SEC filings analysis
Financial Analysis August 2026: Apple Inc
NASDAQ: AAPL · CIK 0000320193 · fiscal year ends in September
What the filings show through June 2026, and the growth rate the share price assumes
- Period covered
- Fiscal 2023 to the June 2026 quarter
- Primary sources
- Forms 10K, 10Q and 8K, the June 2026 earnings release and the 2026 proxy
- Share price
- $319.70 at the last weekly close, 24 August 2026
- Prepared
- 29 August 2026
Apple is closing its best year since the pandemic. Nine month revenue of 364.4 billion dollars is 16.2% ahead of a year earlier. Greater China, down three years running, has grown 30.0%. Trailing free cash flow of 136.7 billion is the highest Apple has reported.
Three things complicate that picture. Apple says tariff refunds added 2 percentage points to the June quarter's 50.1% gross margin, and $0.11 of its $2.02 in earnings. The growth is concentrated in iPhone, up 22.4% over nine months. That looks like customers replacing old phones rather than a permanent step up in demand. And at 36.5x earnings, the price only works if free cash flow grows 11.9% a year for a decade. Over the past five years it grew 8.0%.
The market has noticed. The shares closed at a peak of $333.74 in the week of 13 July, then fell 7.2% in the week the June quarter was published, on results that beat the prior year on every line. Apple also changes chief executive on 1 September, when John Ternus succeeds Tim Cook and Cook becomes Executive Chair.
1. Revenue, margin and cash flow
Figure 1. Quarterly net sales, gross margin on the right axis. The hatched quarter is not filed; it is the year less the rest.
| Billions of dollars unless stated | Twelve months to 27 June 2026 | FY2025 | FY2024 |
|---|---|---|---|
| Net sales | 466.8 | 416.2 | 391.0 |
| Gross margin | 48.7% | 46.9% | 46.2% |
| Research and development | 42.9 | 34.5 | 31.4 |
| Operating income | 154.9 | 133.1 | 123.2 |
| Operating margin | 33.2% | 32.0% | 31.5% |
| Effective tax rate | 17.3% | 15.6% | 24.1% |
| Net income | 128.9 | 112.0 | 93.7 |
| Diluted earnings per share | $8.76 | $7.46 | $6.08 |
| Operating cash flow | 146.7 | 111.5 | 118.3 |
| Capital expenditure | 10.0 | 12.7 | 9.4 |
| Free cash flow | 136.7 | 98.8 | 108.8 |
| Dividends paid | 15.6 | 15.4 | 15.2 |
| Shares repurchased | 82.2 | 90.7 | 94.9 |
| Diluted shares outstanding | 14.71 | 15.00 | 15.41 |
We use the twelve months to 27 June 2026 because only three quarters of fiscal 2026 have been filed, and the missing one contains the iPhone launch. Capital spending of 10.0 billion is less than a tenth of Microsoft's, a comparison section 6 takes up.
| Quarter | Net sales | Gross margin | Operating margin | Diluted EPS | Revenue growth by line | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Billions | Growth | Margin | Change, points | Dollars | Growth | iPhone | Services | Greater China | ||
| FY2026 Q1 | 143.8 | 15.7% | 48.16% | 1.28% | 35.4% | $2.84 | 18.3% | 23.3% | 13.9% | 37.9% |
| FY2026 Q2 | 111.2 | 16.6% | 49.27% | 2.22% | 32.3% | $2.01 | 21.8% | 21.7% | 16.3% | 28.1% |
| FY2026 Q3 | 109.4 | 16.4% | 50.06% | 3.57% | 32.6% | $2.02 | 28.7% | 21.7% | 12.1% | 22.4% |
Every growth and change column compares the quarter with the same quarter a year earlier.
Revenue growth of 15.7%, 16.6% and 16.4% across three consecutive quarters is unusual at this scale, and earnings growth accelerated because margin widened at the same time. Apple's release claims growth in double digits across iPhone, Mac and Services and in every geographic segment, and a record installed base across all major categories. The growth claims check out against the filings; the installed base figure is Apple's own and appears in no statement.
2. One off items, where the margin came from, and tax
Figure 2. Net income as reported, and less two one off items: the State Aid charge added back, the tariff refunds removed.
| Period | Net income as reported | Adjustment | Core net income | Item removed or added back |
|---|---|---|---|---|
| FY2024 | 93.7 | 10.3 | 104.1 | European General Court State Aid charge, added back |
| FY2025 | 112.0 | 0.0 | 112.0 | none disclosed |
| FY2026 nine months | 101.5 | (1.6) | 99.8 | Tariff refunds recognised in the June quarter, removed |
Each column is rounded from the underlying figure, so a row can differ from the sum of its parts by a tenth of a billion.
Two disclosed items distort the comparison, both from earnings releases. In the September 2024 quarter Apple reported $0.97 of diluted earnings per share instead of the $1.64 it would have earned without the European State Aid tax charge; across the year that charge was about 10.3 billion. The June 2026 tariff refunds are worth about 1.6 billion after tax. Strip both out and the nine month figure of 99.8 billion is still 18.1% ahead of a year earlier.
Where the margin came from
| Period | Products | Services | Total margin | Services share of gross profit | ||||
|---|---|---|---|---|---|---|---|---|
| Net sales | Gross profit | Margin | Net sales | Gross profit | Margin | |||
| FY2023 | 298.1 | 108.8 | 36.50% | 85.2 | 60.3 | 70.83% | 44.13% | 35.7% |
| FY2024 | 294.9 | 109.6 | 37.18% | 96.2 | 71.0 | 73.88% | 46.21% | 39.3% |
| FY2025 | 307.0 | 112.9 | 36.77% | 109.2 | 82.3 | 75.41% | 46.91% | 42.2% |
| FY2025 nine months | 233.3 | 86.2 | 36.95% | 80.4 | 60.7 | 75.45% | 46.82% | 41.3% |
| FY2026 nine months | 272.6 | 108.8 | 39.91% | 91.7 | 70.0 | 76.27% | 49.07% | 39.1% |
Billions of dollars. Built from the cost of sales split that Apple presents separately for products and services in the condensed consolidated statements of operations. The nine month rows are not comparable to the full year rows above them.
Apple's margin usually rises because services grow faster than products. Not this year. Products margin gained 2.97 percentage points, services only 0.82, and services' share of gross profit fell from 41.3% to 39.1%. That product margin gain is worth 8.1 billion of gross profit, the largest single driver of the year, and it landed exactly where the tariff refunds did and where component costs are rising. The part that usually lasts, the shift toward services, added almost nothing.
Tax is the other thing to watch. The trailing rate of 17.3% compares against 14.7% in fiscal 2023. Apple points to its Irish and Singapore operations and the new OECD global minimum tax as the reasons the rate is rising. A return to the fiscal 2024 rate would cost about $0.70 a share, roughly what a fall of two and a half points in gross margin would cost.
3. Which product lines drove the growth
Figure 3. Eight quarters of net sales by product line, and the year on year growth of the four lines that moved. Wearables was flat, up 2.3% over the nine months. The two September quarters are derived from the annual reports.
| Product line | Fiscal year, billions | Nine months, billions | Growth | Increase, billions | |||
|---|---|---|---|---|---|---|---|
| FY2023 | FY2024 | FY2025 | FY2025 | FY2026 | |||
| iPhone | 200.6 | 201.2 | 209.6 | 160.6 | 196.5 | 22.4% | 36.0 |
| Services | 85.2 | 96.2 | 109.2 | 80.4 | 91.7 | 14.1% | 11.3 |
| Wearables, Home and Accessories | 39.8 | 37.0 | 35.7 | 26.7 | 27.3 | 2.3% | 0.6 |
| Mac | 29.4 | 30.0 | 33.7 | 25.0 | 27.1 | 8.6% | 2.2 |
| iPad | 28.3 | 26.7 | 28.0 | 21.1 | 21.7 | 3.0% | 0.6 |
Of the 50.7 billion increase in nine month revenue, 36.0 billion came from iPhone alone, 71% of the total. Services grew 14.1%; iPad and the wearables line were close to flat, and iPad fell in the June quarter.
The composition is the risk. Services revenue comes back every year, from more than 2.5 billion devices in use. iPhone is a replacement cycle: up 22% after two years in which it grew 4.5% between them. Whatever was pulled forward comes out of next year, and section 10 prices that risk at $0.36 to $1.07 a share.
4. Sales by region
Figure 4. Net sales by region, Greater China separately on the right. Nine months of fiscal 2026 beat all of 2025 there.
| Region | Net sales, billions | Nine month growth | Segment margin | ||||
|---|---|---|---|---|---|---|---|
| FY2023 | FY2024 | FY2025 | FY2026 nine months | FY2025 | FY2026 nine months | ||
| Americas | 162.6 | 167.0 | 178.4 | 149.4 | 11.4% | 40.6% | 43.5% |
| Europe | 94.3 | 101.3 | 111.0 | 95.6 | 16.1% | 43.0% | 46.3% |
| Greater China | 72.6 | 67.0 | 64.4 | 64.8 | 30.0% | 41.8% | 43.8% |
| Japan | 24.3 | 25.1 | 28.7 | 24.4 | 10.4% | 48.6% | 47.0% |
| Rest of Asia Pacific | 29.6 | 30.7 | 33.7 | 30.2 | 19.4% | 43.3% | 46.4% |
| Consolidated | 383.3 | 391.0 | 416.2 | 364.4 | 16.2% | 32.0% | 33.6% |
Segment margins use the operating income Apple assigns to each region. That excludes research and head office costs, which is why the consolidated margin is lower than any single region. Nine month columns are not comparable to full years.
Greater China fell from 74.2 billion dollars in fiscal 2022 to 72.6 billion, 67.0 billion and 64.4 billion in the three years that followed, then produced 64.8 billion in nine months of fiscal 2026. Every segment grew by more than 10%. Americas and Greater China are the two least profitable, at 43.5% and 43.8% against 47.0% in Japan, and they are where most of the growth landed.
5. The balance sheet, dividends and buybacks
Figure 5. Free cash flow against dividends plus buybacks, with the diluted share count on the right axis. Capital returned exceeded free cash flow in three of the five fiscal years.
| Assets, billions of dollars | 27 June 2026 | 27 September 2025 | Change |
|---|---|---|---|
| Cash and cash equivalents | 39.5 | 35.9 | 3.6 |
| Marketable securities, current | 22.9 | 18.8 | 4.1 |
| Marketable securities, noncurrent | 84.1 | 77.7 | 6.4 |
| Accounts receivable | 31.4 | 39.8 | (8.4) |
| Inventories | 11.1 | 5.7 | 5.4 |
| Vendor nontrade receivables, amounts owed by suppliers | 27.5 | 33.2 | (5.7) |
| Property, plant and equipment, net | 51.4 | 49.8 | 1.6 |
| Intangible assets, net | 20.3 | 11.1 | 9.2 |
| Other noncurrent assets | 77.6 | 72.6 | 5.0 |
| Other current assets | 17.4 | 14.6 | 2.8 |
| Total assets | 383.3 | 359.2 | 24.1 |
| Liabilities and equity, billions of dollars | 27 June 2026 | 27 September 2025 | Change |
|---|---|---|---|
| Accounts payable | 64.5 | 69.9 | (5.4) |
| Deferred revenue, current | 9.5 | 9.1 | 0.4 |
| Commercial paper | 2.0 | 8.0 | (6.0) |
| Term debt, current | 11.0 | 12.3 | (1.3) |
| Term debt, noncurrent | 71.3 | 78.3 | (7.0) |
| Total liabilities | 275.7 | 285.5 | (9.8) |
| Retained earnings, deficit in brackets | 11.3 | (14.3) | 25.6 |
| Total shareholders equity | 107.5 | 73.7 | 33.8 |
Because earnings ran ahead of the buyback, retained earnings turned from a deficit of 14.3 billion dollars at the fiscal year end into a positive 11.3 billion, and equity rose from 73.7 billion to 107.5 billion. Apple paid out 15.6 billion of dividends and 82.2 billion of buybacks over the trailing year, or 76% of earnings, against 118% in fiscal 2024.
Three things here are worth a closer look. Inventories nearly doubled to 11.1 billion: either stock built ahead of the September launch, or products that did not sell. Section 10 sets out how to tell which. Intangible assets rose 9.2 billion while property, plant and equipment rose only 1.6 billion. And cash paid in tax fell from 37.3 billion to 26.6 billion, adding nearly 11 billion to operating cash flow for reasons that have nothing to do with sales.
Net cash is 62.2 billion. The board authorised 100 billion dollars of buybacks in April 2025 and again in April 2026, and raised the dividend 4% to $0.27, payable 13 August 2026. Shares actually outstanding, as against the diluted average used elsewhere, fell from 14.77 billion to 14.61 billion over the nine months, a reduction of 1.1%.
6. Capital spending against Microsoft and Alphabet
Figure 6. Capital spending against free cash flow, in dollars and as a share of revenue.
| Company | Basis | Revenue | Operating margin | Research, % of revenue | Capital expenditure | Capital spending, % of revenue | Free cash flow | Free cash flow, % of revenue | Dividends plus buybacks |
|---|---|---|---|---|---|---|---|---|---|
| Apple | Twelve months to 27 June 2026 | 466.8 | 33.2% | 9.2% | 10.0 | 2.2% | 136.7 | 29.3% | 97.9 |
| Microsoft | Fiscal 2026 to 30 June 2026 | 331.8 | 46.8% | 10.7% | 115.9 | 34.9% | 67.0 | 20.2% | 48.7 |
| Alphabet | Twelve months to 30 June 2026 | 445.9 | 33.1% | 15.5% | 132.4 | 29.7% | 53.3 | 11.9% | 27.7 |
Dollar columns are billions. Apple is the twelve months to 27 June 2026, Microsoft fiscal 2026 to 30 June 2026, and Alphabet the twelve months to 30 June 2026 from its fiscal 2025 and 2026 filings. Alphabet discloses no gross profit line, and its trailing net income carries a large nonoperating gain, so operating income is used here.
Apple converts 29.3% of revenue into free cash flow against 20.2% at Microsoft and 11.9% at Alphabet. Capital spending more than accounts for the difference; on operating margin Microsoft is well ahead of Apple. Alphabet's free cash flow fell to 53.3 billion on 445.9 billion of revenue.
The filings cannot prove which way this goes. If AI data centres turn out to be a poor investment, Apple will have sidestepped an enormous misallocation of capital. If they turn out well, Apple has skipped what its peers treat as the decade's most important platform shift. The accounts do show a choice. Apple launched a rebuilt Siri at its June developer conference, but there is no sign of data centres to run it, and the balance sheet suggests Apple is buying the technology rather than building it. Nine month capital spending of 6.8 billion was below the 9.5 billion of a year earlier, so nothing has changed yet. If it does, capital spending is the line where it shows first, a quarter or more before revenue or margin move.
7. How the shares have moved, and what happened after each results day
Over five years the shares grew 15.7% a year. With each stock set to 100 five years ago, Apple reaches 207 against Alphabet's 241 and Microsoft's 171. Four separate falls of more than 12% happened along the way, two of them close to 30%.
Figure 7. The weekly closing price, with the fall from the previous peak shown beneath. Shaded bands mark falls deeper than 12%.
Figure 8. The same five years for Apple, Microsoft, Alphabet and the Invesco QQQ Nasdaq 100 fund, all set to 100 in the first week.
| Peak week | Trough week | Recovery week | Size of fall | Weeks to trough | Weeks to recover |
|---|---|---|---|---|---|
| 13 Dec 2021 | 03 Jan 2023 | 30 May 2023 | (27.8%) | 56 | 78 |
| 31 Jul 2023 | 23 Oct 2023 | 04 Dec 2023 | (14.1%) | 13 | 19 |
| 18 Dec 2023 | 15 Apr 2024 | 10 Jun 2024 | (16.5%) | 18 | 26 |
| 30 Dec 2024 | 31 Mar 2025 | 22 Sep 2025 | (26.3%) | 14 | 39 |
The reaction to each results day says more.
| Quarter reported | Release date | Prior week close | Week close | Week return | Next week |
|---|---|---|---|---|---|
| Q1 fiscal 2025 | 30 Jan 2025 | $222.78 | $236.00 | 5.93% | (3.55%) |
| Q2 fiscal 2025 | 01 May 2025 | $209.28 | $205.35 | (1.88%) | (3.32%) |
| Q3 fiscal 2025 | 31 Jul 2025 | $213.88 | $202.38 | (5.38%) | 13.33% |
| Q4 fiscal 2025 | 30 Oct 2025 | $262.82 | $270.37 | 2.87% | (0.70%) |
| Q1 fiscal 2026 | 29 Jan 2026 | $248.04 | $259.48 | 4.61% | 7.18% |
| Q2 fiscal 2026 | 30 Apr 2026 | $271.06 | $280.14 | 3.35% | 4.70% |
| Q3 fiscal 2026 | 30 Jul 2026 | $333.02 | $308.91 | (7.24%) | 1.43% |
Apple beat the prior year in every quarter of fiscal 2026. The market rewarded the first two quarters and not the third: the June quarter grew revenue 16.4%, widened margin by 3.57 percentage points and grew earnings 28.7%, and the shares fell 7.2%. The result was good; it was not good enough for a share price this high. On this evidence the greater risk sits in what investors are paying rather than in the business, though section 10 sizes the business risks that remain.
8. The growth rate the price assumes
| Last weekly close, 24 August 2026 | $319.70 |
| Diluted shares outstanding, billions | 14.71 |
| Market capitalisation, billions | 4,704.3 |
| Net cash, billions | 62.2 |
| Enterprise value, market value less net cash, billions | 4,642.1 |
| Trailing diluted earnings per share | $8.76 |
| Price to trailing earnings | 36.5x |
| Enterprise value to operating income | 30.0x |
| Price to trailing sales | 10.1x |
| Free cash flow yield | 2.91% |
| Dividend yield | 0.34% |
| Capital returned as a share of free cash flow | 71.6% |
| Return on equity | 120% |
| Return on capital, securities portfolio excluded | 128% |
| Fifty two week high, intraweek | $344.57 |
| Fifty two week low, intraweek | $225.31 |
| Discount rate | Long run growth | Growth the price needs for ten years | Gap against Apple's actual 8.0% over five years |
|---|---|---|---|
| 8% | 2.5% | 10.19% | 2.17% |
| 8% | 3.0% | 9.32% | 1.30% |
| 9% | 2.5% | 12.65% | 4.63% |
| 9% | 3.0% | 11.92% | 3.90% |
| 10% | 2.5% | 14.91% | 6.89% |
| 10% | 3.0% | 14.28% | 6.26% |
The discount rate is the annual return an owner demands; long run growth is the rate assumed after year ten. Each row solves for the free cash flow growth that reproduces today's enterprise value.
At a 9% discount rate and 3% long run growth, the price needs free cash flow to grow 11.9% a year for a decade. Apple managed 8.0% over five years, and even that is generous: the period ends with its three strongest quarters. Only at an 8% discount rate does the required rate come close to what Apple has achieved. This does not prove the shares are overpriced, because the discount rate is an assumption and Apple's balance sheet supports a low one. What it shows is how much of today's price depends on growth Apple has not delivered yet, and would have to deliver for a decade.
How the fiscal 2026 estimate was built. Fiscal 2026 is treated as 479.1 billion of revenue and 133.4 billion of net income: the three filed quarters as reported, plus a September quarter growing 12% on the 102.5 billion of a year earlier, below the 16% of the filed quarters, with net margin held at the nine month level and no repeat of the tariff refund. Everything after this point is an estimate.
9. Three scenarios for earnings and the share price
| Scenario | Year | Net sales | Gross margin | Operating income | Net income | Diluted shares | EPS | Exit multiple | Implied price | Total return | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Billions | Growth | Billions | Margin | |||||||||
| Bull | fiscal 2027 | 531.8 | 11.0% | 50.5% | 187.8 | 35.3% | 158.7 | 14.42 | $11.01 | |||
| fiscal 2028 | 579.7 | 9.0% | 51.0% | 209.2 | 36.1% | 176.8 | 14.10 | $12.53 | 34x | $426 | 33.3% | |
| Base | fiscal 2027 | 505.5 | 5.5% | 48.2% | 162.1 | 32.1% | 135.7 | 14.43 | $9.40 | |||
| fiscal 2028 | 530.7 | 5.0% | 48.3% | 168.3 | 31.7% | 140.9 | 14.15 | $9.95 | 29x | $289 | (9.7%) | |
| Bear | fiscal 2027 | 471.9 | (1.5%) | 45.5% | 132.5 | 28.1% | 109.9 | 14.46 | $7.60 | |||
| fiscal 2028 | 481.4 | 2.0% | 46.2% | 134.0 | 27.8% | 111.2 | 14.21 | $7.82 | 21x | $164 | (48.6%) | |
Billions of dollars except per share amounts. Growth in the first year is measured against the fiscal 2026 estimate of 479.1 billion in section 8, and in the second against the first. Exit multiples are assumptions about what the market would pay, not forecasts.
Figure 9. Earnings per share under the three scenarios to fiscal 2028, with the implied price at each exit multiple.
Figure 10. Three years of weekly closing prices, then where each scenario would take the share price. The 2027 point applies the same exit multiple to that year of earnings. Buybacks are assumed to happen at the latest closing price.
What each scenario assumes
Bull. The device replacement cycle that lifted fiscal 2026 keeps running through a second year, Greater China holds the recovery it posted in fiscal 2026, Services compounds in the low teens and no adverse ruling disturbs the search licensing arrangement. Tariff refunds continue and component costs ease. Revenue grows 11% and 9%, margin holds above 50%, the multiple stays at 34 times, and the shares reach $426, a gain of 33.3%, or 15.5% a year.
Base. Fiscal 2026 proves to be a pull forward rather than a new level. Growth normalises toward the mid single digits, gross margin gives back the tariff refund benefit and part of the fiscal 2026 mix gain, and Services keeps growing but decelerates as the installed base matures. Revenue grows 5.5% and 5%, margin settles at 48.2%, and the multiple compresses to 29 times. The shares are worth $289, a loss of 9.7%. The business does well and the shareholder does not.
Bear. The fiscal 2026 upgrade wave leaves a hole in fiscal 2027, as the fiscal 2022 wave did in fiscal 2023. A remedy in the Google search matter removes a slice of the highest margin revenue Apple books, the tariff refunds are not repeated, and component costs stay high while Apple still spends far less on capacity than its peers. Revenue falls 1.5% then recovers 2%, margin returns to 45.5%, and the multiple contracts to 21 times, where Apple traded before this cycle. The shares fall to $164, a loss of 48.6%.
The downside is far larger than the upside. Even with everything going right, the bull case returns 33.3%. The base case, where revenue grows every year and margin gives back only the tariff benefit, loses 9.7%; the three scenarios weighted equally lose 8.3%. Earnings still grow 13.6% in the base case and the shares still fall, because the multiple falls by more than earnings rise.
10. What each risk costs in earnings
| Driver | Trigger | Revenue at risk, billions | Effect on annual earnings per share | As a share of current earnings per share |
|---|---|---|---|---|
| Search licensing | Loss of 10% of trailing services revenue | 12.0 | ($0.68) | (7.7%) |
| Loss of 15% of trailing services revenue | 18.1 | ($1.02) | (11.6%) | |
| Loss of 20% of trailing services revenue | 24.1 | ($1.35) | (15.5%) | |
| Gross margin | Gross margin 1 point lower | 4.8 | ($0.27) | (3.1%) |
| Gross margin 2 points lower | 9.6 | ($0.54) | (6.1%) | |
| Gross margin 3 points lower | 14.4 | ($0.81) | (9.2%) | |
| iPhone volume | iPhone revenue 5% below the fiscal 2026 run rate | 13.1 | ($0.36) | (4.1%) |
| iPhone revenue 10% below the fiscal 2026 run rate | 26.2 | ($0.72) | (8.2%) | |
| iPhone revenue 15% below the fiscal 2026 run rate | 39.3 | ($1.07) | (12.3%) | |
| Greater China | Greater China revenue 10% below the fiscal 2026 run rate | 8.6 | ($0.24) | (2.7%) |
| Greater China revenue 20% below the fiscal 2026 run rate | 17.3 | ($0.47) | (5.4%) |
Figure 11. A grid of fiscal 2027 earnings per share across revenue and margin outcomes, holding operating costs, tax and buybacks fixed. Bold cells sit closest to the fiscal 2026 estimate.
Search licensing. Apple names Google in its risk factors, says it earns revenue from search licensing arrangements, and warns that an adverse outcome on appeal could mean Google can no longer pay Apple for search placement. No amount is disclosed, so the table is a sensitivity rather than an estimate. Licensing revenue carries almost no cost, so almost all of it is profit. The bigger risk is what investors pay for Services: if the payments stop, the market finally learns how large they were, and marks down Services as a whole.
The iPhone cycle. A 5% iPhone shortfall against the fiscal 2026 run rate costs $0.36 a share, and 15% costs $1.07. Both figures are too low, because they use Apple's average margin rather than the iPhone's. Two quarters of iPhone revenue below the prior year would settle the question by mid year, and the rising inventory is the first place to look.
The margin. Removing the two tariff percentage points puts the June quarter near 48.1%. Each point is worth $0.27 a share. Losing those two points is not a prediction that things get worse; it is the tariff refunds ending, which Apple has said they will.
Capital spending. The 2.91% yield exists because capital spending is only 2.2% of revenue. Spending half as much of its revenue on capital as Microsoft does would cost Apple about 71.7 billion a year, taking the free cash flow yield to 1.38%. It is the biggest single threat to cash flow, and the one that would never show up in revenue or margin, which is what makes it easy to miss.
11. Management changes and shareholder votes
Figure 12. Timeline of the ten Forms 8K filed since October 2024 that most affect the outlook. Colour marks the kind of filing; the three most important are numbered. Each entry carries the figure that made it matter.
Five of the most senior roles turned over in twenty months: chief financial officer, chief operating officer, principal accounting officer, general counsel, and now chief executive. John Ternus becomes chief executive on 1 September 2026, with Tim Cook as Executive Chair. Across 89 Forms 4 over two years, the insider transaction reports, there were 70 open market sales of 1,717,277 shares for about 420 million dollars, and not one purchase. Nearly all were under plans adopted in advance, so the pattern says little about what anyone at Apple expects of the share price, though it is often read as if it did.
| Proposal | Support | Votes for | Votes against | Outcome |
|---|---|---|---|---|
| Election of eight directors | All elected, on 91.0% to 99.6% | 8,297,337,255 | 822,322,806 | Approved |
| Ratification of the appointment of Ernst & Young LLP as Apple's independent registered public accounting firm for fiscal year 2026 | 98.3% | 11,794,611,709 | 202,435,745 | Approved |
| Advisory resolution to approve executive compensation | 91.4% | 8,304,055,118 | 781,645,634 | Approved |
| Approval of the Apple Inc. Non Employee Director Stock Plan, as Amended and Restated | 98.0% | 8,927,137,986 | 178,910,631 | Approved |
| Shareholder proposal entitled "China Entanglement Audit" | 1.4% | 129,158,181 | 8,939,194,258 | Rejected |
Annual meeting of 24 February 2026. Support is votes for as a share of votes cast for and against. The China Entanglement Audit was a shareholder proposal from the National Center for Public Policy Research asking the board to publish a report within a year on the risks and costs of Apple’s reliance on China: exposure under high tariffs, revenue and profit at risk from action by Beijing, intellectual property theft, and what moving the supply chain elsewhere would cost and how long it would take. The board opposed it as unnecessary and too prescriptive, and 98.6% of votes cast went against. The directors row shows the least and most supported nominee; Art Levinson drew the largest vote against, at 822.3 million. Abstentions and broker non votes are excluded.
12. What the filings and the calls say could go wrong
Every annual report must set out what could go wrong. Apple's list, Item 1A of the Form 10K, runs to 26 separate risks and carries few figures: no revenue concentration percentage, no customer figure, no fine estimate. Seven exposures are named specifically.
- Google, named as the counterparty that pays Apple for search.
- The EU Digital Markets Act, and the changes it has forced on iOS, the App Store and Safari.
- Tariffs on China, India, Japan, South Korea, Taiwan, Vietnam and the European Union, alongside a Section 232 investigation into semiconductors.
- Manufacturing concentrated in Asia, with a single supplier for many components.
- A significant share of net sales from one product category, which Apple does not name or quantify.
- Vendor receivables owed by a handful of Asian suppliers.
- Ireland and Singapore as the tax jurisdictions where a change would matter.
Three named legal matters appear in both the annual and the latest quarterly report. The European Commission fined Apple 500 million euros in April 2025 under the Digital Markets Act, the only monetary amount disclosed; Apple has appealed, and a second investigation, part of the same matter, carries a theoretical cap of 10% of worldwide net sales, or 46.7 billion on trailing revenue. The Department of Justice suit filed in New Jersey in March 2024 seeks equitable relief and no damages. The Epic Games case changed most in the period: the Ninth Circuit modified the injunction in December 2025 to allow parity requirements and some commission on link outs, and the Supreme Court granted review in June 2026 on the civil contempt standard. The commission Apple charges on part of the App Store is therefore before the Supreme Court, and Services is 25.8% of revenue at a much higher margin than the rest, so the commission rate matters more to profit than the revenue it produces suggests.
The filings list what could go wrong; the earnings calls say which of it is already happening. Across the three fiscal 2026 calls the list grew, and the gross margin management guided to fell at each one.
| What management flagged | Q1 call 29 January 2026 | Q2 call 30 April 2026 | Q3 call 30 July 2026 |
|---|---|---|---|
| Memory prices | Market pricing rising significantly, and a bit more of an impact on the March quarter margin | Significantly higher memory costs expected in the June quarter, rising further after it | A hundred year flood with exponential increases. More than the whole of the guided margin fall |
| Chip supply | Constrained on the advanced nodes the chips are built on, and hard to say when supply and demand balance | Constrained on iPhone and to a lesser extent Mac. Several months to reach balance | The constraint grows sharply into the September quarter, with little flexibility left to fix it |
| Tariffs | $1.4 billion of cost in the December quarter, and guidance assumes rates stay as they are | Lower than the quarter before, on smaller volumes and reduced rates | About a point of refund benefit still sits in the September quarter margin guide |
| Currency | Not raised | A 2.5 point tailwind to March quarter growth | A 2.5 point sequential headwind, and about 5 points against Services |
| Raising prices | Not raised | Not raised | iPad and Mac prices went up to cover memory. Too early to judge what buyers do |
| Siri in Europe | Not raised | Not raised | Still not launched in the European Union. The Mac sits outside the same rules |
| Apple Intelligence in China | Not raised | Not raised | The first features were only recently approved, and Siri needs more work down the road |
| App Store | Not raised | Not raised | Operating under a court ruling on link out transactions, with mobile gaming weak |
| Cost of running Siri | Not raised | Not raised | Early going, and no complete plan yet for what the compute will cost |
| Gross margin guided for the quarter ahead | 48% to 49% | 47.5% to 48.5% | 47% to 48% |
Apple does not file its earnings calls with the SEC, so this table comes from published transcripts of the three calls rather than from a filing. Cells quote or paraphrase what Tim Cook or Kevan Parekh, the finance chief, said that day. The guidance row is the gross margin range given for the quarter ahead on each call, which fell at every one of the three.
Method, sources and limitations. Statement data were extracted from the XBRL instance documents of nine filings: the Forms 10K for fiscal 2023, 2024 and 2025, and the Forms 10Q for the first three quarters of fiscal 2025 and 2026, supplemented by the June 2026 earnings release for the products and services cost split, intangible assets and cash taxes. Quarterly cash flow is tagged year to date only, so second and third quarter rows are derived by subtraction. The two September quarters in Figures 1 and 3 are the audited year less the three filed quarters. Reconciliations performed and passed: four quarters to the audited year; segments to consolidated revenue in all periods; product lines to consolidated revenue in all periods; products plus services to total; assets to liabilities plus equity at every date; derived quarterly cash flow back to the filed nine months. Columns are rounded independently, so a row can differ from the sum of its parts by a tenth of a billion. Three limitations: the fiscal 2026 estimate rests on an assumed September quarter and every forward figure inherits it; the search licensing rows are a sensitivity, not an estimate, because Apple discloses no amount; and the weekly price series comes from a single vendor whose feed splits one week of January 2023 into two partial bars. The table of what management flagged on the calls is the one part of this report that does not come from an SEC document, because Apple does not file its transcripts; it was compiled from published transcripts of the three calls. Nothing here is investment advice, and the scenarios illustrate arithmetic under stated assumptions.
