based awards 69,141 66,878 Weighted-average diluted shares 15,150,865 15,576,641 Basic earnings per share $ 2.41 $ 2.19 Diluted earnings per share $ 2.40 $ 2.18 Note 4 – 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 December 28, 2024 and September 28, 2024 (in millions): December 28, 2024 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Current Marketable Securities Non-Current Marketable Securities Cash $ 27,073 $ — $ — $ 27,073 $ 27,073 $ — $ — Level 1: Money market funds 937 — — 937 937 — — Mutual funds 597 109 ( 7 ) 699 — 699 — Subtotal 1,534 109 ( 7 ) 1,636 937 699 — Level 2 (1) : U.S. Treasury securities 15,516 5 ( 616 ) 14,905 903 2,718 11,284 U.S. agency securities 5,570 — ( 303 ) 5,267 314 1,683 3,270 Non-U.S. government securities 8,596 22 ( 819 ) 7,799 50 2,524 5,225 Certificates of deposit and time deposits 1,147 — ( 13 ) 1,134 874 247 13 Commercial paper 418 — ( 19 ) 399 101 298 — Corporate debt securities 61,566 96 ( 2,210 ) 59,452 47 14,451 44,954 Municipal securities 355 — ( 7 ) 348 — 189 159 Mortgage- and asset-backed securities 25,313 29 ( 1,987 ) 23,355 — 667 22,688 Subtotal 118,481 152 ( 5,974 ) 112,659 2,289 22,777 87,593 Total (2)(3) $ 147,088 $ 261 $ ( 5,981 ) $ 141,368 $ 30,299 $ 23,476 $ 87,593 Apple Inc. | Q1 2025 Form 10-Q | 7 September 28, 2024 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Current Marketable Securities Non-Current Marketable Securities Cash $ 27,199 $ — $ — $ 27,199 $ 27,199 $ — $ — Level 1: Money market funds 778 — — 778 778 — — Mutual funds 515 105 ( 3 ) 617 — 617 — Subtotal 1,293 105 ( 3 ) 1,395 778 617 — Level 2 (1) : U.S. Treasury securities 16,150 45 ( 516 ) 15,679 212 4,087 11,380 U.S. agency securities 5,431 — ( 272 ) 5,159 155 703 4,301 Non-U.S. government securities 17,959 93 ( 484 ) 17,568 1,158 10,810 5,600 Certificates of deposit and time deposits 873 — — 873 387 478 8 Commercial paper 1,066 — — 1,066 28 1,038 — Corporate debt securities 65,622 270 ( 1,953 ) 63,939 26 16,027 47,886 Municipal securities 412 — ( 7 ) 405 — 190 215 Mortgage- and asset-backed securities 24,595 175 ( 1,403 ) 23,367 — 1,278 22,089 Subtotal 132,108 583 ( 4,635 ) 128,056 1,966 34,611 91,479 Total (2)(3) $ 160,600 $ 688 $ ( 4,638 ) $ 156,650 $ 29,943 $ 35,228 $ 91,479 (1) The valuation techniques used to measure the fair values of the Company’s Level 2 financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data. (2) As of December 28, 2024 and September 28, 2024, cash and cash equivalents included $ 126 million and $ 2.6 billion, respectively, held in escrow and restricted from general use. These restricted cash and cash equivalents are designated to settle the Company’s obligation related to the 2016 European Commission (the “Commission”) decision that Ireland granted state aid to the Company (the “State Aid Decision”), which was confirmed during the fourth quarter of 2024 by the European Court of Justice in a reversal of the 2020 judgment of the European General Court. (3) As of December 28, 2024 and September 28, 2024, current marketable securities included $ 3.3 billion and $ 13.2 billion, respectively, held in escrow and restricted from general use. These restricted marketable securities are designated to settle the Company’s obligation related to the State Aid Decision. As of December 28, 2024, 85 % of the Company’s non-current marketable debt securities other than mortgage- and asset-backed securities had maturities between 1 and 5 years, 11 % between 5 and 10 years, and 4 % greater than 10 years. As of December 28, 2024, 13 % of the Company’s non-current mortgage- and asset-backed securities had maturities between 1 and 5 years, 10 % between 5 and 10 years, and 77 % greater than 10 years. 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 exchange rates, the Company may use 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 exchange rates, the Company may use forwards, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value hedges. As of December 28, 2024, 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 18 years. The Company may also use derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in foreign exchange rates, as well as to offset a portion of the foreign currency gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies. Apple Inc. | Q1 2025 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 use 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 December 28, 2024 and September 28, 2024 were as follows (in millions): December 28, 2024 September 28, 2024 Derivative instruments designated as accounting hedges: Foreign exchange contracts $ 47,466 $ 64,069 Interest rate contracts $ 14,575 $ 14,575 Derivative instruments not designated as accounting hedges: Foreign exchange contracts $ 96,150 $ 91,493 As of December 28, 2024 and September 28, 2024, the carrying amount of the Company’s current and non-current term debt subject to fair value hedges was $ 13.3 billion and $ 13.5 billion, respectively. Accounts Receivable Trade Receivables As of December 28, 2024, the Company had two customers that individually represented 10% or more of total trade receivables, which accounted for 18 % and 11 %. The Company’s third-party cellular network carriers accounted for 33 % and 38 % of total trade receivables as of December 28, 2024 and September 28, 2024, 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 December 28, 2024, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted f or 43 % and 24 % . A s of September 28, 2024, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 44 % and 23 %. Note 5 – Condensed Consolidated Financial Statement Details The following tables show the Company’s condensed consolidated financial statement details as of December 28, 2024 and September 28, 2024 (in millions): Inventories December 28, 2024 September 28, 2024 Components $ 2,792 $ 3,627 Finished goods 4,119 3,659 Total inventories $ 6,911 $ 7,286 Property, Plant and Equipment, Net December 28, 2024 September 28, 2024 Gross property, plant and equipment $ 120,615 $ 119,128 Accumulated depreciation ( 74,546 ) ( 73,448 ) Total property, plant and equipment, net $ 46,069 $ 45,680 Apple Inc. | Q1 2025 Form 10-Q | 9 Note 6 – Debt Commercial Paper The Company issues unsecured short-term promissory notes 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 December 28, 2024 and September 28, 2024, the Company had $ 2.0 billion and $ 10.0 billion of commercial paper outstanding, respectively. Term Debt As of December 28, 2024 and September 28, 2024, the Company had outstanding fixed-rate notes with varying maturities for an aggregate carrying amount of $ 94.8 billion and $ 96.7 billion, respectively (collectively the “Notes”). As of December 28, 2024 and September 28, 2024, the fair value of the Company’s Notes, based on Level 2 inputs, was $ 82.7 billion and $ 88.4 billion, respectively. Note 7 – Shareholders’ Equity Share Repurchase Program During the three months ended December 28, 2024, the Company repurchased 100 million shares of its common stock for $ 23.3 billion. The Company’s share repurchase 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 (the “Exchange Act”). Note 8 – Share-Based Compensation Restricted Stock Units A summary of the Company’s RSU activity and related information for the three months ended December 28, 2024 is as follows: Number of RSUs (in thousands) Weighted-Average Grant-Date Fair Value Per RSU Balance as of September 28, 2024 163,326 $ 158.73 RSUs granted 61,391 $ 228.04 RSUs vested ( 35,683 ) $ 147.36 RSUs canceled ( 2,278 ) $ 174.77 Balance as of December 28, 2024 186,756 $ 183.49 The total vesting-date fair value of RSUs was $ 8.4 billion and $ 7.7 billion for the three months ended December 28, 2024 and December 30, 2023, 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 months ended December 28, 2024 and December 30, 2023 (in millions): Three Months Ended December 28, 2024 December 30, 2023 Share-based compensation expense $ 3,286 $ 2,997 Income tax benefit related to share-based compensation expense $ ( 1,332 ) $ ( 1,235 ) As of December 28, 2024, the total unrecognized compensation cost related to outstanding RSUs was $ 29.2 billion, which the Company expects to recognize over a weighted-average period of 2.9 years. Apple Inc. | Q1 2025 Form 10-Q | 10 Note 9 – 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. Note 10 – Segment Information and Geographic Data The following table shows information by reportable segment for the three months ended December 28, 2024 and December 30, 2023 (in millions): Three Months Ended December 28, 2024 December 30, 2023 Americas: Net sales $ 52,648 $ 50,430 Operating income $ 21,509 $ 20,357 Europe: Net sales $ 33,861 $ 30,397 Operating income $ 14,607 $ 12,711 Greater China: Net sales $ 18,513 $ 20,819 Operating income $ 8,160 $ 8,622 Japan: Net sales $ 8,987 $ 7,767 Operating income $ 4,314 $ 3,819 Rest of Asia Pacific: Net sales $ 10,291 $ 10,162 Operating income $ 4,584 $ 4,579 A reconciliation of the Company’s segment operating income to the Condensed Consolidated Statements of Operations for the three months ended December 28, 2024 and December 30, 2023 is as follows (in millions): Three Months Ended December 28, 2024 December 30, 2023 Segment operating income $ 53,174 $ 50,088 Research and development expense ( 8,268 ) ( 7,696 ) Other corporate expenses, net ( 2,074 ) ( 2,019 ) Total operating income $ 42,832 $ 40,373 Apple Inc. | Q1 2025 Form 10-Q | 11