UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30 , 2023
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number: 001-36743
Apple Inc.
(Exact name of Registrant as specified in its charter)
California 94-2404110
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer Identification No.)
One Apple Park Way
Cupertino , California
95014
(Address of principal executive offices) (Zip Code)
( 408 ) 996-1010
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading symbol(s) Name of each exchange on which registered
Common Stock, $0.00001 par value per share
AAPL The Nasdaq Stock Market LLC
1.375% Notes due 2024 — The Nasdaq Stock Market LLC
0.000% Notes due 2025 — The Nasdaq Stock Market LLC
0.875% Notes due 2025 — The Nasdaq Stock Market LLC
1.625% Notes due 2026 — The Nasdaq Stock Market LLC
2.000% Notes due 2027 — The Nasdaq Stock Market LLC
1.375% Notes due 2029 — The Nasdaq Stock Market LLC
3.050% Notes due 2029 — The Nasdaq Stock Market LLC
0.500% Notes due 2031 — The Nasdaq Stock Market LLC
3.600% Notes due 2042 — The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒ No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☒
The aggregate market value of the voting and non-voting stock held by non-affiliates of the Registrant, as of March 31, 2023, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately $ 2,591,165,000,000 . Solely for purposes of this disclosure, shares of common stock held by executive officers and directors of the Registrant as of such date have been excluded because such persons may be deemed to be affiliates. This determination of executive officers and directors as affiliates is not necessarily a conclusive determination for any other purposes.
15,552,752,000 shares of common stock were issued and outstanding as of October 20, 2023.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement relating to its 2024 annual meeting of shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The Registrant’s definitive proxy statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
Apple Inc.
Form 10-K
For the Fiscal Year Ended September 30, 2023
TABLE OF CONTENTS
Page
Part I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 1C.
C ybersecurity
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosures
Part II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
[Reserved]
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Part III
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12 .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13 .
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
Part IV
Item 15.
Exhibit and Financial Statement Schedules
Item 16.
Form 10-K Summary
This Annual Report on Form 10-K (“Form 10-K”) contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Many of the forward-looking statements are located in Part I, Item 1 of this Form 10-K under the heading “Business” and Part II, Item 7 of this Form 10-K under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. For example, statements in this Form 10-K regarding the potential future impact of macroeconomic conditions on the Company’s business and results of operations are forward-looking statements. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of this Form 10-K under the heading “Risk Factors.” The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Unless otherwise stated, all information presented herein is based on the Company’s fiscal calendar, and references to particular years, quarters, months or periods refer to the Company’s fiscal years ended in September and the associated quarters, months and periods of those fiscal years. Each of the terms the “Company” and “Apple” as used herein refers collectively to Apple Inc. and its wholly owned subsidiaries, unless otherwise stated.
PART I
Item 1. Business
Company Background
The Company designs, manufactures and markets smartphones, personal computers, tablets, wearables and accessories, and sells a variety of related services. The Company’s fiscal year is the 52- or 53-week period that ends on the last Saturday of September.
Products
iPhone
iPhone ® is the Company’s line of smartphones based on its iOS operating system. The iPhone line includes iPhone 15 Pro, iPhone 15, iPhone 14, iPhone 13 and iPhone SE ® .
Mac
Mac ® is the Company’s line of personal computers based on its macOS ® operating system. The Mac line includes laptops MacBook Air ® and MacBook Pro ® , as well as desktops iMac ® , Mac mini ® , Mac Studio ® and Mac Pro ® .
iPad
iPad ® is the Company’s line of multipurpose tablets based on its iPadOS ® operating system. The iPad line includes iPad Pro ® , iPad Air ® , iPad and iPad mini ® .
Wearables, Home and Accessories
Wearables includes smartwatches and wireless headphones. The Company’s line of smartwatches, based on its watchOS ® operating system, includes Apple Watch Ultra™ 2, Apple Watch ® Series 9 and Apple Watch SE ® . The Company’s line of wireless headphones includes AirPods ® , AirPods Pro ® , AirPods Max™ and Beats ® products.
Home includes Apple TV ® , the Company’s media streaming and gaming device based on its tvOS ® operating system, and HomePod ® and HomePod mini ® , high-fidelity wireless smart speakers.
Accessories includes Apple-branded and third-party accessories.
Apple Inc. | 2023 Form 10-K | 1
Services
Advertising
The Company’s advertising services include third-party licensing arrangements and the Company’s own advertising platforms.
AppleCare
The Company offers a portfolio of fee-based service and support products under the AppleCare ® brand. The offerings provide priority access to Apple technical support, access to the global Apple authorized service network for repair and replacement services, and in many cases additional coverage for instances of accidental damage or theft and loss, depending on the country and type of product.
Cloud Services
The Company’s cloud services store and keep customers’ content up-to-date and available across multiple Apple devices and Windows personal computers.
Digital Content
The Company operates various platforms, including the App Store ® , that allow customers to discover and download applications and digital content, such as books, music, video, games and podcasts.
The Company also offers digital content through subscription-based services, including Apple Arcade ® , a game subscription service; Apple Fitness+ SM , a personalized fitness service; Apple Music ® , which offers users a curated listening experience with on-demand radio stations; Apple News+ ® , a subscription news and magazine service; and Apple TV+ ® , which offers exclusive original content and live sports.
Payment Services
The Company offers payment services, including Apple Card ® , a co-branded credit card, and Apple Pay ® , a cashless payment service.
Segments
The Company manages its business primarily on a geographic basis. The Company’s reportable segments consist of the Americas, Europe, Greater China, Japan and Rest of Asia Pacific. Americas includes both North and South America. Europe includes European countries, as well as India, the Middle East and Africa. Greater China includes China mainland, Hong Kong and Taiwan. Rest of Asia Pacific includes Australia and those Asian countries not included in the Company’s other reportable segments. Although the reportable segments provide similar hardware and software products and similar services, each one is managed separately to better align with the location of the Company’s customers and distribution partners and the unique market dynamics of each geographic region.
Markets and Distribution
The Company’s customers are primarily in the consumer, small and mid-sized business, education, enterprise and government markets. The Company sells its products and resells third-party products in most of its major markets directly to customers through its retail and online stores and its direct sales force. The Company also employs a variety of indirect distribution channels, such as third-party cellular network carriers, wholesalers, retailers and resellers. During 2023, the Company’s net sales through its direct and indirect distribution channels accounted for 37% and 63%, respectively, of total net sales.
Competition
The markets for the Company’s products and services are highly competitive, and are characterized by aggressive price competition and resulting downward pressure on gross margins, frequent introduction of new products and services, short product life cycles, evolving industry standards, continual improvement in product price and performance characteristics, rapid adoption of technological advancements by competitors, and price sensitivity on the part of consumers and businesses. Many of the Company’s competitors seek to compete primarily through aggressive pricing and very low cost structures, and by imitating the Company’s products and infringing on its intellectual property.
Apple Inc. | 2023 Form 10-K | 2
The Company’s ability to compete successfully depends heavily on ensuring the continuing and timely introduction of innovative new products, services and technologies to the marketplace. The Company designs and develops nearly the entire solution for its products, including the hardware, operating system, numerous software applications and related services. Principal competitive factors important to the Company include price, product and service features (including security features), relative price and performance, product and service quality and reliability, design innovation, a strong third-party software and accessories ecosystem, marketing and distribution capability, service and support, and corporate reputation.
The Company is focused on expanding its market opportunities related to smartphones, personal computers, tablets, wearables and accessories, and services. The Company faces substantial competition in these markets from companies that have significant technical, marketing, distribution and other resources, as well as established hardware, software, and service offerings with large customer bases. In addition, some of the Company’s competitors have broader product lines, lower-priced products and a larger installed base of active devices. Competition has been particularly intense as competitors have aggressively cut prices and lowered product margins. Certain competitors have the resources, experience or cost structures to provide products at little or no profit or even at a loss. The Company’s services compete with business models that provide content to users for free and use illegitimate means to obtain third-party digital content and applications. The Company faces significant competition as competitors imitate the Company’s product features and applications within their products, or collaborate to offer integrated solutions that are more competitive than those they currently offer.
Supply of Components
Although most components essential to the Company’s business are generally available from multiple sources, certain components are currently obtained from single or limited sources. The Company also competes for various components with other participants in the markets for smartphones, personal computers, tablets, wearables and accessories. Therefore, many components used by the Company, including those that are available from multiple sources, are at times subject to industry-wide shortage and significant commodity pricing fluctuations.
The Company uses some custom components that are not commonly used by its competitors, and new products introduced by the Company often utilize custom components available from only one source. When a component or product uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or their manufacturing capacities have increased. The continued availability of these components at acceptable prices, or at all, may be affected if suppliers decide to concentrate on the production of common components instead of components customized to meet the Company’s requirements.
The Company has entered into agreements for the supply of many components; however, there can be no guarantee that the Company will be able to extend or renew these agreements on similar terms, or at all.
Research and Development
Because the industries in which the Company competes are characterized by rapid technological advances, the Company’s ability to compete successfully depends heavily upon its ability to ensure a continual and timely flow of competitive products, services and technologies to the marketplace. The Company continues to develop new technologies to enhance existing products and services, and to expand the range of its offerings through research and development (“R&D”), licensing of intellectual property and acquisition of third-party businesses and technology.
Intellectual Property
The Company currently holds a broad collection of intellectual property rights relating to certain aspects of its hardware devices, accessories, software and services. This includes patents, designs, copyrights, trademarks and other forms of intellectual property rights in the U.S. and various foreign countries. Although the Company believes the ownership of such intellectual property rights is an important factor in differentiating its business and that its success does depend in part on such ownership, the Company relies primarily on the innovative skills, technical competence and marketing abilities of its personnel.
The Company regularly files patent, design, copyright and trademark applications to protect innovations arising from its research, development, design and marketing, and is currently pursuing thousands of applications around the world. Over time, the Company has accumulated a large portfolio of issued and registered intellectual property rights around the world. No single intellectual property right is solely responsible for protecting the Company’s products and services. The Company believes the duration of its intellectual property rights is adequate relative to the expected lives of its products and services.
In addition to Company-owned intellectual property, many of the Company’s products and services are designed to include intellectual property owned by third parties. It may be necessary in the future to seek or renew licenses relating to various aspects of the Company’s products, processes and services. While the Company has generally been able to obtain such licenses on commercially reasonable terms in the past, there is no guarantee that such licenses could be obtained in the future on reasonable terms or at all.
Apple Inc. | 2023 Form 10-K | 3
Business Seasonality and Product Introductions
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. The timing of product introductions can also impact the Company’s net sales to its indirect distribution channels as these channels are filled with new inventory following a product launch, and channel inventory of an older product often declines as the launch of a newer product approaches. Net sales can also be affected when consumers and distributors anticipate a product introduction.
Human Capital
The Company believes it has a talented, motivated and dedicated team, and works to create an inclusive, safe and supportive environment for all of its team members. As of September 30, 2023, the Company had approximately 161,000 full-time equivalent employees.
Workplace Practices and Policies
The Company is an equal opportunity employer committed to inclusion and diversity and to providing a workplace free of harassment or discrimination.
Compensation and Benefits
The Company believes that compensation should be competitive and equitable, and should enable employees to share in the Company’s success. The Company recognizes its people are most likely to thrive when they have the resources to meet their needs and the time and support to succeed in their professional and personal lives. In support of this, the Company offers a wide variety of benefits for employees around the world and invests in tools and resources that are designed to support employees’ individual growth and development.
Inclusion and Diversity
The Company is committed to its vision to build and sustain a more inclusive workforce that is representative of the communities it serves. The Company continues to work to increase diverse representation at every level, foster an inclusive culture, and support equitable pay and access to opportunity for all employees.
Engagement
The Company believes that open and honest communication among team members, managers and leaders helps create an open, collaborative work environment where everyone can contribute, grow and succeed. Team members are encouraged to come to their managers with questions, feedback or concerns, and the Company conducts surveys that gauge employee sentiment in areas like career development, manager performance and inclusivity.
Health and Safety
The Company is committed to protecting its team members everywhere it operates. The Company identifies potential workplace risks in order to develop measures to mitigate possible hazards. The Company supports employees with general safety, security and crisis management training, and by putting specific programs in place for those working in potentially high-hazard environments. Additionally, the Company works to protect the safety and security of its team members, visitors and customers through its global security team.
Available Information
The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the U.S. Securities and Exchange Commission (the “SEC”). Such reports and other information filed by the Company with the SEC are available free of charge at investor.apple.com/investor-relations/sec-filings/default.aspx when such reports are available on the SEC’s website. The Company periodically provides certain information for investors on its corporate website, www.apple.com, and its investor relations website, investor.apple.com. This includes press releases and other information about financial performance, information on environmental, social and governance matters, and details related to the Company’s annual meeting of shareholders. The information contained on the websites referenced in this Form 10-K is not incorporated by reference into this filing. Further, the Company’s references to website URLs are intended to be inactive textual references only.
Apple Inc. | 2023 Form 10-K | 4
Item 1A. Risk Factors
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 below. 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.
Because of the following factors, as well as other factors affecting the Company’s results of operations and financial condition, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. This discussion of risk factors contains forward-looking statements.
This section should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and accompanying notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.
Macroeconomic and Industry Risks
The Company’s operations and performance depend significantly on global and regional economic conditions and adverse economic conditions can materially adversely affect the Company’s business, results of operations and financial condition.
The Company has international operations with sales outside the U.S. representing a majority of the Company’s total net sales. In addition, the Company’s global supply chain is large and complex and a majority of the Company’s supplier facilities, including manufacturing and assembly sites, are located outside the U.S. As a result, the Company’s operations and performance depend significantly on global and regional economic conditions.
Adverse macroeconomic conditions, including slow growth or recession, high unemployment, inflation, tighter credit, higher interest rates, and currency fluctuations, can adversely impact consumer confidence and spending and materially adversely affect demand for the Company’s products and services. In addition, consumer confidence and spending can be materially adversely affected in response to changes in fiscal and monetary policy, financial market volatility, declines in income or asset values, and other economic factors.
In addition to an adverse impact on demand for the Company’s products and services, uncertainty about, or a decline in, global or regional economic conditions can have a significant impact on the Company’s suppliers, contract manufacturers, logistics providers, distributors, cellular network carriers and other channel partners, and developers. Potential outcomes include financial instability; inability to obtain credit to finance business operations; and insolvency.
Adverse economic conditions can also lead to increased credit and collectibility risk on the Company’s trade receivables; the failure of derivative counterparties and other financial institutions; limitations on the Company’s ability to issue new debt; reduced liquidity; and declines in the fair values of the Company’s financial instruments. These and other impacts can materially adversely affect the Company’s business, results of operations, financial condition and stock price.
The Company’s business can be impacted by political events, trade and other international disputes, war, terrorism, natural disasters, public health issues, industrial accidents and other business interruptions.
Political events, trade and other international disputes, war, terrorism, natural disasters, public health issues, industrial accidents and other business interruptions can harm or disrupt international commerce and the global economy, and could have a material adverse effect on the Company and its customers, suppliers, contract manufacturers, logistics providers, distributors, cellular network carriers and other channel partners.
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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. Substantially all 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. 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 operations and supply chain and limit the Company’s ability to offer and distribute its products and services to customers. 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 require the Company to take various actions, including changing suppliers, restructuring business relationships, and ceasing to offer third-party applications on its platforms. Changing the Company’s operations in accordance with new or changed restrictions on international trade can be expensive, time-consuming and disruptive to the Company’s operations. Such restrictions can 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, tensions between governments, including the U.S. and China, have in the past led to tariffs and other restrictions being imposed on the Company’s business. If disputes and conflicts further escalate in the future, actions by governments in response could be significantly more severe and restrictive and could materially adversely affect the Company’s business. Political uncertainty surrounding trade and other international disputes could also have a negative effect on consumer confidence and spending, which could adverse
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. In addition, such 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, including pandemics such as the COVID-19 pandemic, and other events beyond the Company’s control. Global climate change is resulting in certain types of natural disasters, such as droughts, floods, hurricanes and wildfires, occurring more frequently or with more intense effects. 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, and result in slowdowns and outages to the Company’s service offerings, and negatively impact consumer spending and demand in affected areas. Following an 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.
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.
While the Company maintains insurance coverage for certain types of losses, such insurance coverage may be insufficient to cover all losses that may arise.
Global markets for the Company’s products and services are highly competitive and subject to rapid technological change, and the Company may be unable to compete effectively in these markets.
The Company’s products and services are offered in highly competitive global markets characterized by aggressive price competition and resulting downward pressure on gross margins, frequent introduction of new products and services, short product life cycles, evolving industry standards, continual improvement in product price and performance characteristics, rapid adoption of technological advancements by competitors, and price sensitivity on the part of consumers and businesses.
The Company’s ability to compete successfully depends heavily on ensuring the continuing and timely introduction of innovative new products, services and technologies to the marketplace. The Company designs and develops nearly the entire solution for its products, including the hardware, operating system, numerous software applications and related services. As a result, the Company must make significant investments in R&D. There can be no assurance these investments will achieve expected returns, and the Company may not be able to develop and market new products and services successfully.
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The Company currently holds a significant number of patents, trademarks and copyrights and has registered, and applied to register, additional patents, trademarks and copyrights. In contrast, many of the Company’s competitors seek to compete primarily through aggressive pricing and very low cost structures, and by imitating the Company’s products and infringing on its intellectual property. Effective intellectual property protection is not consistently available in every country in which the Company operates. If the Company is unable to continue to develop and sell innovative new products with attractive margins or if competitors infringe on the Company’s intellectual property, the Company’s ability to maintain a competitive advantage could be materially adversely affected.
The Company has a minority market share in the global smartphone, personal computer and tablet markets. The Company faces substantial competition in these markets from companies that have significant technical, marketing, distribution and other resources, as well as established hardware, software and digital content supplier relationships. In addition, some of the Company’s competitors have broader product lines, lower-priced products and a larger installed base of active devices. Competition has been particularly intense as competitors have aggressively cut prices and lowered product margins. Certain competitors have the resources, experience or cost structures to provide products at little or no profit or even at a loss. Some of the markets in which the Company competes have from time to time experienced little to no growth or contracted overall.
Additionally, the Company faces significant competition as competitors imitate the Company’s product features and applications within their products or collaborate to offer solutions that are more competitive than those they currently offer. The Company also expects competition to intensify as competitors imitate the Company’s approach to providing components seamlessly within their offerings or work collaboratively to offer integrated solutions.
The Company’s services also face substantial competition, including from companies that have significant resources and experience and have established service offerings with large customer bases. The Company competes with business models that provide content to users for free. The Company also competes with illegitimate means to obtain third-party digital content and applications.
The Company’s business, results of operations and financial condition depend substantially on the Company’s ability to continually improve its products and services to maintain their functional and design advantages. There can be no assurance the Company will be able to continue to provide products and services that compete effectively.
Business Risks
To remain competitive and stimulate customer demand, the Company must successfully manage frequent introductions and transitions of products and services.
Due to the highly volatile and competitive nature of the markets and industries in which the Company competes, the Company must continually introduce new products, services and technologies, enhance existing products and services, effectively stimulate customer demand for new and upgraded products and services, and successfully manage the transition to these new and upgraded products and services. The success of new product and service introductions depends on a number of factors, including timely and successful development, market acceptance, the Company’s ability to manage the risks associated with new technologies and production ramp-up issues, the availability of application software for the Company’s products, the effective management of purchase commitments and inventory levels in line with anticipated product demand, the availability of products in appropriate quantities and at expected costs to meet anticipated demand, and the risk that new products and services may have quality or other defects or deficiencies. There can be no assurance the Company will successfully manage future introductions and transitions of products and services.
The Company depends on component and product manufacturing and logistical services provided by outsourcing partners, many of which are located outside of the U.S.
Substantially all 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, and a significant concentration of this manufacturing is currently performed by a small number of outsourcing partners, often in single locations. Changes or additions to the Company’s supply chain require considerable time and resources and involve significant risks and uncertainties. The Company has also outsourced much of its transportation and logistics management. While these arrangements can lower operating costs, they also reduce the Company’s direct control over production and distribution. Such diminished control has from time to time and may in the future have an adverse effect on the quality or quantity of products manufactured or services provided, or adversely affect the Company’s flexibility to respond to changing conditions. Although arrangements with these partners may contain provisions for product defect expense reimbursement, the Company generally remains responsible to the consumer for warranty and out-of-warranty service in the event of product defects and experiences unanticipated product defect liabilities from time to time. While the Company relies on its partners to adhere to its supplier code of conduct, violations of the supplier code of conduct occur from time to time and can materially adversely affect the Company’s business, reputation, results of operations and financial condition.
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The Company relies on single-source outsourcing partners in the U.S., Asia and Europe to supply and manufacture many components, and on outsourcing partners primarily located in Asia, for final assembly of substantially all of the Company’s hardware products. Any failure of these partners to perform can have a negative impact on the Company’s cost or supply of components or finished goods. In addition, manufacturing or logistics in these locations or transit to final destinations can be disrupted for a variety of reasons, including natural and man-made disasters, information technology system failures, commercial disputes, armed conflict, economic, business, labor, environmental, public health or political issues, or international trade disputes.
The Company has invested in manufacturing process equipment, much of which is held at certain of its outsourcing partners, and has made prepayments to certain of its suppliers associated with long-term supply agreements. While these arrangements help ensure the supply of components and finished goods, if these outsourcing partners or suppliers experience severe financial problems or other disruptions in their business, such continued supply can be reduced or terminated, and the recoverability of manufacturing process equipment or prepayments can be negatively impacted.
Future operating results depend upon the Company’s ability to obtain components in sufficient quantities on commercially reasonable terms.
Because the Company currently obtains certain components from single or limited sources, the Company is subject to significant supply and pricing risks. Many components, including those that are available from multiple sources, are at times subject to industry-wide shortages and significant commodity pricing fluctuations that can materially adversely affect the Company’s business, results of operations and financial condition. For example, the global semiconductor industry has in the past experienced high demand and shortages of supply, which adversely affected the Company’s ability to obtain sufficient quantities of components and products on commercially reasonable terms or at all. Such disruptions could occur in the future. While the Company has entered into agreements for the supply of many components, there can be no assurance the Company will be able to extend or renew these agreements on similar terms, or at all. Component suppliers may suffer from poor financial conditions, which can lead to business failure for the supplier or consolidation within a particular industry, further limiting the Company’s ability to obtain sufficient quantities of components on commercially reasonable terms or at all. The effects of global or regional economic conditions on the Company’s suppliers, described in “ The Company’s operations and performance depend significantly on global and regional economic conditions and adverse economic conditions can materially adversely affect the Company’s business, results of operations and financial condition, ” above, can also affect the Company’s ability to obtain components . Therefore, the Company remains subject to significant risks of supply shortages and price increases that can materially adversely affect its business, results of operations and financial condition.
The Company’s new products often utilize custom components available from only one source. When a component or product uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or their manufacturing capacities have increased. The continued availability of these components at acceptable prices, or at all, can be affected for any number of reasons, including if suppliers decide to concentrate on the production of common components instead of components customized to meet the Company’s requirements. When the Company’s supply of components for a new or existing product has been delayed or constrained, or when an outsourcing partner has delayed shipments of completed products to the Company, the Company’s business, results of operations and financial condition have been adversely affected and future delays or constraints could materially adversely affect the Company’s business, results of operations and financial condition. The Company’s business and financial performance could also be materially adversely affected depending on the time required to obtain sufficient quantities from the source, or to identify and obtain sufficient quantities from an alternative source.
The Company’s products and services may be affected from time to time by design and manufacturing defects that could materially adversely affect the Company’s business and result in harm to the Company’s reputation.
The Company offers complex hardware and software products and services that can be affected by design and manufacturing defects. Sophisticated operating system software and applications, such as those offered by the Company, often have issues that can unexpectedly interfere with the intended operation of hardware or software products and services. Defects can also exist in components and products the Company purchases from third parties. Component defects could make the Company’s products unsafe and create a risk of environmental or property damage and personal injury. These risks may increase as the Company’s products are introduced into specialized applications, including health. In addition, the Company’s service offerings can have quality issues and from time to time experience outages, service slowdowns or errors. As a result, from time to time the Company’s services have not performed as anticipated and may not meet customer expectations. There can be no assurance the Company will be able to detect and fix all issues and defects in the hardware, software and services it offers. Failure to do so can result in widespread technical and performance issues affecting the Company’s products and services. In addition, the Company can be exposed to product liability claims, recalls, product replacements or modifications, write-offs of inventory, property, plant and equipment or intangible assets, and significant warranty and other expenses, including litigation costs and regulatory fines. Quality problems can also 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, delay in new product and service introductions and lost sales.
Apple Inc. | 2023 Form 10-K | 8
The Company is exposed to the risk of write-downs on the value of its inventory and other assets, in addition to purchase commitment cancellation risk.
The Company records a write-down for product and component inventories that have become obsolete or exceed anticipated demand, or for which cost exceeds net realizable value. The Company also accrues necessary cancellation fee reserves for orders of excess products and components. The Company reviews long-lived assets, including capital assets held at its suppliers’ facilities and inventory prepayments, for impairment whenever events or circumstances indicate the assets may not be recoverable. If the Company determines that an impairment has occurred, it records a write-down equal to the amount by which the carrying value of the asset exceeds its fair value. Although the Company believes its inventory, capital assets, inventory prepayments and other assets and purchase commitments are currently recoverable, there can be no assurance the Company will not incur write-downs, fees, impairments and other charges given the rapid and unpredictable pace of product obsolescence in the industries in which the Company competes.
The Company orders components for its products and builds inventory in advance of product announcements and shipments. Manufacturing purchase obligations cover the Company’s forecasted component and manufacturing requirements, typically for periods up to 150 days. Because the Company’s markets are volatile, competitive and subject to rapid technology and price changes, there is a risk the Company will forecast incorrectly and order or produce excess or insufficient amounts of components or products, or not fully utilize firm purchase commitments.
The Company relies on access to third-party intellectual property, which may not be available to the Company on commercially reasonable terms or at all.
The Company’s products and services are designed to include intellectual property owned by third parties, which requires licenses from those third parties. In addition, because of technological changes in the industries in which the Company currently competes or in the future may compete, current extensive patent coverage and the rapid rate of issuance of new patents, the Company’s products and services can unknowingly infringe existing patents or intellectual property rights of others. From time to time, the Company has been notified that it may be infringing certain patents or other intellectual property rights of third parties. Based on experience and industry practice, the Company believes licenses to such third-party intellectual property can generally be obtained on commercially reasonable terms. However, there can be no assurance the necessary licenses can be obtained on commercially reasonable terms or at all. Failure to obtain the right to use third-party intellectual property, or to use such intellectual property on commercially reasonable terms, can preclude the Company from selling certain products or services, or otherwise have a material adverse impact on the Company’s business, results of operations and financial condition.
The Company’s future performance depends in part on support from third-party software developers.
The Company believes decisions by customers to purchase its hardware products depend in part on the availability of third-party software applications and services. There can be no assurance third-party developers will continue to develop and maintain software applications and services for the Company’s products. If third-party software applications and services cease to be developed and maintained for the Company’s products, customers may choose not to buy the Company’s products.
The Company believes the availability of third-party software applications and services for its products depends in part on the developers’ perception and analysis of the relative benefits of developing, maintaining and upgrading such software and services for the Company’s products compared to competitors’ platforms, such as Android for smartphones and tablets, Windows for personal computers and tablets, and PlayStation, Nintendo and Xbox for gaming platforms. This analysis may be based on factors such as the market position of the Company and its products, the anticipated revenue that may be generated, expected future growth of product sales, and the costs of developing such applications and services.
The Company’s minority market share in the global smartphone, personal computer and tablet markets can make developers less inclined to develop or upgrade software for the Company’s products and more inclined to devote their resources to developing and upgrading software for competitors’ products with larger market share. When developers focus their efforts on these competing platforms, the availability and quality of applications for the Company’s devices can suffer.
The Company relies on the continued availability and development of compelling and innovative software applications for its products. The Company’s products and operating systems are subject to rapid technological change, and when third-party developers are unable to or choose not to keep up with this pace of change, their applications can fail to take advantage of these changes to deliver improved customer experiences, can operate incorrectly, and can result in dissatisfied customers and lower customer demand for the Company’s products.
Apple Inc. | 2023 Form 10-K | 9
The Company distributes third-party applications for its products through the App Store. For the vast majority of applications, developers keep all of the revenue they generate on the App Store. The Company retains a commission from sales of applications and sales of digital services or goods initiated within an application. From time to time, the Company has made changes to its App Store, including actions taken in response to competition, market conditions and legal and regulatory requirements. The Company expects to make further business changes in the future, including as a result of legislative initiatives impacting the App Store, such as the European Union (“EU”) Digital Markets Act, which the Company is required to comply with by March 2024. The Company is also subject to litigation and investigations relating to the App Store, which have resulted in changes to the Company’s business practices, and may in the future result in further changes. Changes have included how developers communicate with consumers outside the App Store regarding alternative purchasing mechanisms. Future changes could also affect what the Company charges developers for access to its platforms, how it manages distribution of apps outside of the App Store, and how and to what extent it allows developers to communicate with consumers inside the App Store regarding alternative purchasing mechanisms. This could reduce the volume of sales, and the commission that the Company earns on those sales, would decrease. If the rate of the commission that the Company retains on such sales is reduced, or if it is otherwise narrowed in scope or eliminated, the Company’s business, results of operations and financial condition could be materially adversely affected.
Failure to obtain or create digital content that appeals to the Company’s customers, or to make such content available on commercially reasonable terms, could have a material adverse impact on the Company’s business, results of operations and financial condition.
The Company contracts with numerous third parties to offer their digital content to customers. This includes the right to sell, or offer subscriptions to, third-party content, as well as the right to incorporate specific content into the Company’s own services. The licensing or other distribution arrangements for this content can be for relatively short time periods and do not guarantee the continuation or renewal of these arrangements on commercially reasonable terms, or at all. Some third-party content providers and distributors currently or in the future may offer competing products and services, and can take actions to make it difficult or impossible for the Company to license or otherwise distribute their content. Other content owners, providers or distributors may seek to limit the Company’s access to, or increase the cost of, such content. The Company may be unable to continue to offer a wide variety of content at commercially reasonable prices with acceptable usage rules.
The Company also produces its own digital content, which can be costly to produce due to intense and increasing competition for talent, content and subscribers, and may fail to appeal to the Company’s customers.
Some third-party digital content providers require the Company to provide digital rights management and other security solutions. If requirements change, the Company may have to develop or license new technology to provide these solutions. There can be no assurance the Company will be able to develop or license such solutions at a reasonable cost and in a timely manner.
The Company’s success depends largely on the talents and efforts of its team members, the continued service and availability of highly skilled employees, including key personnel, and the Company’s ability to nurture its distinctive and inclusive culture.
Much of the Company’s future success depends on the talents and efforts of its team members and the continued availability and service of key personnel, including its Chief Executive Officer, executive team and other highly skilled employees. Experienced personnel in the technology industry are in high demand and competition for their talents is intense, especially in Silicon Valley, where most of the Company’s key personnel are located. In addition to intense competition for talent, workforce dynamics are constantly evolving. If the Company does not manage changing workforce dynamics effectively, it could materially adversely affect the Company’s culture, reputation and operational flexibility.
The Company believes that its distinctive and inclusive culture is a significant driver of its success. If the Company is unable to nurture its culture, it could materially adversely affect the Company’s ability to recruit and retain the highly skilled employees who are critical to its success, and could otherwise materially adversely affect the Company’s business, reputation, results of operations and financial condition.
The Company depends on the performance of carriers, wholesalers, retailers and other resellers.
The Company distributes its products and certain of its services through cellular network carriers, wholesalers, retailers and resellers, many of which distribute products and services from competitors. The Company also sells its products and services and resells third-party products in most of its major markets directly to consumers, small and mid-sized businesses, and education, enterprise and government customers through its retail and online stores and its direct sales force.
Some carriers providing cellular network service for the Company’s products offer financing, installment payment plans or subsidies for users’ purchases of the device. There can be no assurance such offers will be continued at all or in the same amounts.
Apple Inc. | 2023 Form 10-K | 10
The Company has invested and will continue to invest in programs to enhance reseller sales, including staffing selected resellers’ stores with Company employees and contractors, and improving product placement displays. These programs can require a substantial investment while not assuring return or incremental sales. The financial condition of these resellers could weaken, these resellers could stop distributing the Company’s products, or uncertainty regarding demand for some or all of the Company’s products could cause resellers to reduce their ordering and marketing of the Company’s products.
The Company’s business and reputation are impacted by information technology system failures and network disruptions.
The Company and its global supply chain are dependent on complex information technology systems and are exposed to information technology system failures or network disruptions caused by natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, ransomware or other cybersecurity incidents, or other events or disruptions. System upgrades, redundancy and other continuity measures may be ineffective or inadequate, and the Company’s or its vendors’ business continuity and disaster recovery planning may not be sufficient for all eventualities. Such failures or disruptions can adversely impact the Company’s business by, among other things, preventing access to the Company’s online services, interfering with customer transactions or impeding the manufacturing and shipping of the Company’s products. These events could materially adversely affect the Company’s business, reputation, results of operations and financial condition.
Losses or unauthorized access to or releases of confidential information, including personal information, could subject the Company to significant reputational, financial, legal and operational consequences.
The Company’s business requires it to use and store confidential information, including personal information, with respect to the Company’s customers and employees. The Company devotes significant resources to network and data security, including through the use of encryption and other security measures intended to protect its systems and data. But these measures cannot provide absolute security, and losses or unauthorized access to or releases of confidential information occur and could materially adversely affect the Company’s business, reputation, results of operations and financial condition.
The Company’s business also requires it to share confidential information with suppliers and other third parties. The Company relies on global suppliers that are also exposed to ransomware and other malicious attacks that can disrupt business operations. Although the Company takes steps to secure confidential information that is provided to or accessible by third parties working on the Company’s behalf, such measures are not always effective and losses or unauthorized access to, or releases of, confidential information occur. Such incidents and other malicious attacks could materially adversely affect the Company’s business, reputation, results of operations and financial condition.
The Company experiences malicious attacks and other attempts to gain unauthorized access to its systems on a regular basis. These attacks seek to compromise the confidentiality, integrity or availability of confidential information or disrupt normal business operations, and can, among other things, impair the Company’s ability to attract and retain customers for its products and services, impact the Company’s stock price, materially damage commercial relationships, and expose the Company to litigation or government investigations, which could result in penalties, fines or judgments against the Company. Globally, attacks are expected to continue accelerating in both frequency and sophistication with increasing use by actors of tools and techniques that are designed to circumvent controls, avoid detection, and remove or obfuscate forensic evidence, all of which hinders the Company’s ability to identify, investigate and recover from incidents. In addition, attacks against the Company and its customers can escalate during periods of severe diplomatic or armed conflict.
Although malicious attacks perpetrated to gain access to confidential information, including personal information, affect many companies across various industries, the Company is at a relatively greater risk of being targeted because of its high profile and the value of the confidential information it creates, owns, manages, stores and processes.
The Company has implemented systems and processes intended to secure its information technology systems and prevent unauthorized access to or loss of sensitive data, and mitigate the impact of unauthorized access, including through the use of encryption and authentication technologies. As with all companies, these security measures may not be sufficient for all eventualities and may be vulnerable to hacking, ransomware attacks, employee error, malfeasance, system error, faulty password management or other irregularities. For example, third parties can fraudulently induce the Company’s or its vendors’ employees or customers into disclosing usernames, passwords or other sensitive information, which can, in turn, be used for unauthorized access to the Company’s or its vendors’ systems and services. To help protect customers and the Company, the Company deploys and makes available technologies like multifactor authentication, monitors its services and systems for unusual activity and may freeze accounts under suspicious circumstances, which, among other things, can result in the delay or loss of customer orders or impede customer access to the Company’s products and services.
While the Company maintains insurance coverage that is intended to address certain aspects of data security risks, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise.
Apple Inc. | 2023 Form 10-K | 11
Investment in new business strategies and acquisitions could disrupt the Company’s ongoing business, present risks not originally contemplated and materially adversely affect the Company’s business, reputation, results of operations and financial condition.
The Company has invested, and in the future may invest, in new business strategies or acquisitions. Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations, greater-than-expected liabilities and expenses, economic, political, legal and regulatory challenges associated with operating in new businesses, regions or countries, inadequate return on capital, potential impairment of tangible and intangible assets, and significant write-offs. Investment and acquisition transactions are exposed to additional risks, including failing to obtain required regulatory approvals on a timely basis or at all, or the imposition of onerous conditions that could delay or prevent the Company from completing a transaction or otherwise limit the Company’s ability to fully realize the anticipated benefits of a transaction. These new ventures are inherently risky and may not be successful. The failure of any significant investment could materially adversely affect the Company’s business, reputation, results of operations and financial condition.
The Company’s retail stores are subject to numerous risks and uncertainties.
The Company’s retail operations are subject to many factors that pose risks and uncertainties and could adversely impact the Company’s business, results of operations and financial condition, including macroeconomic factors that could have an adverse effect on general retail activity. Other factors include the Company’s ability to: manage costs associated with retail store construction and operation; manage relationships with existing retail partners; manage costs associated with fluctuations in the value of retail inventory; and obtain and renew leases in quality retail locations at a reasonable cost.
Legal and Regulatory Compliance Risks
The Company’s business, results of operations and financial condition could be adversely impacted by unfavorable results of legal proceedings or government investigations.
The Company is subject to various claims, legal proceedings and government investigations that have arisen in the ordinary course of business and have not yet been fully resolved, and new matters may arise in the future. In addition, agreements entered into by the Company sometimes include indemnification provisions which can subject the Company to costs and damages in the event of a claim against an indemnified third party. The number of claims, legal proceedings and government investigations involving the Company, and the alleged magnitude of such claims, proceedings and government investigations, has generally increased over time and may continue to increase.
The Company has faced and continues to face a significant number of patent claims relating to its cellular-enabled products, and new claims may arise in the future, including as a result of new legal or regulatory frameworks. For example, technology and other patent-holding companies frequently assert their patents and seek royalties and often enter into litigation based on allegations of patent infringement or other violations of intellectual property rights. The Company is vigorously defending infringement actions in courts in several U.S. jurisdictions, as well as internationally in various countries. The plaintiffs in these actions frequently seek injunctions and substantial damages.
Regardless of the merit of particular claims, defending against litigation or responding to government investigations can be expensive, time-consuming and disruptive to the Company’s operations. In recognition of these considerations, the Company may enter into agreements or other arrangements to settle litigation and resolve such challenges. There can be no assurance such agreements can be obtained on acceptable terms or that litigation will not occur. These agreements can also significantly increase the Company’s cost of sales and operating expenses and require the Company to change its business practices and limit the Company’s ability to offer certain products and services.
Except as described in Part I, Item 3 of this Form 10-K under the heading “Legal Proceedings” and in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 12, “Commitments, Contingencies and Supply Concentrations” under the heading “Contingencies,” 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.
The outcome of litigation or government investigations is inherently uncertain. If one or more legal matters were resolved against the Company or an indemnified third party in a reporting period for amounts above management’s expectations, the Company’s results of operations and financial condition for that reporting period could be materially adversely affected. Further, such an outcome can result in significant compensatory, punitive or trebled monetary damages, disgorgement of revenue or profits, remedial corporate measures or injunctive relief against the Company, and has from time to time required, and can in the future require, the Company to change its business practices and limit the Company’s ability to offer certain products and services, all of which could materially adversely affect the Company’s business, reputation, results of operations and financial condition.
While the Company maintains insurance coverage for certain types of claims, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise.
Apple Inc. | 2023 Form 10-K | 12
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; tax; 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 and regulations 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 supply chain and its business. New and changing laws and regulations can also create uncertainty about how such laws and regulations will be interpreted and applied. These risks and costs may increase as the Company’s products and services are introduced into specialized applications, including health and financial services. 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, r
Expectations relating to environmental, social and governance considerations and related reporting obligations expose the Company to potential liabilities, increased costs, reputational harm, and other adverse effects on the Company’s business.
Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on environmental, social and governance considerations relating to businesses, including climate change and greenhouse gas emissions, human and civil rights, and diversity, equity and inclusion. In addition, the Company makes statements about its goals and initiatives through its various non-financial reports, information provided on its website, press statements and other communications. Responding to these environmental, social and governance considerations and implementation of these goals and initiatives involves risks and uncertainties, requires investments, and depends in part on third-party performance or data that is outside the Company’s control. The Company cannot guarantee that it will achieve its announced environmental, social and governance goals and initiatives. In addition, some stakeholders may disagree with the Company’s goals and initiatives. Any failure, or perceived failure, by the Company to achieve its goals, further its initiatives, adhere to its public statements, comply with federal, state or international environmental, social and governance laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against the Company and materially adversely affect the Company’s business, reputation, results of operations, financial condition and stock price.
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, including as a result of legislative initiatives impacting the App Store, such as the EU Digital Markets Act, which the Company is required to comply with by March 2024, or similar laws in other jurisdictions. Changes have included how developers communicate with consumers outside the App Store regarding alternative purchasing mechanisms. Future changes could also affect what the Company charges developers for access to its platforms, how it manages distribution of apps outside of the App Store, and how and to what extent it allows developers to communicate with consumers inside the App Store regarding alternative purchasing mechanisms.
Apple Inc. | 2023 Form 10-K | 13
The Company is also currently subject to antitrust investigations 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 the subject of investigations in Europe and other jurisdictions relating to App Store terms and conditions. If such investigations result in adverse findings against the Company, the Company could be exposed to significant fines and may be required to make changes to its App Store business, all of which could materially adversely affect the Company’s business, results of operations and financial condition. The Company is also subject to litigation relating to the App Store, which has resulted in changes to the Company’s business practices, and may in the future result in further changes.
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 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.
There can be no assurance the Company’s business 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 could 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, and lost sales.
The Company’s business is subject to a variety of U.S. and international laws, rules, policies and other obligations regarding data protection.
The Company is subject to an increasing number of federal, state and international laws relating to the collection, use, retention, security and transfer of various types of personal information. In many cases, these laws apply not only to third-party transactions, but also restrict transfers of personal information among the Company and its international subsidiaries. Several jurisdictions have passed laws in this area, and additional jurisdictions are considering imposing additional restrictions or have laws that are pending. These laws continue to develop and may be inconsistent from jurisdiction to jurisdiction. Complying with emerging and changing requirements causes the Company to incur substantial costs and has required and may in the future require the Company to change its business practices. Noncompliance could result in significant penalties or legal liability.
The Company makes statements about its use and disclosure of personal information through its privacy policy, information provided on its website, press statements and other privacy notices provided to customers. Any failure by the Company to comply with these public statements or with other federal, state or international privacy or data protection laws and regulations could result in inquiries or proceedings against the Company by governmental entities or others. In addition to reputational impacts, penalties could include ongoing audit requirements and significant legal liability.
In addition to the risks generally relating to the collection, use, retention, security and transfer of personal information, the Company is also subject to specific obligations relating to information considered sensitive under applicable laws, such as health data, financial data and biometric data. Health data and financial data are subject to additional privacy, security and breach notification requirements, and the Company is subject to audit by governmental authorities regarding the Company’s compliance with these obligations. If the Company fails to adequately comply with these rules and requirements, or if health data or financial data is handled in a manner not permitted by law or under the Company’s agreements with healthcare or financial institutions, the Company can be subject to litigation or government investigations, and can be liable for associated investigatory expenses, and can also incur significant fees or fines.
Payment card data is also subject to additional requirements. Under payment card rules and obligations, if cardholder information is potentially compromised, the Company can be liable for associated investigatory expenses and can also incur significant fees or fines if the Company fails to follow payment card industry data security standards. The Company could also experience a significant increase in payment card transaction costs or lose the ability to process payment cards if it fails to follow payment card industry data security standards, which could materially adversely affect the Company’s business, reputation, results of operations and financial condition.
Apple Inc. | 2023 Form 10-K | 14
Financial Risks
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; and the introduction of new products or services, including new products or services with higher cost structures. These and other factors could have a materially adverse impact on the Company’s results of operations and financial condition.
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 failure of one of the Company’s logistics, components supply, or manufacturing partners.
The Company’s financial performance is subject to risks associated with changes in the value of the U.S. dollar relative to local currencies.
The Company’s primary exposure to movements in foreign exchange rates relates to non–U.S. dollar–denominated sales, cost of sales and operating expenses worldwide. Gross margins on the Company’s products in foreign countries and on products that include components obtained from foreign suppliers have in the past been adversely affected and could in the future be materially adversely affected by foreign exchange rate fluctuations.
The weakening of foreign currencies relative to the U.S. dollar adversely affects the U.S. dollar value of the Company’s foreign currency–denominated sales and earnings, and generally leads the Company to raise international pricing, potentially reducing demand for the Company’s products. In some circumstances, for competitive or other reasons, the Company may decide not to raise international pricing to offset the U.S. dollar’s strengthening, which would adversely affect the U.S. dollar value of the gross margins the Company earns on foreign currency–denominated sales.
Conversely, a strengthening of foreign currencies relative to the U.S. dollar, while generally beneficial to the Company’s foreign currency–denominated sales and earnings, could cause the Company to reduce international pricing or incur losses on its foreign currency derivative instruments, thereby limiting the benefit. Additionally, strengthening of foreign currencies may increase the Company’s cost of product components denominated in those currencies, thus adversely affecting gross margins.
The Company uses derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign exchange rates. The use of such hedging activities may not be effective to offset any, or more than a portion, of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place.
The Company is exposed to credit risk and fluctuations in the values of its investment portfolio.
The Company’s investments can be negatively affected by changes in liquidity, credit deterioration, financial results, market and economic conditions, political risk, sovereign risk, interest rate fluctuations or other factors. As a result, the value and liquidity of the Company’s cash, cash equivalents and marketable securities may fluctuate substantially. Therefore, although the Company has not realized any significant losses on its cash, cash equivalents and marketable securities, future fluctuations in their value could result in significant losses and could have a material adverse impact on the Company’s results of operations and financial condition.
Apple Inc. | 2023 Form 10-K | 15
The Company is exposed to credit risk on its trade accounts receivable, vendor non-trade receivables and prepayments related to long-term supply agreements, and this risk is heightened during periods when economic conditions worsen.
The Company distributes its products and certain of its services through third-party cellular network carriers, wholesalers, retailers and resellers. The Company also sells its products and services directly to small and mid-sized businesses and education, enterprise and government customers. A substantial majority of the Company’s outstanding trade receivables are not covered by collateral, third-party bank support or financing arrangements, or credit insurance, and a significant portion of the Company’s trade receivables can be concentrated within cellular network carriers or other resellers. The Company’s exposure to credit and collectibility risk on its trade receivables is higher in certain international markets and its ability to mitigate such risks may be limited. The Company also has unsecured vendor non-trade receivables resulting from purchases of components by outsourcing partners and other vendors that manufacture subassemblies or assemble final products for the Company. In addition, the Company has made prepayments associated with long-term supply agreements to secure supply of inventory components. As of September 30, 2023, the Company’s vendor non-trade receivables and prepayments related to long-term supply agreements were concentrated among a few individual vendors located primarily in Asia. While the Company has procedures to monitor and limit exposure to credit risk on its trade and vendor non-trade receivables, as well as long-term prepayments, there can be no assurance such procedures will effectively limit its credit risk and avoid losses.
The Company is subject to changes in tax rates, the adoption of new U.S. or international tax legislation and exposure to additional tax liabilities.
The Company is subject to taxes in the U.S. and numerous foreign jurisdictions, including Ireland and Singapore, where a number of the Company’s subsidiaries are organized. Due to economic and political conditions, tax laws and tax rates for income taxes and other non-income taxes in various jurisdictions may be subject to significant change. For example, the Organisation for Economic Co-operation and Development continues to advance proposals for modernizing international tax rules, including the introduction of global minimum tax standards. The Company’s effective tax rates are affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, the introduction of new taxes, and changes in tax laws or their interpretation. The application of tax laws may be uncertain, require significant judgment and be subject to differing interpretations.
The Company is also subject to the examination of its tax returns and other tax matters by the U.S. Internal Revenue Service and other tax authorities and governmental bodies. The Company regularly assesses the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of its provision for taxes. There can be no assurance as to the outcome of these examinations. If the Company’s effective tax rates were to increase, or if the ultimate determination of the Company’s taxes owed is for an amount in excess of amounts previously accrued, the Company’s business, results of operations and financial condition could be materially adversely affected.
General Risks
The price of the Company’s stock is subject to volatility.
The Company’s stock has experienced substantial price volatility in the past and may continue to do so in the future. Additionally, the Company, the technology industry and the stock market as a whole have, from time to time, experienced extreme stock price and volume fluctuations that have affected stock prices in ways that may have been unrelated to these companies’ operating performance. Price volatility may cause the average price at which the Company repurchases its stock in a given period to exceed the stock’s price at a given point in time. The Company believes the price of its stock should reflect expectations of future growth and profitability. The Company also believes the price of its stock should reflect expectations that its cash dividend will continue at current levels or grow, and that its current share repurchase program will be fully consummated. Future dividends are subject to declaration by the Company’s Board of Directors, and the Company’s share repurchase program does not obligate it to acquire any specific number of shares. If the Company fails to meet expectations related to future growth, profitability, dividends, share repurchases or other market expectations, the price of the Company’s stock may decline significantly, which could have a material adverse impact on investor confidence and employee retention.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Not applicable.
Apple Inc. | 2023 Form 10-K | 16
Item 2. Properties
The Company’s headquarters is located in Cupertino, California. As of September 30, 2023, the Company owned or leased facilities and land for corporate functions, R&D, data centers, retail and other purposes at locations throughout the U.S. and in various places outside the U.S. The Company believes its existing facilities and equipment, which are used by all reportable segments, are in good operating condition and are suitable for the conduct of its business.
Item 3. Legal Proceedings
Epic Games
Epic Games, Inc. (“Epic”) filed a lawsuit in the U.S. District Court for the Northern District of California (the “District Court”) against the Company alleging violations of federal and state antitrust laws and California’s unfair competition law based upon the Company’s operation of its App Store. On September 10, 2021, the District Court ruled in favor of the Company with respect to nine out of the ten counts included in Epic’s claim. The District Court found that certain provisions of the Company’s App Store Review Guidelines violate California’s unfair competition law and issued an injunction enjoining the Company from prohibiting developers from including in their apps external links that direct customers to purchasing mechanisms other than Apple in-app purchasing. The injunction applies to apps on the U.S. storefront of the iOS and iPadOS App Store. On April 24, 2023, the U.S. Court of Appeals for the Ninth Circuit (the “Circuit Court”) affirmed the District Court’s ruling. On June 7, 2023, the Company and Epic filed petitions with the Circuit Court requesting further review of the decision. On June 30, 2023, the Circuit Court denied both petitions. On July 17, 2023, the Circuit Court granted Apple’s motion to stay enforcement of the injunction pending appeal to the U.S. Supreme Court. If the U.S. Supreme Court denies Apple’s petition, the stay of the injunction will expire.
Masimo
Masimo Corporation and Cercacor Laboratories, Inc. (together, “Masimo”) filed a complaint before the U.S. International Trade Commission (the “ITC”) alleging infringement by the Company of five patents relating to the functionality of the blood oxygen feature in Apple Watch Series 6 and 7. In its complaint, Masimo sought a permanent exclusion order prohibiting importation to the United States of certain Apple Watch models that include blood oxygen sensing functionality. On October 26, 2023, the ITC entered a limited exclusion order (the “Order”) prohibiting importation and sales in the United States of Apple Watch models with blood oxygen sensing functionality, which includes Apple Watch Series 9 and Ultra 2. The Order will not go into effect until the end of the administrative review period, which is currently expected to end on December 25, 2023. The Company intends to appeal the Order and seek a stay pending the appeal.
Other Legal Proceedings
The Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The Company settled certain matters during the fourth quarter of 2023 that did not individually or in the aggregate have a material impact on the Company’s financial condition or operating results. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected.
Item 4. Mine Safety Disclosures
Not applicable.
Apple Inc. | 2023 Form 10-K | 17
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company’s common stock is traded on The Nasdaq Stock Market LLC under the symbol AAPL.
Holders
As of October 20, 2023, there were 23,763 shareholders of record.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Share repurchase activity during the three months ended September 30, 2023 was as follows (in millions, except number of shares, which are reflected in thousands, and per-share amounts):
Periods Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of
Shares That May Yet Be Purchased
Under the Plans or Programs (1)
July 2, 2023 to August 5, 2023:
Open market and privately negotiated purchases 33,864 $ 191.62 33,864
August 6, 2023 to September 2, 2023:
August 2023 ASRs 22,085 (2)
(2)
22,085 (2)
Open market and privately negotiated purchases 30,299 $ 178.99 30,299
September 3, 2023 to September 30, 2023:
Open market and privately negotiated purchases 20,347 $ 176.31 20,347
Total 106,595 $ 74,069
(1) As of September 30, 2023, the Company was authorized by the Board of Directors to purchase up to $90 billion of the Company’s common stock under a share repurchase program announced on May 4, 2023, of which $15.9 billion had been utilized. During the fourth quarter of 2023, the Company also utilized the final $4.6 billion under its previous repurchase program, which was most recently authorized in April 2022. The programs do not obligate the Company to acquire a minimum amount of shares. Under the programs, shares may be repurchased in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.
(2) In August 2023, the Company entered into new accelerated share repurchase agreements (“ASRs”). Under the terms of the ASRs, two financial institutions committed to deliver shares of the Company’s common stock during the purchase periods in exchange for up-front payments totaling $5.0 billion. The total number of shares ultimately delivered under the ASRs, and therefore the average repurchase price paid per share, is determined based on the volume-weighted average price of the Company’s common stock during the ASRs’ purchase periods, which end in the first quarter of 2024.
Apple Inc. | 2023 Form 10-K | 18
Company Stock Performance
The following graph shows a comparison of five-year cumulative total shareholder return, calculated on a dividend-reinvested basis, for the Company, the S&P 500 Index and the Dow Jones U.S. Technology Supersector Index. The graph assumes $100 was invested in each of the Company’s common stock, the S&P 500 Index and the Dow Jones U.S. Technology Supersector Index as of the market close on September 28, 2018. Past stock price performance is not necessarily indicative of future stock price performance.
September 2018 September 2019 September 2020 September 2021 September 2022 September 2023
Apple Inc. $ 100 $ 98 $ 204 $ 269 $ 277 $ 317
S&P 500 Index $ 100 $ 104 $ 118 $ 161 $ 136 $ 160
Dow Jones U.S. Technology Supersector Index $ 100 $ 105 $ 154 $ 227 $ 164 $ 226
Item 6. [Reserved]
Apple Inc. | 2023 Form 10-K | 19
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this Form 10-K. This Item generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 are not included, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 24, 2022.
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 year 2023 spanned 53 weeks, whereas fiscal years 2022 and 2021 spanned 52 weeks each.
Fiscal Year Highlights
The Company’s total net sales were $383.3 billion and net income was $97.0 billion during 2023.
The Company’s total net sales decreased 3% or $11.0 billion during 2023 compared to 2022. The weakness in foreign currencies relative to the U.S. dollar accounted for more than the entire year-over-year decrease in total net sales, which consisted primarily of lower net sales of Mac and iPhone, partially offset by higher net sales of Services.
The Company announces new product, service and software offerings at various times during the year. Significant announcements during fiscal year 2023 included the following:
First Quarter 2023:
• iPad and iPad Pro;
• Next-generation Apple TV 4K; and
• MLS Season Pass, a Major League Soccer subscription streaming service.
Second Quarter 2023:
• MacBook Pro 14”, MacBook Pro 16” and Mac mini; and
• Second-generation HomePod.
Third Quarter 2023:
• MacBook Air 15”, Mac Studio and Mac Pro;
• Apple Vision Pro™, the Company’s first spatial computer featuring its new visionOS™, expected to be available in early calendar year 2024; and
• iOS 17, macOS Sonoma, iPadOS 17, tvOS 17 and watchOS 10, updates to the Company’s operating systems.
Fourth Quarter 2023:
• iPhone 15, iPhone 15 Plus, iPhone 15 Pro and iPhone 15 Pro Max; and
• Apple Watch Series 9 and Apple Watch Ultra 2.
In May 2023, the Company announced a new share repurchase program of up to $90 billion and raised its quarterly dividend from $0.23 to $0.24 per share beginning in May 2023. During 2023, the Company repurchased $76.6 billion of its common stock and paid dividends and dividend equivalents of $15.0 billion.
Macroeconomic Conditions
Macroeconomic conditions, including inflation, changes in 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.
Apple Inc. | 2023 Form 10-K | 20
Segment Operating Performance
The following table shows net sales by reportable segment for 2023, 2022 and 2021 (dollars in millions):
2023 Change 2022 Change 2021
Net sales by reportable segment:
Americas $ 162,560 (4) % $ 169,658 11 % $ 153,306
Europe 94,294 (1) % 95,118 7 % 89,307
Greater China 72,559 (2) % 74,200 9 % 68,366
Japan 24,257 (7) % 25,977 (9) % 28,482
Rest of Asia Pacific 29,615 1 % 29,375 11 % 26,356
Total net sales $ 383,285 (3) % $ 394,328 8 % $ 365,817
Americas
Americas net sales decreased 4% or $7.1 billion during 2023 compared to 2022 due to lower net sales of iPhone and Mac, partially offset by higher net sales of Services.
Europe
Europe net sales decreased 1% or $824 million during 2023 compared to 2022. The weakness in foreign currencies relative to the U.S. dollar accounted for more than the entire year-over-year decrease in Europe net sales, which consisted primarily of lower net sales of Mac and Wearables, Home and Accessories, partially offset by higher net sales of iPhone and Services.
Greater China
Greater China net sales decreased 2% or $1.6 billion during 2023 compared to 2022. The weakness in the renminbi relative to the U.S. dollar accounted for more than the entire year-over-year decrease in Greater China net sales, which consisted primarily of lower net sales of Mac and iPhone.
Japan
Japan net sales decreased 7% or $1.7 billion during 2023 compared to 2022. The weakness in the yen relative to the U.S. dollar accounted for more than the entire year-over-year decrease in Japan net sales, which consisted primarily of lower net sales of iPhone, Wearables, Home and Accessories and Mac.
Rest of Asia Pacific
Rest of Asia Pacific net sales increased 1% or $240 million during 2023 compared to 2022. The weakness in foreign currencies relative to the U.S. dollar had a significantly unfavorable year-over-year impact on Rest of Asia Pacific net sales. The net sales increase consisted of higher net sales of iPhone and Services, partially offset by lower net sales of Mac and iPad.
Apple Inc. | 2023 Form 10-K | 21
Products and Services Performance
The following table shows net sales by category for 2023, 2022 and 2021 (dollars in millions):
2023 Change 2022 Change 2021
Net sales by category:
iPhone (1)
$ 200,583 (2) % $ 205,489 7 % $ 191,973
Mac (1)
29,357 (27) % 40,177 14 % 35,190
iPad (1)
28,300 (3) % 29,292 (8) % 31,862
Wearables, Home and Accessories (1)
39,845 (3) % 41,241 7 % 38,367
Services (2)
85,200 9 % 78,129 14 % 68,425
Total net sales $ 383,285 (3) % $ 394,328 8 % $ 365,817
(1) Products net sales include amortization of the deferred value of unspecified software upgrade rights, which are bundled in the sales price of the respective product.
(2) Services net sales include amortization of the deferred value of services bundled in the sales price of certain products.
iPhone
iPhone net sales decreased 2% or $4.9 billion during 2023 compared to 2022 due to lower net sales of non-Pro iPhone models, partially offset by higher net sales of Pro iPhone models.
Mac
Mac net sales decreased 27% or $10.8 billion during 2023 compared to 2022 due primarily to lower net sales of laptops.
iPad
iPad net sales decreased 3% or $1.0 billion during 2023 compared to 2022 due primarily to lower net sales of iPad mini and iPad Air, partially offset by the combined net sales of iPad 9th and 10th generation.
Wearables, Home and Accessories
Wearables, Home and Accessories net sales decreased 3% or $1.4 billion during 2023 compared to 2022 due primarily to lower net sales of Wearables and Accessories.
Services
Services net sales increased 9% or $7.1 billion during 2023 compared to 2022 due to higher net sales across all lines of business.
Apple Inc. | 2023 Form 10-K | 22
Gross Margin
Products and Services gross margin and gross margin percentage for 2023, 2022 and 2021 were as follows (dollars in millions):
2023 2022 2021
Gross margin:
Products $ 108,803 $ 114,728 $ 105,126
Services 60,345 56,054 47,710
Total gross margin $ 169,148 $ 170,782 $ 152,836
Gross margin percentage:
Products 36.5 % 36.3 % 35.3 %
Services 70.8 % 71.7 % 69.7 %
Total gross margin percentage 44.1 % 43.3 % 41.8 %
Products Gross Margin
Products gross margin decreased during 2023 compared to 2022 due to the weakness in foreign currencies relative to the U.S. dollar and lower Products volume, partially offset by cost savings and a different Products mix.
Products gross margin percentage increased during 2023 compared to 2022 due to cost savings and a different Products mix, partially offset by the weakness in foreign currencies relative to the U.S. dollar and decreased leverage.
Services Gross Margin
Services gross margin increased during 2023 compared to 2022 due primarily to higher Services net sales, partially offset by the weakness in foreign currencies relative to the U.S. dollar and higher Services costs.
Services gross margin percentage decreased during 2023 compared to 2022 due to higher Services costs and the weakness in foreign currencies relative to the U.S. dollar, partially offset by a different Services mix.
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.
Operating Expenses
Operating expenses for 2023, 2022 and 2021 were as follows (dollars in millions):
2023 Change 2022 Change 2021
Research and development $ 29,915 14 % $ 26,251 20 % $ 21,914
Percentage of total net sales 8 % 7 % 6 %
Selling, general and administrative $ 24,932 (1) % $ 25,094 14 % $ 21,973
Percentage of total net sales 7 % 6 % 6 %
Total operating expenses $ 54,847 7 % $ 51,345 17 % $ 43,887
Percentage of total net sales 14 % 13 % 12 %
Research and Development
The year-over-year growth in R&D expense in 2023 was driven primarily by increases in headcount-related expenses.
Selling, General and Administrative
Selling, general and administrative expense was relatively flat in 2023 compared to 2022.
Apple Inc. | 2023 Form 10-K | 23
Provision for Income Taxes
Provision for income taxes, effective tax rate and statutory federal income tax rate for 2023, 2022 and 2021 were as follows (dollars in millions):
2023 2022 2021
Provision for income taxes $ 16,741 $ 19,300 $ 14,527
Effective tax rate 14.7 % 16.2 % 13.3 %
Statutory federal income tax rate 21 % 21 % 21 %
The Company’s effective tax rate for 2023 and 2022 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 2023 was lower compared to 2022 due primarily to a lower effective tax rate on foreign earnings and the impact of U.S. foreign tax credit regulations issued by the U.S. Department of the Treasury in 2022, partially offset by lower tax benefits from share-based compensation.
Liquidity and Capital Resources
The Company believes its balances of cash, cash equivalents and unrestricted marketable securities, which totaled $148.3 billion as of September 30, 2023, 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:
Debt
As of September 30, 2023, the Company had outstanding fixed-rate notes with varying maturities for an aggregate principal amount of $106.6 billion (collectively the “Notes”), with $9.9 billion payable within 12 months. Future interest payments associated with the Notes total $41.1 billion, with $2.9 billion payable within 12 months.
The Company also issues unsecured short-term promissory notes pursuant to a commercial paper program. As of September 30, 2023, the Company had $6.0 billion of commercial paper outstanding, all of which was payable within 12 months.
Leases
The Company has lease arrangements for certain equipment and facilities, including corporate, data center, manufacturing and retail space. As of September 30, 2023, the Company had fixed lease payment obligations of $15.8 billion, with $2.0 billion payable within 12 months.
Manufacturing Purchase Obligations
The Company utilizes several outsourcing partners to manufacture subassemblies for the Company’s products and to perform final assembly and testing of finished products. The Company also obtains individual components for its products from a wide variety of individual suppliers. As of September 30, 2023, the Company had manufacturing purchase obligations of $53.1 billion, with $52.9 billion payable within 12 months. The Company’s manufacturing purchase obligations are primarily noncancelable.
Other Purchase Obligations
The Company’s other purchase obligations primarily consist of noncancelable obligations to acquire capital assets, including assets related to product manufacturing, and noncancelable obligations related to supplier arrangements, licensed intellectual property and content, and distribution rights. As of September 30, 2023, the Company had other purchase obligations of $21.9 billion, with $5.6 billion payable within 12 months.
Deemed Repatriation Tax Payable
As of September 30, 2023, the balance of the deemed repatriation tax payable imposed by the U.S. Tax Cuts and Jobs Act of 2017 (the “Act”) was $22.0 billion, with $6.5 billion expected to be paid within 12 months.
Apple Inc. | 2023 Form 10-K | 24
Capital Return Program
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 September 30, 2023, the Company’s quarterly cash dividend was $0.24 per share. The Company intends to increase its dividend on an annual basis, subject to declaration by the Board of Directors.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Note 1, “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Uncertain Tax Positions
The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. The evaluation of the Company’s uncertain tax positions involves significant judgment in the interpretation and application of GAAP and complex domestic and international tax laws, including the Act and matters related to the allocation of international taxation rights between countries. Although management believes the Company’s reserves are reasonable, no assurance can be given that the final outcome of these uncertainties will not be different from that which is reflected in the Company’s reserves. Reserves are adjusted considering changing facts and circumstances, such as the closing of a tax examination. 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.
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. 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.
Apple Inc. | 2023 Form 10-K | 25
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to economic risk from interest rates and foreign exchange rates. The Company uses various strategies to manage these risks; however, they may still impact the Company’s consolidated financial statements.
Interest Rate Risk
The Company is primarily exposed to fluctuations in U.S. interest rates and their impact on the Company’s investment portfolio and term debt. Increases in interest rates will negatively affect the fair value of the Company’s investment portfolio and increase the interest expense on the Company’s term debt. To protect against interest rate risk, the Company may use derivative instruments, offset interest rate–sensitive assets and liabilities, or control duration of the investment and term debt portfolios.
The following table sets forth potential impacts on the Company’s investment portfolio and term debt, including the effects of any associated derivatives, that would result from a hypothetical increase in relevant interest rates as of September 30, 2023 and September 24, 2022 (dollars in millions):
Interest Rate
Sensitive Instrument
Hypothetical Interest
Rate Increase
Potential Impact
2023 2022
Investment portfolio
100 basis points, all tenors
Decline in fair value
$ 3,089 $ 4,022
Term debt
100 basis points, all tenors
Increase in annual interest expense
$ 194 $ 201
Foreign Exchange Rate Risk
The Company’s exposure to foreign exchange rate risk relates primarily to the Company being a net receiver of currencies other than the U.S. dollar. Changes in exchange rates, and in particular a strengthening of the U.S. dollar, will negatively affect the Company’s net sales and gross margins as expressed in U.S. dollars. Fluctuations in exchange rates may also affect the fair values of certain of the Company’s assets and liabilities. To protect against foreign exchange rate risk, the Company may use derivative instruments, offset exposures, or adjust local currency pricing of its products and services. However, the Company may choose to not hedge certain foreign currency exposures for a variety of reasons, including accounting considerations or prohibitive cost.
The Company applied a value-at-risk (“VAR”) model to its foreign currency derivative positions to assess the potential impact of fluctuations in exchange rates. The VAR model used a Monte Carlo simulation. The VAR is the maximum expected loss in fair value, for a given confidence interval, to the Company’s foreign currency derivative positions due to adverse movements in rates. Based on the results of the model, the Company estimates, with 95% confidence, a maximum one-day loss in fair value of $669 million and $1.0 billion as of September 30, 2023 and September 24, 2022, respectively. Changes in the Company’s underlying foreign currency exposures, which were excluded from the assessment, generally offset changes in the fair values of the Company’s foreign currency derivatives.
Apple Inc. | 2023 Form 10-K | 26
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements Page
Consolidated Statements of Operations for the years ended September 30, 2023, September 24, 2022 and September 25, 2021
Consolidated Statements of Comprehensive Income for the years ended September 30, 2023, September 24, 2022 and September 25, 2021
Consolidated Balance Sheets as of September 30, 2023 and September 24, 2022
Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2023, September 24, 2022 and September 25, 2021
Consolidated Statements of Cash Flows for the years ended September 30, 2023, September 24, 2022 and September 25, 2021
Notes to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm
All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and accompanying notes.
Apple Inc. | 2023 Form 10-K | 27
Apple Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except number of shares, which are reflected in thousands, and per-share amounts)
Years ended
September 30, 2023 September 24, 2022 September 25, 2021
Net sales:
Products $ 298,085 $ 316,199 $ 297,392
Services 85,200 78,129 68,425
Total net sales 383,285 394,328 365,817
Cost of sales:
Products 189,282 201,471 192,266
Services 24,855 22,075 20,715
Total cost of sales 214,137 223,546 212,981
Gross margin 169,148 170,782 152,836
Operating expenses:
Research and development 29,915 26,251 21,914
Selling, general and administrative 24,932 25,094 21,973
Total operating expenses 54,847 51,345 43,887
Operating income 114,301 119,437 108,949
Other income/(expense), net ( 565 ) ( 334 ) 258
Income before provision for income taxes 113,736 119,103 109,207
Provision for income taxes 16,741 19,300 14,527
Net income $ 96,995 $ 99,803 $ 94,680
Earnings per share:
Basic $ 6.16 $ 6.15 $ 5.67
Diluted $ 6.13 $ 6.11 $ 5.61
Shares used in computing earnings per share:
Basic 15,744,231 16,215,963 16,701,272
Diluted 15,812,547 16,325,819 16,864,919
See accompanying Notes to Consolidated Financial Statements.
Apple Inc. | 2023 Form 10-K | 28
Apple Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Years ended
September 30, 2023 September 24, 2022 September 25, 2021
Net income $ 96,995 $ 99,803 $ 94,680
Other comprehensive income/(loss):
Change in foreign currency translation, net of tax ( 765 ) ( 1,511 ) 501
Change in unrealized gains/losses on derivative instruments, net of tax:
Change in fair value of derivative instruments 323 3,212 32
Adjustment for net (gains)/losses realized and included in net income ( 1,717 ) ( 1,074 ) 1,003
Total change in unrealized gains/losses on derivative instruments ( 1,394 ) 2,138 1,035
Change in unrealized gains/losses on marketable debt securities, net of tax:
Change in fair value of marketable debt securities 1,563 ( 12,104 ) ( 694 )
Adjustment for net (gains)/losses realized and included in net income 253 205 ( 273 )
Total change in unrealized gains/losses on marketable debt securities 1,816 ( 11,899 ) ( 967 )
Total other comprehensive income/(loss) ( 343 ) ( 11,272 ) 569
Total comprehensive income $ 96,652 $ 88,531 $ 95,249
See accompanying Notes to Consolidated Financial Statements.
Apple Inc. | 2023 Form 10-K | 29
Apple Inc.
CONSOLIDATED BALANCE SHEETS
(In millions, except number of shares, which are reflected in thousands, and par value)
September 30, 2023 September 24, 2022
ASSETS:
Current assets:
Cash and cash equivalents $ 29,965 $ 23,646
Marketable securities 31,590 24,658
Accounts receivable, net 29,508 28,184
Vendor non-trade receivables 31,477 32,748
Inventories 6,331 4,946
Other current assets 14,695 21,223
Total current assets 143,566 135,405
Non-current assets:
Marketable securities 100,544 120,805
Property, plant and equipment, net 43,715 42,117
Other non-current assets 64,758 54,428
Total non-current assets 209,017 217,350
Total assets $ 352,583 $ 352,755
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Accounts payable $ 62,611 $ 64,115
Other current liabilities 58,829 60,845
Deferred revenue 8,061 7,912
Commercial paper 5,985 9,982
Term debt 9,822 11,128
Total current liabilities 145,308 153,982
Non-current liabilities:
Term debt 95,281 98,959
Other non-current liabilities 49,848 49,142
Total non-current liabilities 145,129 148,101
Total liabilities 290,437 302,083
Commitments and contingencies
Shareholders’ equity:
Common stock and additional paid-in capital, $ 0.00001 par value: 50,400,000 shares authorized; 15,550,061 and 15,943,425 shares issued and outstanding, respectively
73,812 64,849
Accumulated deficit ( 214 ) ( 3,068 )
Accumulated other comprehensive loss ( 11,452 ) ( 11,109 )
Total shareholders’ equity 62,146 50,672
Total liabilities and shareholders’ equity $ 352,583 $ 352,755
See accompanying Notes to Consolidated Financial Statements.
Apple Inc. | 2023 Form 10-K | 30
Apple Inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In millions, except per-share amounts)
Years ended
September 30, 2023 September 24, 2022 September 25, 2021
Total shareholders’ equity, beginning balances $ 50,672 $ 63,090 $ 65,339
Common stock and additional paid-in capital:
Beginning balances 64,849 57,365 50,779
Common stock issued 1,346 1,175 1,105
Common stock withheld related to net share settlement of equity awards ( 3,521 ) ( 2,971 ) ( 2,627 )
Share-based compensation 11,138 9,280 8,108
Ending balances 73,812 64,849 57,365
Retained earnings/(Accumulated deficit):
Beginning balances ( 3,068 ) 5,562 14,966
Net income 96,995 99,803 94,680
Dividends and dividend equivalents declared ( 14,996 ) ( 14,793 ) ( 14,431 )
Common stock withheld related to net share settlement of equity awards ( 2,099 ) ( 3,454 ) ( 4,151 )
Common stock repurchased ( 77,046 ) ( 90,186 ) ( 85,502 )
Ending balances ( 214 ) ( 3,068 ) 5,562
Accumulated other comprehensive income/(loss):
Beginning balances ( 11,109 ) 163 ( 406 )
Other comprehensive income/(loss) ( 343 ) ( 11,272 ) 569
Ending balances ( 11,452 ) ( 11,109 ) 163
Total shareholders’ equity, ending balances $ 62,146 $ 50,672 $ 63,090
Dividends and dividend equivalents declared per share or RSU $ 0.94 $ 0.90 $ 0.85
See accompanying Notes to Consolidated Financial Statements.
Apple Inc. | 2023 Form 10-K | 31
Apple Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Years ended
September 30, 2023 September 24, 2022 September 25, 2021
Cash, cash equivalents and restricted cash, beginning balances $ 24,977 $ 35,929 $ 39,789
Operating activities:
Net income 96,995 99,803 94,680
Adjustments to reconcile net income to cash generated by operating activities:
Depreciation and amortization 11,519 11,104 11,284
Share-based compensation expense 10,833 9,038 7,906
Other ( 2,227 ) 1,006 ( 4,921 )
Changes in operating assets and liabilities:
Accounts receivable, net ( 1,688 ) ( 1,823 ) ( 10,125 )
Vendor non-trade receivables 1,271 ( 7,520 ) ( 3,903 )
Inventories ( 1,618 ) 1,484 ( 2,642 )
Other current and non-current assets ( 5,684 ) ( 6,499 ) ( 8,042 )
Accounts payable ( 1,889 ) 9,448 12,326
Other current and non-current liabilities 3,031 6,110 7,475
Cash generated by operating activities 110,543 122,151 104,038
Investing activities:
Purchases of marketable securities ( 29,513 ) ( 76,923 ) ( 109,558 )
Proceeds from maturities of marketable securities 39,686 29,917 59,023
Proceeds from sales of marketable securities 5,828 37,446 47,460
Payments for acquisition of property, plant and equipment ( 10,959 ) ( 10,708 ) ( 11,085 )
Other ( 1,337 ) ( 2,086 ) ( 385 )
Cash generated by/(used in) investing activities 3,705 ( 22,354 ) ( 14,545 )
Financing activities:
Payments for taxes related to net share settlement of equity awards ( 5,431 ) ( 6,223 ) ( 6,556 )
Payments for dividends and dividend equivalents ( 15,025 ) ( 14,841 ) ( 14,467 )
Repurchases of common stock ( 77,550 ) ( 89,402 ) ( 85,971 )
Proceeds from issuance of term debt, net 5,228 5,465 20,393
Repayments of term debt ( 11,151 ) ( 9,543 ) ( 8,750 )
Proceeds from/(Repayments of) commercial paper, net ( 3,978 ) 3,955 1,022
Other ( 581 ) ( 160 ) 976
Cash used in financing activities ( 108,488 ) ( 110,749 ) ( 93,353 )
Increase/(Decrease) in cash, cash equivalents and restricted cash 5,760 ( 10,952 ) ( 3,860 )
Cash, cash equivalents and restricted cash, ending balances $ 30,737 $ 24,977 $ 35,929
Supplemental cash flow disclosure:
Cash paid for income taxes, net $ 18,679 $ 19,573 $ 25,385
Cash paid for interest $ 3,803 $ 2,865 $ 2,687
See accompanying Notes to Consolidated Financial Statements.
Apple Inc. | 2023 Form 10-K | 32
Apple Inc.
Notes to Consolidated Financial Statements
Note 1 – Summary of Significant Accounting Policies
Basis of Presentation and Preparation
The consolidated financial statements include the accounts of Apple Inc. and its wholly owned subsidiaries. The preparation of these consolidated financial statements and accompanying notes in conformity with GAAP requires the use of management estimates. Certain prior period amounts in the consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation.
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 fiscal quarter of 2023. The Company’s fiscal year 2023 spanned 53 weeks, whereas fiscal years 2022 and 2021 spanned 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.
Revenue
The Company records revenue net of taxes collected from customers that are remitted to governmental authorities.
Share-Based Compensation
The Company recognizes share-based compensation expense on a straight-line basis for its estimate of equity awards that will ultimately vest.
Cash Equivalents
All highly liquid investments with maturities of three months or less at the date of purchase are treated as cash equivalents.
Marketable Securities
The cost of securities sold is determined using the specific identification method.
Inventories
Inventories are measured using the first-in, first-out method.
Property, Plant and Equipment
Depreciation on property, plant and equipment is recognized on a straight-line basis.
Derivative Instruments
The Company presents derivative assets and liabilities at their gross fair values in the Consolidated Balance Sheets.
Income Taxes
The Company records certain deferred tax assets and liabilities in connection with the minimum tax on certain foreign earnings created by the Act.
Leases
The Company combines and accounts for lease and nonlease components as a single lease component for leases of corporate, data center and retail facilities.
Apple Inc. | 2023 Form 10-K | 33
Note 2 – Revenue
The Company recognizes revenue at the amount to which it expects to be entitled when control of the products or services is transferred to its customers. Control is generally transferred when the Company has a present right to payment and title and the significant risks and rewards of ownership of products or services are transferred to its customers. For most of the Company’s Products net sales, control transfers when products are shipped. For the Company’s Services net sales, control transfers over time as services are delivered. Payment for Products and Services net sales is collected within a short period following transfer of control or commencement of delivery of services, as applicable.
The Company records reductions to Products net sales related to future product returns, price protection and other customer incentive programs based on the Company’s expectations and historical experience.
For arrangements with multiple performance obligations, which represent promises within an arrangement that are distinct, the Company allocates revenue to all distinct performance obligations based on their relative stand-alone selling prices (“SSPs”). When available, the Company uses observable prices to determine SSPs. When observable prices are not available, SSPs are established that reflect the Company’s best estimates of what the selling prices of the performance obligations would be if they were sold regularly on a stand-alone basis. The Company’s process for estimating SSPs without observable prices considers multiple factors that may vary depending upon the unique facts and circumstances related to each performance obligation including, where applicable, prices charged by the Company for similar offerings, market trends in the pricing for similar offerings, product-specific business objectives and the estimated cost to provide the performance obligation.
The Company has identified up to three performance obligations regularly included in arrangements involving the sale of iPhone, Mac, iPad and certain other products. The first performance obligation, which represents the substantial portion of the allocated sales price, is the hardware and bundled software delivered at the time of sale. The second performance obligation is the right to receive certain product-related bundled services, which include iCloud ® , Siri ® and Maps. The third performance obligation is the right to receive, on a when-and-if-available basis, future unspecified software upgrades relating to the software bundled with each device. The Company allocates revenue and any related discounts to these performance obligations based on their relative SSPs. Because the Company lacks observable prices for the undelivered performance obligations, the allocation of revenue is based on the Company’s estimated SSPs. Revenue allocated to the delivered hardware and bundled software is recognized when control has transferred to the customer, which generally occurs when the product is shipped. Revenue allocated to the product-related bundled services and unspecified software upgrade rights is deferred and recognized on a straight-line basis over the estimated period they are expected to be provided.
For certain long-term service arrangements, the Company has performance obligations for services it has not yet delivered. For these arrangements, the Company does not have a right to bill for the undelivered services. The Company has determined that any unbilled consideration relates entirely to the value of the undelivered services. Accordingly, the Company has not recognized revenue, and does not disclose amounts, related to these undelivered services.
For the sale of third-party products where the Company obtains control of the product before transferring it to the customer, the Company recognizes revenue based on the gross amount billed to customers. The Company considers multiple factors when determining whether it obtains control of third-party products, including evaluating if it can establish the price of the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product. For third-party applications sold through the App Store, the Company does not obtain control of the product before transferring it to the customer. Therefore, the Company accounts for all third-party application–related sales on a net basis by recognizing in Services net sales only the commission it retains.
Apple Inc. | 2023 Form 10-K | 34
Net sales disaggregated by significant products and services for 2023, 2022 and 2021 were as follows (in millions):
2023 2022 2021
iPhone (1)
$ 200,583 $ 205,489 $ 191,973
Mac (1)
29,357 40,177 35,190
iPad (1)
28,300 29,292 31,862
Wearables, Home and Accessories (1)
39,845 41,241 38,367
Services (2)
85,200 78,129 68,425
Total net sales $ 383,285 $ 394,328 $ 365,817
(1) Products net sales include amortization of the deferred value of unspecified software upgrade rights, which are bundled in the sales price of the respective product.
(2) Services net sales include amortization of the deferred value of services bundled in the sales price of certain products.
Total net sales include $ 8.2 billion of revenue recognized in 2023 that was included in deferred revenue as of September 24, 2022, $ 7.5 billion of revenue recognized in 2022 that was included in deferred revenue as of September 25, 2021, and $ 6.7 billion of revenue recognized in 2021 that was included in deferred revenue as of September 26, 2020.
The Company’s proportion of net sales by disaggregated revenue source was generally consistent for each reportable segment in Note 13, “Segment Information and Geographic Data” for 2023, 2022 and 2021, except in Greater China, where iPhone revenue represented a moderately higher proportion of net sales.
As of September 30, 2023 and September 24, 2022, the Company had total deferred revenue of $ 12.1 billion and $ 12.4 billion, respectively. As of September 30, 2023, the Company expects 67 % of total deferred revenue to be realized in less than a year, 25 % within one-to-two years, 7 % within two-to-three years and 1 % in greater than three years.
Note 3 – Earnings Per Share
The following table shows the computation of basic and diluted earnings per share for 2023, 2022 and 2021 (net income in millions and shares in thousands):
2023 2022 2021
Numerator:
Net income $ 96,995 $ 99,803 $ 94,680
Denominator:
Weighted-average basic shares outstanding 15,744,231 16,215,963 16,701,272
Effect of dilutive share-based awards 68,316 109,856 163,647
Weighted-average diluted shares 15,812,547 16,325,819 16,864,919
Basic earnings per share $ 6.16 $ 6.15 $ 5.67
Diluted earnings per share $ 6.13 $ 6.11 $ 5.61
Approximately 24 million restricted stock units (“RSUs”) were excluded from the computation of diluted earnings per share for 2023 because their effect would have been antidilutive.
Apple Inc. | 2023 Form 10-K | 35
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 September 30, 2023 and September 24, 2022 (in millions):
2023
Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Current Marketable Securities Non-Current Marketable Securities
Cash $ 28,359 $ — $ — $ 28,359 $ 28,359 $ — $ —
Level 1:
Money market funds 481 — — 481 481 — —
Mutual funds and equity securities 442 12 ( 26 ) 428 — 428 —
Subtotal 923 12 ( 26 ) 909 481 428 —
Level 2 (1) :
U.S. Treasury securities 19,406 — ( 1,292 ) 18,114 35 5,468 12,611
U.S. agency securities 5,736 — ( 600 ) 5,136 36 271 4,829
Non-U.S. government securities 17,533 6 ( 1,048 ) 16,491 — 11,332 5,159
Certificates of deposit and time deposits 1,354 — — 1,354 1,034 320 —
Commercial paper 608 — — 608 — 608 —
Corporate debt securities 76,840 6 ( 5,956 ) 70,890 20 12,627 58,243
Municipal securities 628 — ( 26 ) 602 — 192 410
Mortgage- and asset-backed securities 22,365 6 ( 2,735 ) 19,636 — 344 19,292
Subtotal 144,470 18 ( 11,657 ) 132,831 1,125 31,162 100,544
Total (2)
$ 173,752 $ 30 $ ( 11,683 ) $ 162,099 $ 29,965 $ 31,590 $ 100,544
2022
Adjusted Cost Unrealized Gains Unrealized Losses Fair Value Cash and Cash Equivalents Current Marketable Securities Non-Current Marketable Securities
Cash $ 18,546 $ — $ — $ 18,546 $ 18,546 $ — $ —
Level 1:
Money market funds 2,929 — — 2,929 2,929 — —
Mutual funds 274 — ( 47 ) 227 — 227 —
Subtotal 3,203 — ( 47 ) 3,156 2,929 227 —
Level 2 (1) :
U.S. Treasury securities 25,134 — ( 1,725 ) 23,409 338 5,091 17,980
U.S. agency securities 5,823 — ( 655 ) 5,168 — 240 4,928
Non-U.S. government securities 16,948 2 ( 1,201 ) 15,749 — 8,806 6,943
Certificates of deposit and time deposits 2,067 — — 2,067 1,805 262 —
Commercial paper 718 — — 718 28 690 —
Corporate debt securities 87,148 9 ( 7,707 ) 79,450 — 9,023 70,427
Municipal securities 921 — ( 35 ) 886 — 266 620
Mortgage- and asset-backed securities 22,553 — ( 2,593 ) 19,960 — 53 19,907
Subtotal 161,312 11 ( 13,916 ) 147,407 2,171 24,431 120,805
Total (2)
$ 183,061 $ 11 $ ( 13,963 ) $ 169,109 $ 23,646 $ 24,658 $ 120,805
(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 September 30, 2023 and September 24, 2022, total marketable securities included $ 13.8 billion and $ 12.7 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 7, “Income Taxes”) and other agreements.
Apple Inc. | 2023 Form 10-K | 36
The following table shows the fair value of the Company’s non-current marketable debt securities, by contractual maturity, as of September 30, 2023 (in millions):
Due after 1 year through 5 years $ 74,427
Due after 5 years through 10 years 9,964
Due after 10 years 16,153
Total fair value $ 100,544
The Company’s investments in marketable debt securities have been classified and accounted for as available-for-sale. The Company classifies marketable debt securities as either current or non-current based solely on each instrument’s underlying contractual maturity date.
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.
The Company classifies cash flows related to derivative instruments in the same section of the Consolidated Statements of Cash Flows as the items being hedged, which are generally classified as operating activities.
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 September 30, 2023, 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 19 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.
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 September 30, 2023 and September 24, 2022 were as follows (in millions):
2023 2022
Derivative instruments designated as accounting hedges:
Foreign exchange contracts $ 74,730 $ 102,670
Interest rate contracts $ 19,375 $ 20,125
Derivative instruments not designated as accounting hedges:
Foreign exchange contracts $ 104,777 $ 185,381
Apple Inc. | 2023 Form 10-K | 37
The gross fair values of the Company’s derivative assets and liabilities as of September 24, 2022 were as follows (in millions):
2022
Fair Value of Derivatives Designated as Accounting Hedges Fair Value of Derivatives Not Designated as Accounting Hedges Total Fair Value
Derivative assets (1) :
Foreign exchange contracts $ 4,317 $ 2,819 $ 7,136
Derivative liabilities (2) :
Foreign exchange contracts $ 2,205 $ 2,547 $ 4,752
Interest rate contracts $ 1,367 $ — $ 1,367
(1) Derivative assets are measured using Level 2 fair value inputs and are included in other current assets and other non-current assets in the Consolidated Balance Sheet.
(2) Derivative liabilities are measured using Level 2 fair value inputs and are included in other current liabilities and other non-current liabilities in the Consolidated Balance Sheet.
The derivative assets above represent the Company’s gross credit exposure if all counterparties failed to perform. To mitigate credit risk, the Company generally uses collateral security arrangements that provide for collateral to be received or posted when the net fair values of certain derivatives fluctuate from contractually established thresholds. To further limit credit risk, the Company generally uses master netting arrangements with the respective counterparties to the Company’s derivative contracts, under which the Company is allowed to settle transactions with a single net amount payable by one party to the other. As of September 24, 2022, the potential effects of these rights of set-off associated with the Company’s derivative contracts, including the effects of collateral, would be a reduction to both derivative assets and derivative liabilities of $ 7.8 billion, resulting in a net derivative asset of $ 412 million.
The carrying amounts of the Company’s hedged items in fair value hedges as of September 30, 2023 and September 24, 2022 were as follows (in millions):
2023 2022
Hedged assets/(liabilities):
Current and non-current marketable securities $ 14,433 $ 13,378
Current and non-current term debt $ ( 18,247 ) $ ( 18,739 )
Accounts Receivable
Trade Receivables
As of September 24, 2022, the Company had one customer that represented 10% or more of total trade receivables, which accounted for 10 %. The Company’s third-party cellular network carriers accounted for 41 % and 44 % of total trade receivables as of September 30, 2023 and September 24, 2022, 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 September 30, 2023, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 48 % and 23 %. As of September 24, 2022, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 54 % and 13 %.
Apple Inc. | 2023 Form 10-K | 38
Note 5 – Property, Plant and Equipment
The following table shows the Company’s gross property, plant and equipment by major asset class and accumulated depreciation as of September 30, 2023 and September 24, 2022 (in millions):
2023 2022
Land and buildings $ 23,446 $ 22,126
Machinery, equipment and internal-use software 78,314 81,060
Leasehold improvements 12,839 11,271
Gross property, plant and equipment 114,599 114,457
Accumulated depreciation
( 70,884 ) ( 72,340 )
Total property, plant and equipment, net $ 43,715 $ 42,117
Depreciation expense on property, plant and equipment was $ 8.5 billion, $ 8.7 billion and $ 9.5 billion during 2023, 2022 and 2021, respectively.
Note 6 – Consolidated Financial Statement Details
The following tables show the Company’s consolidated financial statement details as of September 30, 2023 and September 24, 2022 (in millions):
Other Non-Current Assets
2023 2022
Deferred tax assets $ 17,852 $ 15,375
Other non-current assets 46,906 39,053
Total other non-current assets $ 64,758 $ 54,428
Other Current Liabilities
2023 2022
Income taxes payable $ 8,819 $ 6,552
Other current liabilities 50,010 54,293
Total other current liabilities $ 58,829 $ 60,845
Other Non-Current Liabilities
2023 2022
Long-term taxes payable $ 15,457 $ 16,657
Other non-current liabilities 34,391 32,485
Total other non-current liabilities $ 49,848 $ 49,142
Other Income/(Expense), Net
The following table shows the detail of other income/(expense), net for 2023, 2022 and 2021 (in millions):
2023 2022 2021
Interest and dividend income $ 3,750 $ 2,825 $ 2,843
Interest expense ( 3,933 ) ( 2,931 ) ( 2,645 )
Other income/(expense), net ( 382 ) ( 228 ) 60
Total other income/(expense), net $ ( 565 ) $ ( 334 ) $ 258
Apple Inc. | 2023 Form 10-K | 39
Note 7 – Income Taxes
Provision for Income Taxes and Effective Tax Rate
The provision for income taxes for 2023, 2022 and 2021, consisted of the following (in millions):
2023 2022 2021
Federal:
Current $ 9,445 $ 7,890 $ 8,257
Deferred ( 3,644 ) ( 2,265 ) ( 7,176 )
Total 5,801 5,625 1,081
State:
Current 1,570 1,519 1,620
Deferred ( 49 ) 84 ( 338 )
Total 1,521 1,603 1,282
Foreign:
Current 8,750 8,996 9,424
Deferred 669 3,076 2,740
Total 9,419 12,072 12,164
Provision for income taxes $ 16,741 $ 19,300 $ 14,527
The foreign provision for income taxes is based on foreign pretax earnings of $ 72.9 billion, $ 71.3 billion and $ 68.7 billion in 2023, 2022 and 2021, respectively.
A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate ( 21 % in 2023, 2022 and 2021) to income before provision for income taxes for 2023, 2022 and 2021, is as follows (dollars in millions):
2023 2022 2021
Computed expected tax $ 23,885 $ 25,012 $ 22,933
State taxes, net of federal effect 1,124 1,518 1,151
Earnings of foreign subsidiaries ( 5,744 ) ( 4,366 ) ( 4,715 )
Research and development credit, net ( 1,212 ) ( 1,153 ) ( 1,033 )
Excess tax benefits from equity awards ( 1,120 ) ( 1,871 ) ( 2,137 )
Foreign-derived intangible income deduction — ( 296 ) ( 1,372 )
Other ( 192 ) 456 ( 300 )
Provision for income taxes $ 16,741 $ 19,300 $ 14,527
Effective tax rate 14.7 % 16.2 % 13.3 %
Apple Inc. | 2023 Form 10-K | 40
Deferred Tax Assets and Liabilities
As of September 30, 2023 and September 24, 2022, the significant components of the Company’s deferred tax assets and liabilities were (in millions):
2023 2022
Deferred tax assets:
Tax credit carryforwards $ 8,302 $ 6,962
Accrued liabilities and other reserves 6,365 6,515
Capitalized research and development 6,294 1,267
Deferred revenue 4,571 5,742
Unrealized losses 2,447 2,913
Lease liabilities 2,421 2,400
Other 2,343 3,407
Total deferred tax assets 32,743 29,206
Less: Valuation allowance ( 8,374 ) ( 7,530 )
Total deferred tax assets, net 24,369 21,676
Deferred tax liabilities:
Right-of-use assets 2,179 2,163
Depreciation 1,998 1,582
Minimum tax on foreign earnings 1,940 1,983
Unrealized gains 511 942
Other 490 469
Total deferred tax liabilities 7,118 7,139
Net deferred tax assets $ 17,251 $ 14,537
As of September 30, 2023, the Company had $ 5.2 billion in foreign tax credit carryforwards in Ireland and $ 3.0 billion in California R&D credit carryforwards, both of which can be carried forward indefinitely. A valuation allowance has been recorded for the credit carryforwards and a portion of other temporary differences.
Uncertain Tax Positions
As of September 30, 2023, the total amount of gross unrecognized tax benefits was $ 19.5 billion, of which $ 9.5 billion, if recognized, would impact the Company’s effective tax rate. As of September 24, 2022, the total amount of gross unrecognized tax benefits was $ 16.8 billion, of which $ 8.0 billion, if recognized, would have impacted the Company’s effective tax rate.
The aggregate change in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for 2023, 2022 and 2021, is as follows (in millions):
2023 2022 2021
Beginning balances $ 16,758 $ 15,477 $ 16,475
Increases related to tax positions taken during a prior year 2,044 2,284 816
Decreases related to tax positions taken during a prior year ( 1,463 ) ( 1,982 ) ( 1,402 )
Increases related to tax positions taken during the current year 2,628 1,936 1,607
Decreases related to settlements with taxing authorities ( 19 ) ( 28 ) ( 1,838 )
Decreases related to expiration of the statute of limitations ( 494 ) ( 929 ) ( 181 )
Ending balances $ 19,454 $ 16,758 $ 15,477
The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction and many state and foreign jurisd ictions. Tax years after 2017 for the U.S. federal jurisdiction, and after 2014 in certain major foreign jurisdictions, remain subject to examination. Altho ugh the timing of resolution or closure of examinations is not certain, the Company believes it is reasonably possible that its gross unrecognized tax benefits could decrease in the next 12 months by as much as $ 4.5 billion.
Apple Inc. | 2023 Form 10-K | 41
European Commission State Aid Decision
On August 30, 2016, the European Commission announced its decision that Ireland granted state aid to the Company by providing tax opinions in 1991 and 2007 concerning the tax allocation of profits of the Irish branches of two subsidiaries of the Company (the “State Aid Decision”). The State Aid Decision ordered Ireland to calculate and recover additional taxes from the Company for the period June 2003 through December 2014. Irish legislative changes, effective as of January 2015, eliminated the application of the tax opinions from that date forward. The recovery amount was calculated to be € 13.1 billion, plus interest of € 1.2 billion. The Company and Ireland appealed the State Aid Decision to the General Court of the Court of Justice of the European Union (the “General Court”). On July 15, 2020, the General Court annulled the State Aid Decision. On September 25, 2020, the European Commission appealed the General Court’s decision to the European Court of Justice (the “ECJ”) and a hearing was held on May 23, 2023. A decision from the ECJ is expected in calendar year 2024. The Company believes it would be eligible to claim a U.S. foreign tax credit for a portion of any incremental Irish corporate income taxes potentially due related to the State Aid Decision.
On an annual basis, the Company may request approval from the Irish Minister for Finance to reduce the recovery amount for certain taxes paid to other countries. As of September 30, 2023, the adjusted recovery amount was € 12.7 billion, excluding interest. The adjusted recovery amount plus interest is funded into escrow, where it will remain restricted from general use pending the conclusion of all legal proceedings. Refer to the Cash, Cash Equivalents and Marketable Securities section of Note 4, “Financial Instruments” for more information.
Note 8 – Leases
The Company has lease arrangements for certain equipment and facilities, including corporate, data center, manufacturing and retail space. These leases typically have original terms not exceeding 10 years and generally contain multiyear renewal options, some of which are reasonably certain of exercise.
Payments under the Company’s lease arrangements may be fixed or variable, and variable lease payments are primarily based on purchases of output of the underlying leased assets. Lease costs associated with fixed payments on the Company’s operating leases were $ 2.0 billion, $ 1.9 billion and $ 1.7 billion for 2023, 2022 and 2021, respectively. Lease costs associated with variable payments on the Company’s leases were $ 13.9 billion, $ 14.9 billion and $ 12.9 billion for 2023, 2022 and 2021, respectively.
The Company made $ 1.9 billion, $ 1.8 billion and $ 1.4 billion of fixed cash payments related to operating leases in 2023, 2022 and 2021, respectively. Noncash activities involving right-of-use (“ROU”) assets obtained in exchange for lease liabilities were $ 2.1 billion, $ 2.8 billion and $ 3.3 billion for 2023, 2022 and 2021, respectively.
The following table shows ROU assets and lease liabilities, and the associated financial statement line items, as of September 30, 2023 and September 24, 2022 (in millions):
Lease-Related Assets and Liabilities Financial Statement Line Items 2023 2022
Right-of-use assets:
Operating leases Other non-current assets $ 10,661 $ 10,417
Finance leases Property, plant and equipment, net 1,015 952
Total right-of-use assets $ 11,676 $ 11,369
Lease liabilities:
Operating leases Other current liabilities $ 1,410 $ 1,534
Other non-current liabilities 10,408 9,936
Finance leases Other current liabilities 165 129
Other non-current liabilities 859 812
Total lease liabilities $ 12,842 $ 12,411
Apple Inc. | 2023 Form 10-K | 42
Lease liability maturities as of September 30, 2023, are as follows (in millions):
Operating Leases Finance Leases Total
2024 $ 1,719 $ 196 $ 1,915
2025 1,875 151 2,026
2026 1,732 120 1,852
2027 1,351 52 1,403
2028 1,181 34 1,215
Thereafter 5,983 872 6,855
Total undiscounted liabilities 13,841 1,425 15,266
Less: Imputed interest ( 2,023 ) ( 401 ) ( 2,424 )
Total lease liabilities $ 11,818 $ 1,024 $ 12,842
The weighted-average remaining lease term related to the Company’s lease liabilities as of September 30, 2023 and September 24, 2022 was 10.6 years and 10.1 years, respectively. The discount rate related to the Company’s lease liabilities as of September 30, 2023 and September 24, 2022 was 3.0 % and 2.3 %, respectively. The discount rates related to the Company’s lease liabilities are generally based on estimates of the Company’s incremental borrowing rate, as the discount rates implicit in the Company’s leases cannot be readily determined.
As of September 30, 2023, the Company had $ 544 million of future payments under additional leases, primarily for corporate facilities and retail space, that had not yet commenced. These leases will commence between 2024 and 2026, with lease terms ranging from 1 year to 21 years.
Note 9 – 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 September 30, 2023 and September 24, 2022, the Company had $ 6.0 billion and $ 10.0 billion of commercial paper outstanding, respectively, with maturities generally less than nine months . The weighted-average interest rate of the Company’s commercial paper was 5.28 % and 2.31 % as of September 30, 2023 and September 24, 2022, respectively. The following table provides a summary of cash flows associated with the issuance and maturities of commercial paper for 2023, 2022 and 2021 (in millions):
2023 2022 2021
Maturities 90 days or less:
Proceeds from/(Repayments of) commercial paper, net $ ( 1,333 ) $ 5,264 $ ( 357 )
Maturities greater than 90 days:
Proceeds from commercial paper — 5,948 7,946
Repayments of commercial paper ( 2,645 ) ( 7,257 ) ( 6,567 )
Proceeds from/(Repayments of) commercial paper, net ( 2,645 ) ( 1,309 ) 1,379
Total proceeds from/(repayments of) commercial paper, net $ ( 3,978 ) $ 3,955 $ 1,022
Apple Inc. | 2023 Form 10-K | 43
Term Debt
The Company has outstanding Notes, which are senior unsecured obligations with interest payable in arrears. The following table provides a summary of the Company’s term debt as of September 30, 2023 and September 24, 2022:
Maturities
(calendar year)
2023 2022
Amount
(in millions)
Effective Interest Rate Amount
(in millions)
Effective Interest Rate
2013 – 2022 debt issuances:
Fixed-rate 0.000 % – 4.650 % notes
2024 – 2062
$ 101,322 0.03 % – 6.72 %
$ 111,824 0.03 % – 4.78 %
Third quarter 2023 debt issuance:
Fixed-rate 4.000 % – 4.850 % notes
2026 – 2053
5,250 4.04 % – 4.88 %
Total term debt principal
106,572 111,824
Unamortized premium/(discount) and issuance costs, net
( 356 ) ( 374 )
Hedge accounting fair value adjustments ( 1,113 ) ( 1,363 )
Total term debt
105,103 110,087
Less: Current portion of term debt ( 9,822 ) ( 11,128 )
Total non-current portion of term debt $ 95,281 $ 98,959
To manage interest rate risk on certain of its U.S. dollar–denominated fixed-rate notes, the Company uses interest rate swaps to effectively convert the fixed interest rates to floating interest rates on a portion of these notes. Additionally, to manage foreign exchange rate risk on certain of its foreign currency–denominated notes, the Company uses cross-currency swaps to effectively convert these notes to U.S. dollar–denominated notes.
The effective interest rates for the Notes include the interest on the Notes, amortization of the discount or premium and, if applicable, adjustments related to hedging. The Company recognized $ 3.7 billion, $ 2.8 billion and $ 2.6 billion of interest expense on its term debt for 2023, 2022 and 2021, respectively.
The future principal payments for the Company’s Notes as of September 30, 2023, are as follows (in millions):
2024 $ 9,943
2025 10,775
2026 12,265
2027 9,786
2028 7,800
Thereafter 56,003
Total term debt principal $ 106,572
As of September 30, 2023 and September 24, 2022, the fair value of the Company’s Notes, based on Level 2 inputs, was $ 90.8 billion and $ 98.8 billion, respectively.
Note 10 – Shareholders’ Equity
Share Repurchase Program
During 2023, the Company repurchased 471 million shares of its common stock for $ 76.6 billion, excluding excise tax due under the Inflation Reduction Act of 2022. The Company’s share repurchase programs do not obligate the Company to acquire a minimum amount of shares. Under the programs, shares may be repurchased in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.
Apple Inc. | 2023 Form 10-K | 44
Shares of Common Stock
The following table shows the changes in shares of common stock for 2023, 2022 and 2021 (in thousands):
2023 2022 2021
Common stock outstanding, beginning balances 15,943,425 16,426,786 16,976,763
Common stock repurchased ( 471,419 ) ( 568,589 ) ( 656,340 )
Common stock issued, net of shares withheld for employee taxes 78,055 85,228 106,363
Common stock outstanding, ending balances 15,550,061 15,943,425 16,426,786
Note 11 – Share-Based Compensation
2022 Employee Stock Plan
The Apple Inc. 2022 Employee Stock Plan (the “2022 Plan”) is a shareholder-approved plan that provides for broad-based equity grants to employees, including executive officers, and permits the granting of RSUs, stock grants, performance-based awards, stock options and stock appreciation rights. RSUs granted under the 2022 Plan generally vest over four years , based on continued employment, and are settled upon vesting in shares of the Company’s common stock on a one -for-one basis. All RSUs granted under the 2022 Plan have dividend equivalent rights, which entitle holders of RSUs to the same dividend value per share as holders of common stock. A maximum of approximately 1.3 billion shares were authorized for issuance pursuant to 2022 Plan awards at the time the plan was approved on March 4, 2022.
2014 Employee Stock Plan
The Apple Inc. 2014 Employee Stock Plan (the “2014 Plan”) is a shareholder-approved plan that provided for broad-based equity grants to employees, including executive officers. The 2014 Plan permitted the granting of substantially the same types of equity awards with substantially the same terms as the 2022 Plan. The 2014 Plan also permitted the granting of cash bonus awards. In the third quarter of 2022, the Company terminated the authority to grant new awards under the 2014 Plan.
Restricted Stock Units
A summary of the Company’s RSU activity and related information for 2023, 2022 and 2021, is as follows:
Number of
RSUs
(in thousands)
Weighted-Average Grant Date Fair Value Per RSU Aggregate
Fair Value
(in millions)
Balance as of September 26, 2020 310,778 $ 51.58
RSUs granted 89,363 $ 116.33
RSUs vested ( 145,766 ) $ 50.71
RSUs canceled ( 13,948 ) $ 68.95
Balance as of September 25, 2021 240,427 $ 75.16
RSUs granted 91,674 $ 150.70
RSUs vested ( 115,861 ) $ 72.12
RSUs canceled ( 14,739 ) $ 99.77
Balance as of September 24, 2022 201,501 $ 109.48
RSUs granted 88,768 $ 150.87
RSUs vested ( 101,878 ) $ 97.31
RSUs canceled ( 8,144 ) $ 127.98
Balance as of September 30, 2023 180,247 $ 135.91 $ 30,860
The fair value as of the respective vesting dates of RSUs was $ 15.9 billion, $ 18.2 billion and $ 19.0 billion for 2023, 2022 and 2021, respectively. The majority of RSUs that vested in 2023, 2022 and 2021 were net share settled such that the Company withheld shares with a value equivalent to the employees’ obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld were approximately 37 million, 41 million and 53 million for 2023, 2022 and 2021, respectively, and were based on the value of the RSUs on their respective vesting dates as determined by the Company’s closing stock price. Total payments to taxing authorities for employees’ tax obligations were $ 5.6 billion, $ 6.4 billion and $ 6.8 billion in 2023, 2022 and 2021, respectively.
Apple Inc. | 2023 Form 10-K | 45
Share-Based Compensation
The following table shows share-based compensation expense and the related income tax benefit included in the Consolidated Statements of Operations for 2023, 2022 and 2021 (in millions):
2023 2022 2021
Share-based compensation expense $ 10,833 $ 9,038 $ 7,906
Income tax benefit related to share-based compensation expense $ ( 3,421 ) $ ( 4,002 ) $ ( 4,056 )
As of September 30, 2023, the total unrecognized compensation cost related to outstanding RSUs was $ 18.6 billion, which the Company expects to recognize over a weighted-average period of 2.5 years.
Note 12 – Commitments, Contingencies and Supply Concentrations
Unconditional Purchase Obligations
The Company has entered into certain off–balance sheet commitments that require the future purchase of goods or services (“unconditional purchase obligations”). The Company’s unconditional purchase obligations primarily consist of supplier arrangements, licensed intellectual property and content, and distribution rights. Future payments under noncancelable unconditional purchase obligations with a remaining term in excess of one year as of September 30, 2023, are as follows (in millions):
2024 $ 4,258
2025 2,674
2026 3,434
2027 1,277
2028 5,878
Thereafter 3,215
Total $ 20,736
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.
Concentrations in the Available Sources of Supply of Materials and Product
Although most components essential to the Company’s business are generally available from multiple sources, certain components are currently obtained from single or limited sources. The Company also competes for various components with other participants in the markets for smartphones, personal computers, tablets, wearables and accessories. Therefore, many components used by the Company, including those that are available from multiple sources, are at times subject to industry-wide shortage and significant commodity pricing fluctuations.
The Company uses some custom components that are not commonly used by its competitors, and new products introduced by the Company often utilize custom components available from only one source. When a component or product uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or their manufacturing capacities have increased. The continued availability of these components at acceptable prices, or at all, may be affected if suppliers decide to concentrate on the production of common components instead of components customized to meet the Company’s requirements.
Substantially all of the Company’s hardware products are manufactured by outsourcing partners that are located primarily in China mainland, India, Japan, South Korea, Taiwan and Vietnam.
Apple Inc. | 2023 Form 10-K | 46
Note 13 – Segment Information and Geographic Data
The Company manages its business primarily on a geographic basis. The Company’s reportable segments consist of the Americas, Europe, Greater China, Japan and Rest of Asia Pacific. Americas includes both North and South America. Europe includes European countries, as well as India, the Middle East and Africa. Greater China includes China mainland, Hong Kong and Taiwan. Rest of Asia Pacific includes Australia and those Asian countries not included in the Company’s other reportable segments. Although the reportable segments provide similar hardware and software products and similar services, each one is managed separately to better align with the location of the Company’s customers and distribution partners and the unique market dynamics of each geographic region.
The Company evaluates the performance of its reportable segments based on net sales and operating income. Net sales for geographic segments are generally based on the location of customers and sales through the Company’s retail stores located in those geographic locations. Operating income for each segment consists of net sales to third parties, related cost of sales, and operating expenses directly attributable to the segment. The information provided to the Company’s chief operating decision maker for purposes of making decisions and assessing segment performance excludes asset information.
The following table shows information by reportable segment for 2023, 2022 and 2021 (in millions):
2023 2022 2021
Americas:
Net sales $ 162,560 $ 169,658 $ 153,306
Operating income $ 60,508 $ 62,683 $ 53,382
Europe:
Net sales $ 94,294 $ 95,118 $ 89,307
Operating income $ 36,098 $ 35,233 $ 32,505
Greater China:
Net sales $ 72,559 $ 74,200 $ 68,366
Operating income $ 30,328 $ 31,153 $ 28,504
Japan:
Net sales $ 24,257 $ 25,977 $ 28,482
Operating income $ 11,888 $ 12,257 $ 12,798
Rest of Asia Pacific:
Net sales $ 29,615 $ 29,375 $ 26,356
Operating income $ 12,066 $ 11,569 $ 9,817
A reconciliation of the Company’s segment operating income to the Consolidated Statements of Operations for 2023, 2022 and 2021 is as follows (in millions):
2023 2022 2021
Segment operating income $ 150,888 $ 152,895 $ 137,006
Research and development expense ( 29,915 ) ( 26,251 ) ( 21,914 )
Other corporate expenses, net (1)
( 6,672 ) ( 7,207 ) ( 6,143 )
Total operating income $ 114,301 $ 119,437 $ 108,949
(1) Includes corporate marketing expenses, certain share-based compensation expenses, various nonrecurring charges, and other separately managed general and administrative costs.
Apple Inc. | 2023 Form 10-K | 47
The U.S. and China were the only countries that accounted for more than 10% of the Company’s net sales in 2023, 2022 and 2021. Net sales for 2023, 2022 and 2021 and long-lived assets as of September 30, 2023 and September 24, 2022 were as follows (in millions):
2023 2022 2021
Net sales:
U.S. $ 138,573 $ 147,859 $ 133,803
China (1)
72,559 74,200 68,366
Other countries 172,153 172,269 163,648
Total net sales $ 383,285 $ 394,328 $ 365,817
2023 2022
Long-lived assets:
U.S. $ 33,276 $ 31,119
China (1)
5,778 7,260
Other countries 4,661 3,738
Total long-lived assets $ 43,715 $ 42,117
(1) China includes Hong Kong and Taiwan.
Apple Inc. | 2023 Form 10-K | 48
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Apple Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Apple Inc. as of September 30, 2023 and September 24, 2022, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended September 30, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Apple Inc. at September 30, 2023 and September 24, 2022, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”), Apple Inc.’s internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated November 2, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of Apple Inc.’s management. Our responsibility is to express an opinion on Apple Inc.’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Apple Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
Uncertain Tax Positions
Description of the Matter As discussed in Note 7 to the financial statements, Apple Inc. is subject to taxation and files income tax returns in the U.S. federal jurisdiction and many state and foreign jurisdictions. As of September 30, 2023, the total amount of gross unrecognized tax benefits was $ 19.5 billion, of which $ 9.5 billion, if recognized, would impact Apple Inc.’s effective tax rate. In accounting for some of the uncertain tax positions, Apple Inc. uses significant judgment in the interpretation and application of complex domestic and international tax laws.
Auditing management’s evaluation of whether an uncertain tax position is more likely than not to be sustained and the measurement of the benefit of various tax positions can be complex, involves significant judgment, and is based on interpretations of tax laws and legal rulings.
Apple Inc. | 2023 Form 10-K | 49
How We Addressed the Matter in Our Audit We tested controls relating to the evaluation of uncertain tax positions, including controls over management’s assessment as to whether tax positions are more likely than not to be sustained, management’s process to measure the benefit of its tax positions, and the development of the related disclosures.
To evaluate Apple Inc.’s assessment of which tax positions are more likely than not to be sustained, our audit procedures included, among others, reading and evaluating management’s assumptions and analysis, and, as applicable, Apple Inc.’s communications with taxing authorities, that detailed the basis and technical merits of the uncertain tax positions. We involved our tax subject matter resources in assessing the technical merits of certain of Apple Inc.’s tax positions based on our knowledge of relevant tax laws and experience with related taxing authorities. For certain tax positions, we also received external legal counsel confirmation letters and discussed the matters with external advisors and Apple Inc. tax personnel. In addition, we evaluated Apple Inc.’s disclosure in relation to these matters included in Note 7 to the financial statements.
/s/ Ernst & Young LLP
We have served as Apple Inc.’s auditor since 2009.
San Jose, California
November 2, 2023
Apple Inc. | 2023 Form 10-K | 50
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Apple Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Apple Inc.’s internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO criteria”). In our opinion, Apple Inc. maintained, in all material respects, effective internal control over financial reporting as of September 30, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”), the consolidated balance sheets of Apple Inc. as of September 30, 2023 and September 24, 2022, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended September 30, 2023, and the related notes and our report dated November 2, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
Apple Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on Apple Inc.’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Apple Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
San Jose, California
November 2, 2023
Apple Inc. | 2023 Form 10-K | 51
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of September 30, 2023 to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Inherent Limitations over Internal Controls
The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company’s internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on the Company’s assessment, management has concluded that its internal control over financial reporting was effective as of September 30, 2023 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. The Company’s independent registered public accounting firm, Ernst & Young LLP, has issued an audit report on the Company’s internal control over financial reporting, which appears in Part II, Item 8 of this Form 10-K.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the fourth quarter of 2023, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Apple Inc. | 2023 Form 10-K | 52
Item 9B. Other Information
Insider Trading Arrangements
On August 30, 2023 , Deirdre O’Brien , the Company’s Senior Vice President, Retail , and Jeff Williams , the Company’s Chief Operating Officer , each entered into a trading plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. The plans provide for the sale of all shares vested during the duration of the plans pursuant to certain equity awards granted to Ms. O’Brien and Mr. Williams, respectively, excluding any shares withheld by the Company to satisfy income tax withholding and remittance obligations. Ms. O’Brien’s plan will expire on October 15, 2024, and Mr. Williams’ plan will expire on December 15, 2024, subject to early termination for certain specified events set forth in the plans.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item will be included in the Company’s definitive proxy statement to be filed with the SEC within 120 days after September 30, 2023, in connection with the solicitation of proxies for the Company’s 2024 annual meeting of shareholders (the “2024 Proxy Statement”), and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item will be included in the 2024 Proxy Statement, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item will be included in the 2024 Proxy Statement, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item will be included in the 2024 Proxy Statement, and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item will be included in the 2024 Proxy Statement, and is incorporated herein by reference.
Apple Inc. | 2023 Form 10-K | 53
PART IV
Item 15. Exhibit and Financial Statement Schedules
(a) Documents filed as part of this report
(1) All financial statements
Index to Consolidated Financial Statements Page
Consolidated Statements of Operations for the years ended September 30, 2023, September 24, 2022 and September 25, 2021
Consolidated Statements of Comprehensive Income for the years ended September 30, 2023, September 24, 2022 and September 25, 2021
Consolidated Balance Sheets as of September 30, 2023 and September 24, 2022
Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2023, September 24, 2022 and September 25, 2021
Consolidated Statements of Cash Flows for the years ended September 30, 2023, September 24, 2022 and September 25, 2021
Notes to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm*
* Ernst & Young LLP, PCAOB Firm ID No. 000 42 .
(2) Financial Statement Schedules
All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and accompanying notes included in this Form 10-K.
(3) Exhibits required by Item 601 of Regulation S-K (1)
Incorporated by Reference
Exhibit Number Exhibit Description Form Exhibit Filing Date/ Period End Date
3.1 Restated Articles of Incorporation of the Registrant filed on August 3, 2020.
8-K 3.1 8/7/20
3.2 Amended and Restated Bylaws of the Registrant effective as of August 17, 2022.
8-K 3.2 8/19/22
4.1** Description of Securities of the Registrant.
4.2 Indenture, dated as of April 29, 2013, between the Registrant and The Bank of New York Mellon Trust Company, N.A., as Trustee.
S-3 4.1 4/29/13
4.3 Officer’s Certificate of the Registrant, dated as of May 3, 2013, including forms of global notes representing the Floating Rate Notes due 2016, Floating Rate Notes due 2018, 0.45% Notes due 2016, 1.00% Notes due 2018, 2.40% Notes due 2023 and 3.85% Notes due 2043.
8-K 4.1 5/3/13
4.4 Officer’s Certificate of the Registrant, dated as of May 6, 2014, including forms of global notes representing the Floating Rate Notes due 2017, Floating Rate Notes due 2019, 1.05% Notes due 2017, 2.10% Notes due 2019, 2.85% Notes due 2021, 3.45% Notes due 2024 and 4.45% Notes due 2044.
8-K 4.1 5/6/14
4.5 Officer’s Certificate of the Registrant, dated as of November 10, 2014, including forms of global notes representing the 1.000% Notes due 2022 and 1.625% Notes due 2026.
8-K 4.1 11/10/14
4.6 Officer’s Certificate of the Registrant, dated as of February 9, 2015, including forms of global notes representing the Floating Rate Notes due 2020, 1.55% Notes due 2020, 2.15% Notes due 2022, 2.50% Notes due 2025 and 3.45% Notes due 2045.
8-K 4.1 2/9/15
4.7 Officer’s Certificate of the Registrant, dated as of May 13, 2015, including forms of global notes representing the Floating Rate Notes due 2017, Floating Rate Notes due 2020, 0.900% Notes due 2017, 2.000% Notes due 2020, 2.700% Notes due 2022, 3.200% Notes due 2025, and 4.375% Notes due 2045.
8-K 4.1 5/13/15
4.8 Officer’s Certificate of the Registrant, dated as of July 31, 2015, including forms of global notes representing the 3.05% Notes due 2029 and 3.60% Notes due 2042.
8-K 4.1 7/31/15
4.9 Officer’s Certificate of the Registrant, dated as of September 17, 2015, including forms of global notes representing the 1.375% Notes due 2024 and 2.000% Notes due 2027.
8-K 4.1 9/17/15
Apple Inc. | 2023 Form 10-K | 54
Incorporated by Reference
Exhibit Number Exhibit Description Form Exhibit Filing Date/ Period End Date
4.10 Officer’s Certificate of the Registrant, dated as of February 23, 2016, including forms of global notes representing the Floating Rate Notes due 2019, Floating Rate Notes due 2021, 1.300% Notes due 2018, 1.700% Notes due 2019, 2.250% Notes due 2021, 2.850% Notes due 2023, 3.250% Notes due 2026, 4.500% Notes due 2036 and 4.650% Notes due 2046.
8-K 4.1 2/23/16
4.11 Supplement No. 1 to the Officer’s Certificate of the Registrant, dated as of March 24, 2016.
8-K 4.1 3/24/16
4.12 Officer’s Certificate of the Registrant, dated as of August 4, 2016, including forms of global notes representing the Floating Rate Notes due 2019, 1.100% Notes due 2019, 1.550% Notes due 2021, 2.450% Notes due 2026 and 3.850% Notes due 2046.
8-K 4.1 8/4/16
4.13 Officer’s Certificate of the Registrant, dated as of February 9, 2017, including forms of global notes representing the Floating Rate Notes due 2019, Floating Rate Notes due 2020, Floating Rate Notes due 2022, 1.550% Notes due 2019, 1.900% Notes due 2020, 2.500% Notes due 2022, 3.000% Notes due 2024, 3.350% Notes due 2027 and 4.250% Notes due 2047.
8-K 4.1 2/9/17
4.14 Officer’s Certificate of the Registrant, dated as of May 11, 2017, including forms of global notes representing the Floating Rate Notes due 2020, Floating Rate Notes due 2022, 1.800% Notes due 2020, 2.300% Notes due 2022, 2.850% Notes due 2024 and 3.200% Notes due 2027.
8-K 4.1 5/11/17
4.15 Officer’s Certificate of the Registrant, dated as of May 24, 2017, including forms of global notes representing the 0.875% Notes due 2025 and 1.375% Notes due 2029.
8-K 4.1 5/24/17
4.16 Officer’s Certificate of the Registrant, dated as of June 20, 2017, including form of global note representing the 3.000% Notes due 2027.
8-K 4.1 6/20/17
4.17 Officer’s Certificate of the Registrant, dated as of August 18, 2017, including form of global note representing the 2.513% Notes due 2024.
8-K 4.1 8/18/17
4.18 Officer’s Certificate of the Registrant, dated as of September 12, 2017, including forms of global notes representing the 1.500% Notes due 2019, 2.100% Notes due 2022, 2.900% Notes due 2027 and 3.750% Notes due 2047.
8-K 4.1 9/12/17
4.19 Officer’s Certificate of the Registrant, dated as of November 13, 2017, including forms of global notes representing the 1.800% Notes due 2019, 2.000% Notes due 2020, 2.400% Notes due 2023, 2.750% Notes due 2025, 3.000% Notes due 2027 and 3.750% Notes due 2047.
8-K 4.1 11/13/17
4.20 Indenture, dated as of November 5, 2018, between the Registrant and The Bank of New York Mellon Trust Company, N.A., as Trustee.
S-3 4.1 11/5/18
4.21 Officer’s Certificate of the Registrant, dated as of September 11, 2019, including forms of global notes representing the 1.700% Notes due 2022, 1.800% Notes due 2024, 2.050% Notes due 2026, 2.200% Notes due 2029 and 2.950% Notes due 2049.
8-K 4.1 9/11/19
4.22 Officer’s Certificate of the Registrant, dated as of November 15, 2019, including forms of global notes representing the 0.000% Notes due 2025 and 0.500% Notes due 2031.
8-K 4.1 11/15/19
4.23 Officer’s Certificate of the Registrant, dated as of May 11, 2020, including forms of global notes representing the 0.750% Notes due 2023, 1.125% Notes due 2025, 1.650% Notes due 2030 and 2.650% Notes due 2050.
8-K 4.1 5/11/20
4.24 Officer’s Certificate of the Registrant, dated as of August 20, 2020, including forms of global notes representing the 0.550% Notes due 2025, 1.25% Notes due 2030, 2.400% Notes due 2050 and 2.550% Notes due 2060.
8-K 4.1 8/20/20
4.25 Officer’s Certificate of the Registrant, dated as of February 8, 2021, including forms of global notes representing the 0.700% Notes due 2026, 1.200% Notes due 2028, 1.650% Notes due 2031, 2.375% Notes due 2041, 2.650% Notes due 2051 and 2.800% Notes due 2061.
8-K 4.1 2/8/21
4.26 Officer’s Certificate of the Registrant, dated as of August 5, 2021, including forms of global notes representing the 1.400% Notes due 2028, 1.700% Notes due 2031, 2.700% Notes due 2051 and 2.850% Notes due 2061.
8-K 4.1 8/5/21
4.27 Indenture, dated as of October 28, 2021, between the Registrant and The Bank of New York Mellon Trust Company, N.A., as Trustee.
S-3 4.1 10/29/21
4.28 Officer’s Certificate of the Registrant, dated as of August 8, 2022, including forms of global notes representing the 3.250% Notes due 2029, 3.350% Notes due 2032, 3.950% Notes due 2052 and 4.100% Notes due 2062.
8-K 4.1 8/8/22
Apple Inc. | 2023 Form 10-K | 55
Incorporated by Reference
Exhibit Number Exhibit Description Form Exhibit Filing Date/ Period End Date
4.29 Officer’s Certificate of the Registrant, dated as of May 10, 2023, including forms of global notes representing the 4.421% Notes due 2026, 4.000% Notes due 2028, 4.150% Notes due 2030, 4.300% Notes due 2033 and 4.850% Notes due 2053.
8-K 4.1 5/10/23
4.30* Apple Inc. Deferred Compensation Plan.
S-8 4.1 8/23/18
10.1* Apple Inc. Employee Stock Purchase Plan, as amended and restated as of March 10, 2015.
8-K 10.1 3/13/15
10.2* Form of Indemnification Agreement between the Registrant and each director and executive officer of the Registrant.
10-Q 10.2 6/27/09
10.3* Apple Inc. Non-Employee Director Stock Plan, as amended November 9, 2021.
10-Q 10.1 12/25/21
10.4* Apple Inc. 2014 Employee Stock Plan, as amended and restated as of October 1, 2017.
10-K 10.8 9/30/17
10.5* Form of Restricted Stock Unit Award Agreement under 2014 Employee Stock Plan effective as of September 26, 2017.
10-K 10.20 9/30/17
10.6* Form of Restricted Stock Unit Award Agreement under Non-Employee Director Stock Plan effective as of February 13, 2018.
10-Q 10.2 3/31/18
10.7* Form of Restricted Stock Unit Award Agreement under 2014 Employee Stock Plan effective as of August 21, 2018.
10-K 10.17 9/29/18
10.8* Form of Performance Award Agreement under 2014 Employee Stock Plan effective as of August 21, 2018.
10-K 10.18 9/29/18
10.9* Form of Restricted Stock Unit Award Agreement under 2014 Employee Stock Plan effective as of September 29, 2019.
10-K 10.15 9/28/19
10.10* Form of Performance Award Agreement under 2014 Employee Stock Plan effective as of September 29, 2019.
10-K 10.16 9/28/19
10.11* Form of Restricted Stock Unit Award Agreement under 2014 Employee Stock Plan effective as of August 18, 2020.
10-K 10.16 9/26/20
10.12* Form of Performance Award Agreement under 2014 Employee Stock Plan effective as of August 18, 2020.
10-K 10.17 9/26/20
10.13* Form of CEO Restricted Stock Unit Award Agreement under 2014 Employee Stock Plan effective as of September 27, 2020.
10-Q 10.1 12/26/20
10.14* Form of CEO Performance Award Agreement under 2014 Employee Stock Plan effective as of September 27, 2020.
10-Q 10.2 12/26/20
10.15* Apple Inc. 2022 Employee Stock Plan.
8-K 10.1 3/4/22
10.16* Form of Restricted Stock Unit Award Agreement under 2022 Employee Stock Plan effective as of March 4, 2022.
8-K 10.2 3/4/22
10.17* Form of Performance Award Agreement under 2022 Employee Stock Plan effective as of March 4, 2022.
8-K 10.3 3/4/22
10.18* Apple Inc. Executive Cash Incentive Plan.
8-K 10.1 8/19/22
10.19* Form of CEO Restricted Stock Unit Award Agreement under 2022 Employee Stock Plan effective as of September 25, 2022.
10-Q 10.1 12/31/22
10.20* Form of CEO Performance Award Agreement under 2022 Employee Stock Plan effective as of September 25, 2022.
10-Q 10.2 12/31/22
21.1** Subsidiaries of the Registrant.
23.1** Consent of Independent Registered Public Accounting Firm.
24.1** Power of Attorney (included on the Signatures page of this Annual Report on Form 10-K).
31.1** Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer.
31.2** Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer.
32.1*** Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer.
101** Inline XBRL Document Set for the consolidated financial statements and accompanying notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
Apple Inc. | 2023 Form 10-K | 56
Incorporated by Reference
Exhibit Number Exhibit Description Form Exhibit Filing Date/ Period End Date
104** Inline XBRL for the cover page of this Annual Report on Form 10-K, included in the Exhibit 101 Inline XBRL Document Set.
* Indicates management contract or compensatory plan or arrangement.
** Filed herewith.
*** Furnished herewith.
(1) Certain instruments defining the rights of holders of long-term debt securities of the Registrant are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The Registrant hereby undertakes to furnish to the SEC, upon request, copies of any such instruments.
Item 16. Form 10-K Summary
None.
Apple Inc. | 2023 Form 10-K | 57
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 2, 2023
Apple Inc.
By: /s/ Luca Maestri
Luca Maestri
Senior Vice President, Chief Financial Officer
Power of Attorney
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy D. Cook and Luca Maestri, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Name Title Date
/s/ Timothy D. Cook Chief Executive Officer and Director (Principal Executive Officer) November 2, 2023
TIMOTHY D. COOK
/s/ Luca Maestri Senior Vice President, Chief Financial Officer (Principal Financial Officer) November 2, 2023
LUCA MAESTRI
/s/ Chris Kondo Senior Director of Corporate Accounting (Principal Accounting Officer) November 2, 2023
CHRIS KONDO
/s/ James A. Bell Director November 2, 2023
JAMES A. BELL
/s/ Al Gore Director November 2, 2023
AL GORE
/s/ Alex Gorsky Director November 2, 2023
ALEX GORSKY
/s/ Andrea Jung Director November 2, 2023
ANDREA JUNG
/s/ Arthur D. Levinson Director and Chair of the Board November 2, 2023
ARTHUR D. LEVINSON
/s/ Monica Lozano Director November 2, 2023
MONICA LOZANO
/s/ Ronald D. Sugar Director November 2, 2023
RONALD D. SUGAR
/s/ Susan L. Wagner Director November 2, 2023
SUSAN L. WAGNER
Apple Inc. | 2023 Form 10-K | 58