What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-01-30 compared with 2025-08-01 · 68 added, 82 removed, 99 unchanged (60% of the section changed)

8 unchanged sentences

The following discussion should be read in conjunction with the 2025 Form 10-K filed with the U.S.

Securities and Exchange Commission (the “SEC”) and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.

Securities and Exchange Commission (“SEC”) and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.

Available Information

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

During the third quarter of 2025, the Company announced iOS 26, macOS ® Tahoe 26, iPadOS ® 26, watchOS ® 26, visionOS ® 26 and tvOS ® 26.

During the first quarter of 2026, the Company announced the following updated products:

• 14-inch MacBook Pro ®

• Apple Vision Pro ®

Macroeconomic Conditions

Macroeconomic conditions, including inflation, interest rates and currency fluctuations, have directly and indirectly impacted, and could in the future materially impact, the Company’s results of operations and financial condition.

Macroeconomic conditions, including inflation, interest rates, component pricing and currency fluctuations, have directly and indirectly impacted, and could in the future materially impact, the Company’s results of operations and financial condition.

| Q1 2026 Form 10-Q | 13

Tariffs and Other Measures

Beginning in the second quarter of 2025, new tariffs were announced on imports to the U.S.

Tariffs”), including additional tariffs on imports from China, India, Japan, South Korea, Taiwan, Vietnam and the European Union (“EU”), among others.

Beginning in the second quarter of 2025, new tariffs were announced on imports to the U.S., including additional tariffs on imports from China, India, Japan, South Korea, Taiwan, Vietnam and the European Union (“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.

On January 14, 2026, initial results were published of the previously announced U.S.

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

The announcement of the initial results of the investigation did not impose any additional tariffs affecting the Company’s products at this time.

Various modifications to U.S.

tariffs have been announced and further changes could be made in the future, which may include additional measures under the Section 232 semiconductor sector investigation, additional sector-based tariffs, or other measures.

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.

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Segment Operating Performance

The following table shows net sales by reportable segment for the three- and nine-month periods ended June 28, 2025 and June 29, 2024 (dollars in millions):

Three Months Ended Nine Months Ended

2025 June 29,

2024 Change June 28,

2025 June 29,

The following table shows net sales by reportable segment for the three months ended December 27, 2025 and December 28, 2024 (dollars in millions):

Three Months Ended

2025 December 28,

Americas $ 58,529 $ 52,648 11 %

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Total net sales $ 143,756 $ 124,300 16 %

Americas net sales increased during the third quarter and first nine months of 2025 compared to the same periods in 2024 due primarily 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 the third quarter and first nine months of 2025.

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

Americas net sales increased during the first quarter of 2026 compared to the same quarter in 2025 primarily due to higher net sales of iPhone and Services.

Europe net sales increased during the first quarter of 2026 compared to the same quarter in 2025 primarily due to higher net sales of iPhone and Services.

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 2026.

Greater China

Greater China net sales increased during the third quarter of 2025 compared to the third quarter of 2024 due primarily to higher net sales of iPhone and Mac.

Greater China net sales decreased during the first nine months of 2025 compared to the same period in 2024 due to lower net sales of iPhone, partially offset by higher net sales of Mac.

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

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

dollar had a favorable year-over-year impact on Japan net sales during the third quarter of 2025.

Greater China net sales increased during the first quarter of 2026 compared to the same quarter in 2025 due to higher net sales of iPhone.

Japan net sales increased during the first quarter of 2026 compared to the same quarter in 2025 primarily due to higher net sales of iPhone and iPad.

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

dollar had an unfavorable year-over-year impact on Japan net sales during the first quarter of 2026.

Rest of Asia Pacific

Rest of Asia Pacific net sales increased during the third quarter and first nine months of 2025 compared to the same periods in 2024 due primarily to higher net sales of Services and iPhone.

Rest of Asia Pacific net sales increased during the first quarter of 2026 compared to the same quarter in 2025 primarily due to higher net sales of iPhone and Services.

| Q1 2026 Form 10-Q | 14

Products and Services Performance

The following table shows net sales by category for the three- and nine-month periods ended June 28, 2025 and June 29, 2024 (dollars in millions):

Three Months Ended Nine Months Ended

2025 June 29,

2024 Change June 28,

2025 June 29,

The following table shows net sales by category for the three months ended December 27, 2025 and December 28, 2024 (dollars in millions):

Three Months Ended

2025 December 28,

iPhone $ 85,269 $ 69,138 23 %

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Total net sales $ 143,756 $ 124,300 16 %

iPhone net sales increased during the third quarter and first nine months of 2025 compared to the same periods in 2024 due to higher net sales of Pro models.

Mac net sales increased during the third quarter and first nine months of 2025 compared to the same periods in 2024 due to higher net sales of both laptops and desktops.

iPad net sales decreased during the third quarter of 2025 compared to the third quarter of 2024 due to lower net sales of iPad Pro ® , partially offset by higher net sales of all other iPad models.

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

iPhone net sales increased during the first quarter of 2026 compared to the same quarter in 2025 due to higher net sales of Pro models.

Mac net sales decreased during the first quarter of 2026 compared to the same quarter in 2025 primarily due to lower net sales of laptops and desktops.

iPad net sales increased during the first quarter of 2026 compared to the same quarter in 2025 primarily due to higher net sales of iPad and iPad Pro, partially offset by lower net sales of iPad mini ® .

Wearables, Home and Accessories

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

Services net sales increased during the third quarter and first nine months of 2025 compared to the same periods in 2024 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 2026 compared to the same quarter in 2025 primarily due to lower net sales of Wearables.

Services net sales increased during the first quarter of 2026 compared to the same quarter in 2025 primarily due to higher net sales from advertising, the App Store ® and cloud services.

| Q1 2026 Form 10-Q | 15

Products and Services gross margin and gross margin percentage for the three- and nine-month periods ended June 28, 2025 and June 29, 2024, were as follows (dollars in millions):

Three Months Ended Nine Months Ended

2025 June 29,

2024 June 28,

2025 June 29,

Products and Services gross margin and gross margin percentage for the three months ended December 27, 2025 and December 28, 2024, were as follows (dollars in millions):

Three Months Ended

2025 December 28,

Gross margin:

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Products Gross Margin

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

Products gross margin increased during the first nine months of 2025 compared to the same period in 2024 due primarily to favorable costs and a different mix of products, partially offset by tariffs and the weakness in foreign currencies relative to the U.S.

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

Products gross margin percentage decreased during the first nine months of 2025 compared to the same period in 2024 due primarily to a different mix of products and tariffs, partially offset by favorable costs.

Products gross margin and gross margin percentage increased during the first quarter of 2026 compared to the same quarter in 2025 primarily due to a different mix of products, partially offset by tariff costs.

Services Gross Margin

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

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

Services gross margin increased during the first quarter of 2026 compared to the same quarter in 2025 primarily due to higher Services net sales and a different mix of services.

Services gross margin percentage increased during the first quarter of 2026 compared to the same quarter in 2025 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 the 2025 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.

| Q3 2025 Form 10-Q | 16

Operating Expenses

Operating expenses for the three- and nine-month periods ended June 28, 2025 and June 29, 2024, were as follows (dollars in millions):

Three Months Ended Nine Months Ended

2025 June 29,

2024 June 28,

2025 June 29,

Operating expenses for the three months ended December 27, 2025 and December 28, 2024, were as follows (dollars in millions):

Three Months Ended

2025 December 28,

Research and development $ 10,887 $ 8,268 32 %

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Research and Development

The growth in research and development (“R&D”) expense during the third quarter and first nine months of 2025 compared to the same periods in 2024 was driven primarily by increases in headcount-related expenses and infrastructure-related costs.

The growth in research and development (“R&D”) expense during the first quarter of 2026 compared to the same quarter in 2025 was primarily driven by increases in infrastructure-related costs, headcount-related expenses and engineering program costs.

Selling, General and Administrative

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

The growth in selling, general and administrative expense during the first quarter of 2026 compared to the same quarter in 2025 was primarily driven by increases in headcount-related expenses and variable selling expenses.

| Q1 2026 Form 10-Q | 16

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 28, 2025 and June 29, 2024, were as follows (dollars in millions):

Three Months Ended Nine Months Ended

2025 June 29,

2024 June 28,

2025 June 29,

Provision for income taxes, effective tax rate and statutory federal income tax rate for the three months ended December 27, 2025 and December 28, 2024, were as follows (dollars in millions):

Three Months Ended

2025 December 28,

Provision for income taxes $ 8,905 $ 6,254

1 unchanged sentence

Statutory federal income tax rate 21 % 21 %

The Company’s effective tax rate for the third quarter of 2025 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 first quarter of 2026 was lower than the statutory federal income tax rate primarily due 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 first nine months of 2025 was lower than the statutory federal income tax rate due primarily to a lower effective tax rate on foreign earnings, including the impact of changes in unrecognized tax benefits, tax benefits from share-based compensation, and the impact of the U.S.

federal R&D credit, partially offset by state income taxes.

The Company’s effective tax rate for the third quarter of 2025 was higher compared to the third quarter of 2024 due primarily to the impact from foreign currency revaluations of unrecognized tax benefits.

The Company’s effective tax rate for the first nine months of 2025 was lower compared to the same period in 2024 due primarily to the impact of changes in unrecognized tax benefits, partially offset by a higher effective tax rate on foreign earnings.

| Q3 2025 Form 10-Q | 17

The Company’s effective tax rate for the first quarter of 2026 was higher compared to the first quarter of 2025 primarily due 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 in the first quarter of 2025 related to the State Aid Decision.

Liquidity and Capital Resources

The Company believes its balances of 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 manufacturing purchase obligations and the State Aid Decision tax payable.

The Company’s contractual cash requirements have not changed materially since the 2025 Form 10-K, except for manufacturing purchase obligations and other purchase obligations.

Manufacturing Purchase Obligations

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

As of June 28, 2025, the Company had manufacturing purchase obligations of $44.1 billion, with $43.8 billion payable within 12 months.

State Aid Decision Tax Payable

During the first nine months of 2025, the Company released from escrow €14.2 billion, or $15.4 billion, to Ireland in connection with the State Aid Decision, which fully settled the obligation.

As of December 27, 2025, the Company had manufacturing purchase obligations of $44.4 billion, with $43.7 billion payable within 12 months.

Other Purchase Obligations

The Company’s other purchase obligations primarily consist of noncancelable obligations related to supplier arrangements, licensed intellectual property and content, distribution rights, and the acquisition of capital assets related to product manufacturing.

As of December 27, 2025, the Company had other purchase obligations of $35.1 billion, with $9.3 billion payable within 12 months.

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 28, 2025, the Company’s quarterly cash dividend was $0.26 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 27, 2025, the Company’s quarterly cash dividend was $0.26 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 2025, the Company repurchased $21.0 billion of its common stock and paid dividends and dividend equivalents of $3.9 billion.

During the first quarter of 2026, the Company repurchased $25.0 billion of its common stock and paid dividends and dividend equivalents of $3.9 billion.

| Q1 2026 Form 10-Q | 17

Recent Accounting Pronouncements

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 Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No.

In November 2024, the FASB issued ASU No.

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

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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.

| Q3 2025 Form 10-Q | 18

Critical Accounting Estimates

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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 2025.

There have been no material changes to the Company’s market risk during the first three months of 2026.

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 2025 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