What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-10-31 compared with 2024-11-01 · 62 added, 47 removed, 117 unchanged (48% of the section changed)

7 unchanged sentences

First Quarter 2025:

• MacBook Pro 14-in.;

• MacBook Pro 16-in.;

• MacBook Pro

Second Quarter 2025:

• MacBook Air 13-in.;

• MacBook Air 15-in.

• MacBook Air

Third Quarter 2025:

• iOS 18, macOS Sequoia, iPadOS 18, watchOS 11, visionOS 2 and tvOS 18, updates to the Company’s operating systems;

• Apple Intelligence™, a personal intelligence system that uses generative models.

• iOS 26, macOS Tahoe 26, iPadOS 26, watchOS 26, visionOS 26 and tvOS 26

Fourth Quarter 2025:

• iPhone 16, iPhone 16 Plus, iPhone 16 Pro and iPhone 16 Pro Max;

• Apple Watch Series 10;

• iPhone 17, iPhone Air, iPhone 17 Pro and iPhone 17 Pro Max

• Apple Watch Series 11, Apple Watch SE 3 and Apple Watch Ultra 3

• AirPods Pro 3

Fiscal Period

5 unchanged sentences

| 2025 Form 10-K | 21

Tariffs and Other 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 to the U.S.

Tariffs have been announced and further changes could 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.

Tariffs and other measures that are applied to the Company’s products or their components can have a material adverse impact on the Company’s business, results of operations and financial condition, including impacting the Company’s supply chain, the availability of rare earths and other raw materials and components, pricing and gross margin.

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.

Trade and other international disputes can 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.

Segment Operating Performance

7 unchanged sentences

Total net sales $ 416,161 6 % $ 391,035 2 % $ 383,285

Americas net sales increased during 2024 compared to 2023 due primarily to higher net sales of Services.

Europe net sales increased during 2024 compared to 2023 due primarily to higher net sales of Services and iPhone.

Americas net sales increased during 2025 compared to 2024 primarily due to higher net sales of iPhone and Services.

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

dollar had an unfavorable year-over-year impact on Americas net sales during 2025.

Europe net sales increased during 2025 compared to 2024 primarily due to higher net sales of Services, iPhone and Mac.

Greater China

Greater China net sales decreased during 2024 compared to 2023 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 2024.

Japan net sales increased during 2024 compared to 2023 due primarily to higher net sales of iPhone.

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

dollar had an unfavorable year-over-year impact on Japan net sales during 2024.

Greater China net sales decreased during 2025 compared to 2024 primarily due to lower net sales of iPhone, partially offset by higher net sales of Mac.

Japan net sales increased during 2025 compared to 2024 primarily due to higher net sales of iPhone, Services and iPad.

Rest of Asia Pacific

Rest of Asia Pacific net sales increased during 2024 compared to 2023 due primarily to higher net sales of Services.

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 2024.

Rest of Asia Pacific net sales increased during 2025 compared to 2024 primarily due to higher net sales of iPhone, Services and Mac.

| 2025 Form 10-K | 22

9 unchanged sentences

(1) Services net sales include amortization of the deferred value of services bundled in the sales price of certain products.

iPhone net sales were relatively flat during 2024 compared to 2023.

Mac net sales increased during 2024 compared to 2023 due primarily to higher net sales of laptops.

iPad net sales decreased during 2024 compared to 2023 due primarily to lower net sales of iPad Pro and the entry-level iPad models, partially offset by higher net sales of iPad Air.

iPhone net sales increased during 2025 compared to 2024 due to higher net sales of Pro models.

Mac net sales increased during 2025 compared to 2024 primarily due to higher net sales of laptops and desktops.

iPad net sales increased during 2025 compared to 2024 primarily due to higher net sales of iPad Air, iPad mini and iPad, partially offset by lower net sales of iPad Pro.

Wearables, Home and Accessories

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

Services net sales increased during 2024 compared to 2023 due primarily to higher net sales from advertising, the App Store ® and cloud services.

Wearables, Home and Accessories net sales decreased during 2025 compared to 2024 primarily due to lower net sales of Accessories and Wearables.

Services net sales increased during 2025 compared to 2024 primarily due to higher net sales from advertising, the App Store and cloud services.

| 2025 Form 10-K | 23

10 unchanged sentences

Products Gross Margin

Products gross margin and Products gross margin percentage increased during 2024 compared to 2023 due to cost savings, partially offset by a different Products mix and the weakness in foreign currencies relative to the U.S.

Products gross margin increased during 2025 compared to 2024 primarily due to favorable costs and a different mix of products, partially offset by tariff costs.

Products gross margin percentage decreased during 2025 compared to 2024 primarily due to a different mix of products and tariff costs, partially offset by other favorable costs.

Services Gross Margin

Services gross margin increased during 2024 compared to 2023 due primarily to higher Services net sales.

Services gross margin percentage increased during 2024 compared to 2023 due to a different Services mix.

Services gross margin increased during 2025 compared to 2024 primarily due to higher Services net sales and a different mix of services.

Services gross margin percentage increased during 2025 compared to 2024 primarily due to a different mix of services, partially offset by higher costs.

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

9 unchanged sentences

Research and Development

The growth in R&D expense during 2024 compared to 2023 was driven primarily by increases in headcount-related expenses.

The growth in R&D expense during 2025 compared to 2024 was primarily driven by increases in headcount-related expenses and infrastructure-related costs.

Selling, General and Administrative

Selling, general and administrative expense increased $1.2 billion during 2024 compared to 2023.

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

| 2025 Form 10-K | 24

5 unchanged sentences

Statutory federal income tax rate 21 % 21 % 21 %

The Company’s effective tax rate for 2024 was higher than the statutory federal income tax rate due primarily to a one-time income tax charge of $10.2 billion, net, related to the State Aid Decision (refer to Note 7, “Income Taxes” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K) and state income taxes, partially offset by 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.

The Company’s effective tax rate for 2024 was higher compared to 2023 due primarily to a one-time income tax charge of $10.2 billion, net, related to the State Aid Decision, a higher effective tax rate on foreign earnings and lower tax benefits from share-based compensation.

The Company’s effective tax rate for 2025 was lower than the statutory federal income tax rate primarily due to a lower effective tax rate on foreign earnings, including the impact of changes in unrecognized tax benefits, the impact of the U.S.

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

The Company’s effective tax rate for 2025 was lower compared to 2024 due to a $10.7 billion year-over-year decrease in the provision for income taxes related to the State Aid Decision (refer to Note 7, “Income Taxes” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K) and the impact of changes in unrecognized tax benefits, partially offset by a change in valuation allowance and a higher effective tax rate on foreign earnings.

Liquidity and Capital Resources

The Company believes its balances of unrestricted cash, cash equivalents and marketable securities, which totaled $140.8 billion as of September 28, 2024, 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 believes its balances of cash, cash equivalents and marketable securities, which totaled $132.4 billion as of September 27, 2025, 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 material cash requirements include the following contractual obligations:

2 unchanged sentences

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

As of September 28, 2024, the Company had $10.0 billion of commercial paper outstanding, all of which was payable within 12 months.

As of September 27, 2025, the Company had $8.0 billion of commercial paper outstanding, which was payable within 12 months.

The Company has lease arrangements for certain equipment and facilities, including corporate, data center, manufacturing and retail space.

9 unchanged sentences

As of September 27, 2025, the balance of the deemed repatriation tax payable imposed by the U.S.

Tax Cuts and Jobs Act of 2017 (the “TCJA”) was $16.5 billion, with $7.2 billion expected to be paid within 12 months.

Tax Cuts and Jobs Act of 2017 (“TCJA”) was $8.8 billion, which was payable within 12 months.

| 2025 Form 10-K | 25

State Aid Decision Tax Payable

As of September 28, 2024, the Company had an obligation to pay €14.2 billion or $15.8 billion to Ireland in connection with the State Aid Decision, all of which was expected to be paid within 12 months.

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

Capital Return Program

6 unchanged sentences

Recent Accounting Pronouncements

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

Internal-Use Software

In September 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), which modernizes the accounting for internal-use software.

ASU 2025-06 removes all references to software development stages and requires capitalization of software costs when management has committed to the software project and it is probable the software will be completed and perform its intended use.

ASU 2025-06 will be effective for the Company in its first quarter of 2029, and early adoption is permitted.

The Company is currently evaluating the timing and method of its adoption of ASU 2025-06.

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued 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.

Segment Reporting

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which will require the Company to disclose segment expenses that are significant and regularly provided to the Company’s chief operating decision maker (“CODM”).

In addition, ASU 2023-07 will require the Company to disclose the title and position of its CODM and how the CODM uses segment profit or loss information in assessing segment performance and deciding how to allocate resources.

The Company will adopt ASU 2023-07 in its fourth quarter of 2025 using a retrospective transition method.

Critical Accounting Estimates

10 unchanged sentences

Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on the Company’s financial condition and operating results.

| 2025 Form 10-K | 26

Legal and Other Contingencies

The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, the outcomes of which are inherently uncertain.

The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable, the determination of which requires significant judgment.

The Company records a liability when it is probable a loss has been incurred and the amount is reasonably estimable, the determination of which requires significant judgment.

Resolution of legal matters in a manner inconsistent with management’s expectations could have a material impact on the Company’s financial condition and operating results.

| 2024 Form 10-K | 26

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-K

Item 7. Management’s Discussion and Analysis