What changed in this filing

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Item 1A. Risk Factors

2025-05-02 compared with 2025-01-31 · 65 added, 59 removed, 1 unchanged (99% of the section changed)

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 2024 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.

Except as set forth below, there have been no material changes to the Company’s risk factors since the 2024 Form 10-K.

The Company is subject to complex and changing laws and regulations worldwide, which exposes the Company to potential liabilities, increased costs and other adverse effects on the Company’s business.

The Company’s global operations are subject to complex and changing laws and regulations on subjects including antitrust;

privacy, data security and data localization;

consumer protection;

advertising, sales, billing and e-commerce;

financial services and technology;

product liability;

intellectual property ownership and infringement;

digital platforms;

machine learning and artificial intelligence;

internet, telecommunications and mobile communications;

media, television, film and digital content;

availability of third-party software applications and services;

labor and employment;

anticorruption;

import, export and trade;

foreign exchange controls and cash repatriation restrictions;

anti–money laundering;

foreign ownership and investment;

national security;

and environmental, health and safety, including electronic waste, recycling, product design and climate change.

Compliance with these laws and regulations is onerous and expensive.

New and changing laws, regulations, executive orders, directives, and enforcement priorities can adversely affect the Company’s business by increasing the Company’s costs, limiting the Company’s ability to offer a product, service or feature to customers, imposing changes to the design of the Company’s products and services, impacting customer demand for the Company’s products and services, and requiring changes to the Company’s business or supply chain.

New and changing laws, regulations, executive orders, directives, and enforcement priorities can also create uncertainty about how such laws and regulations will be interpreted and applied.

Risks and costs related to new and changing laws, regulations, executive orders, directives, and enforcement priorities may increase as the Company’s products and services are introduced into specialized applications, including health and financial services, or as the Company expands the use of technologies, such as machine learning and artificial intelligence features, and must navigate new legal, regulatory and ethical considerations relating to such technologies.

The Company has implemented policies and procedures designed to ensure compliance with applicable laws and regulations, but there can be no assurance the Company’s employees, contractors or agents will not violate such laws and regulations or the Company’s policies and procedures.

If the Company is found to have violated laws and regulations, it could materially adversely affect the Company’s business, reputation, results of operations and financial condition.

Regulatory changes and other actions that materially adversely affect the Company’s business may be announced with little or no advance notice and the Company may not be able to effectively mitigate all adverse impacts from such measures.

For example, the Company is subject to changing regulations relating to the export and import of its products.

Although the Company has programs, policies and procedures in place that are designed to satisfy regulatory requirements, there can be no assurance that such policies and procedures will be effective in preventing a violation or a claim of a violation.

As a result, the Company’s products could be banned, delayed or prohibited from importation, which could materially adversely affect the Company’s business, reputation, results of operations and financial condition.

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.

The Company has also implemented changes to iOS, iPadOS, the App Store and Safari in the EU as it seeks to comply with the DMA, including new business terms and alternative fee structures for iOS and iPadOS apps, alternative methods of distribution for iOS and iPadOS apps, alternative payment processing for apps across the Company’s operating systems, and additional tools and application programming interfaces (“APIs”) for developers.

The Company has also continued to make changes to its compliance plan in response to feedback and engagement with the Commission.

Although the Company’s compliance plan is intended to address the DMA’s obligations, it has been challenged by the Commission and may be challenged further by private litigants.

The DMA provides for significant fines and penalties for noncompliance, and other jurisdictions may seek to require the Company to make changes to its business.

While the changes introduced by the Company in the EU are intended to reduce new privacy and security risks that the DMA poses to EU users, many risks will remain.

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 2024 Form 10-K and Part II, Item 1A of the Form 10-Q for the quarter ended December 28, 2024 (the “first quarter 2025 Form 10-Q”), in each case 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.

Except for the risk factors set forth below and those disclosed in Part II, Item 1A of the first quarter 2025 Form 10-Q , which are hereby incorporated by reference into this Part II, Item 1A of this Form 10-Q, there have been no material changes to the Company’s risk factors since the 2024 Form 10-K.

The Company’s business can be impacted by political events, trade and other international disputes, geopolitical tensions, conflict, terrorism, natural disasters, public health issues, industrial accidents and other business interruptions.

Political events, trade and other international disputes, geopolitical tensions, conflict, terrorism, natural disasters, public health issues, industrial accidents and other business interruptions can have a material adverse effect on the Company and its customers, employees, suppliers, contract manufacturers, logistics providers, distributors, cellular network carriers and other channel partners.

The Company has a large, global business with sales outside the U.S.

representing a majority of the Company’s total net sales, and the Company believes that it generally benefits from growth in international trade.

A significant majority of the Company’s manufacturing is performed in whole or in part by outsourcing partners located primarily in China mainland, India, Japan, South Korea, Taiwan and Vietnam, in addition to sourcing from partners and facilities located in the U.S.

Restrictions on international trade, such as tariffs and other controls on imports or exports of goods, technology or data, can materially adversely affect the Company’s business and supply chain.

The impact can be particularly significant if these restrictive measures apply to countries and regions where the Company derives a significant portion of its revenues and/or has significant supply chain operations.

Restrictive measures can increase the cost of the Company’s products and the components and rare earths and other raw materials that go into them or affect the availability of such components and rare earths and other raw materials, and can require the Company to take various actions, including changing suppliers, restructuring business relationships and operations, ceasing to offer and distribute affected products, services and third-party applications to its customers, and increasing the prices of its products and services.

Changing the Company’s business and supply chain in accordance with new or changed restrictions on international trade can be expensive, time-consuming and disruptive to the Company’s business and results of operations.

Trade and other international disputes can also have an adverse impact on the overall macroeconomic environment and result in shifts and reductions in consumer spending and negative consumer sentiment for the Company’s products and services, all of which can further adversely affect the Company’s business and results of operations.

Such restrictions can be announced with little or no advance notice, which can create uncertainty, and the Company may not be able to effectively mitigate any or all adverse impacts from such measures.

Beginning in the second quarter of 2025, new U.S.

Tariffs were announced, including additional tariffs on imports from China, India, Japan, South Korea, Taiwan, Vietnam and the EU, among others.

In response, several countries have imposed, or threatened to impose, reciprocal tariffs on imports from the U.S.

and other retaliatory measures.

Various modifications and delays to the U.S.

Tariffs have been announced and further changes are expected to be made in the future, which may include additional sector-based tariffs or other measures.

For example, the U.S.

Department of Commerce has initiated an investigation under Section 232 of the Trade Expansion Act of 1962, as amended, into, among other things, imports of semiconductors, semiconductor manufacturing equipment, and their derivative products, including downstream products that contain semiconductors.

The ultimate impact remains uncertain and will depend on several factors, including whether additional or incremental U.S.

Tariffs or other measures are announced or imposed, to what extent other countries implement tariffs or other retaliatory measures in response, and the overall magnitude and duration of these measures.

If disputes and conflicts further escalate, actions by governments in response could be significantly more severe and restrictive.

Any of the foregoing could materially adversely affect the Company’s business, results of operations, financial condition and stock price.

Many of the Company’s operations and facilities, as well as critical business operations of the Company’s suppliers and contract manufacturers, are in locations that are prone to earthquakes and other natural disasters.

Global climate change is resulting in certain types of natural disasters and extreme weather occurring more frequently or with more intense effects.

In addition, the Company’s and its suppliers’ operations and facilities are subject to the risk of interruption by fire, power shortages, nuclear power plant accidents and other industrial accidents, terrorist attacks and other hostile acts, ransomware and other cybersecurity attacks, labor disputes, public health issues and other events beyond the Company’s control.

For example, global supply chains can be highly concentrated and geopolitical tensions or conflict could result in significant disruptions.

Such events can make it difficult or impossible for the Company to manufacture and deliver products to its customers, create delays and inefficiencies in the Company’s supply and manufacturing chain, result in slowdowns and outages to the Company’s service offerings, increase the Company’s costs, and negatively impact consumer spending and demand in affected areas.

| Q2 2025 Form 10-Q | 20

The Company is also currently subject to antitrust investigations and litigation 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 subject to civil antitrust lawsuits in the U.S.

alleging monopolization or attempted monopolization in the markets for “performance smartphones” and “smartphones” generally in violation of U.S.

antitrust laws.

In addition, the Company is the subject of investigations in Europe and other jurisdictions relating to App Store terms and conditions.

If such investigations or litigation are resolved against the Company, the Company can be exposed to significant fines and may be required to make further changes to its business practices, all of which could materially adversely affect the Company’s business, reputation, 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 Google LLC (“Google”) and 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.

On August 5, 2024, Google was found to have violated U.S.

antitrust laws.

In connection with this finding, the DOJ has proposed remedies, which include changes to Google’s products, services and business models.

The proposed changes vary in scope and severity and range from imposing significant restrictions on Google’s licensing agreements to prohibiting Google from offering the Company commercial terms for search distribution for up to 10 years.

If implemented, such remedies could materially adversely affect the Company’s ability to earn revenue from such licensing arrangements.

There can be no assurance the Company’s business, results of operations and financial condition 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, lost sales, and lower profit margins.

The Company’s operations are also subject to the risks of industrial accidents at its suppliers and contract manufacturers.

While the Company’s suppliers are required to maintain safe working environments and operations, an industrial accident could occur and could result in serious injuries or loss of life, disruption to the Company’s business, and harm to the Company’s reputation.

Major public health issues, including pandemics such as the COVID-19 pandemic, have adversely affected, and could in the future materially adversely affect, the Company due to their impact on the global economy and demand for consumer products;

the imposition of protective public safety measures, such as stringent employee travel restrictions and limitations on freight services and the movement of products between regions;

and disruptions in the Company’s operations, supply chain and sales and distribution channels, resulting in interruptions to the supply of current products and offering of existing services, and delays in production ramps of new products and development of new services.

Following any interruption to its business, the Company can require substantial recovery time, experience significant expenditures to resume operations, and lose significant sales.

Because the Company relies on single or limited sources for the supply and manufacture of many critical components, a business interruption affecting such sources would exacerbate any negative consequences to the Company.

While the Company maintains insurance coverage for certain types of losses, such insurance coverage may be insufficient to cover all losses that may arise.

The Company expects its quarterly net sales and results of operations to fluctuate.

The Company’s profit margins vary across its products, services, geographic segments and distribution channels.

For example, the gross margins on the Company’s products and services vary significantly and can change over time.

The Company’s gross margins are subject to volatility and downward pressure due to a variety of factors, including:

continued industry-wide global product pricing pressures and product pricing actions that the Company may take in response to such pressures;

increased competition;

the Company’s ability to effectively stimulate demand for certain of its products and services;

compressed product life cycles;

supply shortages;

potential increases in the cost of components, outside manufacturing services, and developing, acquiring and delivering content for the Company’s services;

the Company’s ability to manage product quality and warranty costs effectively;

shifts in the mix of products and services, or in the geographic, currency or channel mix, including to the extent that regulatory changes require the Company to modify its product and service offerings;

fluctuations in foreign exchange rates;

inflation and other macroeconomic pressures;

the imposition of new or increased tariffs and other trade restrictions, their overall magnitude and duration, and retaliatory actions in response;

and the introduction of new products or services, including new products or services with lower profit margins.

These and other factors could have a materially adverse impact on the Company’s results of operations, financial condition and stock price.

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.

Further, the Company generates a significant portion of its net sales from a single product and a decline in demand for that product could significantly impact quarterly net sales.

The Company could also be subject to unexpected developments, such as lower-than-anticipated demand for the Company’s products or services, issues with new product or service introductions, information technology system failures or network disruptions, or a change in or failure of one or more of the Company’s logistics, supply or manufacturing partners.

Varied stakeholder expectations about social and other issues expose the Company to potential liabilities, increased costs, reputational harm, and other adverse effects on the Company’s business.

Various stakeholders, including governments, regulators, investors, employees, customers and others, have differing expectations about a wide range of social and other issues related to the Company’s business.

The Company makes statements about its values, including the environmental and societal impact of its business, through various non-financial reports, information provided on the Company’s website, and in press statements and other communications.

The Company also pursues environmental and other goals and initiatives that involve risks and uncertainties, require investments, and depend in part on third-party performance or data that is outside the Company’s control, and there can be no assurance that the Company will fully achieve all of its goals and initiatives.

Efforts by the Company to advance its business and values, or achieve its goals and further its initiatives, or to align with stakeholders’ expectations, or comply with evolving, varied and at times conflicting federal, state and international laws, regulations and standards, or any failure or perceived failure to do so, can result in adverse reactions by consumers and other stakeholders, including the commencement of legal and regulatory proceedings against the Company, and can materially adversely affect the Company’s business, reputation, results of operations, financial condition and stock price.

| Q2 2025 Form 10-Q | 21

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 1A. Risk Factors