AAPL Apple Inc. 10-K 2026-09-26 section summaries

Business and operating model

Apple’s FY2026 business includes iPhone, Mac, iPad, wearables, home and accessories, and services spanning advertising, AppleCare, cloud, digital content and subscriptions, and payment services. It reports five geographic segments: Americas, Europe, Greater China, Japan, and Rest of Asia Pacific. Approximately 60% of FY2026 net sales came through indirect distribution channels, including carriers and resellers. As of September 26, 2026, Apple had approximately 167,000 full-time-equivalent employees.

Strategy

Apple aims to expand opportunities across its hardware and services markets and to develop integrated hardware, operating systems, applications, and services. It is investing in AI features and related infrastructure. Its competitiveness depends substantially on timely innovation and product introductions; it also uses research and development, licensing, and acquisitions to develop technologies and broaden its offerings.

Risks and business pressures

• Competition and product cycles: Apple faces intense competition, aggressive competitor price cuts, margin pressure, price-sensitive customers, short product cycles, and rapid technological change, including in AI. It has minority global market shares in smartphones, PCs, tablets, and wearables, and some of those markets have stagnated or contracted. Competitors may imitate Apple’s features, offer integrated alternatives, or sell at very low prices or losses. Performance also depends on protecting intellectual property and maintaining its ecosystem, distribution, and customer support.
• Components and supply chain: Industry-wide shortages and price volatility affect components, particularly advanced semiconductors, memory, and storage; Apple expects memory and storage pressures to intensify. Some custom or new components have single or limited sources. Supplier capacity, yields, consolidation, or shifting priorities could constrain timely supply. Trade restrictions could raise costs or restrict access to products, components, rare earths, and raw materials.
• AI and cloud infrastructure: AI and other services add to demand for compute and storage. Industry infrastructure constraints, long lead times, rising costs, and reliance in part on a limited number of third-party cloud providers may limit capacity. Data-center development entails significant spending and long-term commitments, with execution and cost risks involving construction, power, water, land, labor, financing, regulation, environmental requirements, outages, and cybersecurity. Inadequate capacity could delay features, constrain availability, increase operating costs, and adversely affect revenue and margins.
• Licensing, intellectual property, and seasonality: Apple may be unable to obtain third-party technology licenses on acceptable terms and faces potential IP infringement claims. AI creates additional copyright risks related to training materials and generated outputs. Product-launch timing and seasonal holiday demand materially influence sales, costs, and operating expenses; launches also affect channel inventory.

Apple — Item 1A: Principal Risks

Apple’s risk profile reflects the global reach of its business, concentrated supply chains, rapid technology shifts, and substantial dependence on product demand and third-party relationships. Most sales are outside the U.S., and a significant majority of manufacturing is performed wholly or partly by outsourcing partners, primarily in Asia. Economic weakness, inflation, high interest rates, currency volatility, or declining consumer confidence could reduce demand, increase credit and counterparty risks, constrain financing and liquidity, and reduce the value of financial instruments.

Global operations, trade and supply chain

Geopolitical tensions and changing trade rules could disrupt both supply and demand. Critical components—including advanced semiconductors, memory and storage—may have only one or a limited number of sources. Tariffs, export controls, sanctions and other restrictions can increase costs, restrict component availability, require changes to suppliers or operations, or force Apple to modify or stop offering products, services or technologies, including AI-related offerings. Beginning in Q2 2025, the U.S. announced new tariffs on imports from China mainland, India, Japan, South Korea, Taiwan, Vietnam, the EU and other locations; several countries imposed or threatened reciprocal measures. The ultimate effects remain uncertain, further changes are possible, and Apple may not obtain refunds if tariffs are rescinded. Supply-chain shifts are costly, time-consuming and disruptive.

Industry-wide supply-demand imbalances are constraining advanced semiconductors, memory and storage, with Apple expecting memory and storage constraints to intensify. Higher component prices may not be offset by price increases without weakening demand. New custom components may be single-sourced, while supplier capacity, yields, consolidation or inability to renew agreements on comparable terms could limit supply. Outsourcing partners also perform final assembly of substantially all hardware products and much of transportation and logistics, limiting Apple’s direct control over cost, quality, quantity and flexibility. Apple remains responsible to customers for warranty and out-of-warranty service, and supplier defects or code violations can create additional exposure.

Natural disasters and extreme weather, industrial accidents, public-health events, labor disputes, cyberattacks, power outages and other interruptions could affect Apple or suppliers. Many facilities are in disaster-prone areas, and limited sourcing can magnify disruption. Consequences may include delayed production, deliveries, launches or services, higher costs and lost sales; recovery can take substantial time and spending, and insurance may not cover all losses.

Competition, products and AI

Apple competes in markets characterized by aggressive pricing, short product life cycles and rapid technological change. It has minority global market share in smartphones, PCs, tablets and wearables, and competitors may offer lower-priced products, imitate features or provide integrated alternatives. Sustained competitiveness requires substantial innovation and R&D investment, without assurance of expected returns. Product transitions require accurate demand forecasts, production ramps, quality control, inventory and purchase commitments, third-party integration and customer acceptance. New offerings may replace existing products while producing lower revenue or margins; forecasting errors can leave excess inventory, unused commitments, cancellation fees or impaired supplier-held assets.

AI presents both strategic opportunity and execution risk. Apple is investing in AI technologies, personnel and infrastructure, including data-center capacity, components, equipment and energy, but returns are uncertain and investments may fail to improve offerings or generate profitable returns. AI agents may behave unpredictably, exceed permissions, access systems, alter code or execute transactions; such actions may be difficult to test, audit or reverse, particularly when third-party tools are involved. AI also raises risks of inaccurate or harmful outputs, privacy and security incidents, bias, product liability, copyright and other IP claims, employee misuse, and regulatory or reputational damage. More broadly, inadequate compute, storage, power, networks or cloud capacity—or inability to secure them promptly and at commercially reasonable prices—could delay features, limit functionality, raise costs or leave demand unmet. Data-center expansion entails significant spending and long-term commitments, and may be constrained by utilities, land, labor, construction, permitting and environmental requirements.

Product, software, service or third-party component defects, service outages, and AI errors could cause customer harm, recalls, replacements, warranty and litigation costs, fines, write-offs and reputational damage. Apple also depends on third-party IP licenses; disputes or inability to obtain rights on reasonable terms could increase costs, restrict sales or require product changes. Developers may favor larger platforms or use alternative distribution and payment methods, reducing App Store commissions. Third-party digital content may be costly, unavailable or unattractive to customers. Competition for skilled employees can raise compensation costs and impair recruitment or retention, while carriers and resellers may reduce financing, subsidies, orders or promotional support.

Cybersecurity, privacy and regulation

Apple and its supply chain rely on complex IT systems. Cyberattacks, system outages, disasters or disruptions—including ERP upgrades—could impair services, transactions, inventory, manufacturing, shipping or financial reporting. Malicious attacks are increasing in scale and sophistication, with AI enabling more effective phishing, deepfakes and automated exploitation. Security controls cannot eliminate the risk; incidents may cause operational disruption, reputational harm, litigation, investigations, fines or judgments. Insurance may not fully cover losses, and protective measures can themselves restrict customer access or delay orders.

Privacy, data-protection, localization, online-safety and child-protection rules are expanding and diverging across jurisdictions. China’s data requirements constrain cross-border transfers. Compliance may require substantial spending, product redesign or feature limitations, and violations can lead to penalties or license suspension. Sensitive health, biometric, financial and payment-card data, minors’ information and new AI features increase exposure. Actual or perceived failures to meet legal or privacy commitments could prompt investigations, litigation and reputational harm.

Competition, trade, national-security, tax, environmental and AI rules may conflict across markets or change suddenly. Government actions can delay or prohibit products, require business changes or force market exits. In the EU, the Digital Markets Act has required changes to iOS, iPadOS, the App Store and Safari, including alternative distribution and payment options. Interoperability obligations consume engineering resources, create security and privacy concerns and could weaken product functionality or competitive advantage; Apple’s compliance plan has been challenged and significant fines are possible. Changes have affected, and could affect, availability of features such as Siri AI in some jurisdictions.

In the U.S., a court-ordered injunction currently prevents Apple from charging commissions or fees on certain digital-goods and services purchases made through external links in third-party iOS/iPadOS apps. Further proceedings and Supreme Court review of the civil-contempt standard leave the outcome uncertain; restrictions on commissions could materially affect revenue and margins. Apple also faces smartphone and App Store antitrust matters. Separately, a September 2, 2025 D.C. District Court order following the finding that Google violated U.S. antitrust laws remains subject to appeals and further proceedings. Remedies could prevent Google from offering Apple commercial terms for search distribution, impairing related licensing revenue; renewal on favorable terms, or at all, is uncertain.

Financial, legal and shareholder risks

Gross margins vary by product, service, geography and channel. They are exposed to component costs and shortages, competition and pricing, product and geographic mix, manufacturing, content and warranty expenses, regulation, AI investment, seasonality, tariffs, foreign exchange and lower-margin launches. Apple also depends significantly on a product category and certain services, including third-party licensing arrangements, making results vulnerable to weaker demand or unfavorable changes. Currency movements affect translated sales, expenses and earnings; hedging only partially offsets exposure. Cash and investments face market, credit, sovereign, political, liquidity and interest-rate risks. Unsecured receivables can be concentrated among carriers and resellers, while vendor non-trade receivables were concentrated among a few vendors, primarily in Asia, as of September 26, 2026. Long-term supply prepayments add exposure to vendor credit risk. Tax-law changes, global minimum-tax proposals, earnings mix and uncertain examinations may raise the effective tax rate or produce assessments above accrued amounts.

Apple reports that claims, proceedings and government investigations have generally increased in number and alleged magnitude. Matters span IP, antitrust, privacy, security, advertising, content, algorithms, consumer protection, product performance, employment and online safety. Adverse outcomes may involve damages, disgorgement, injunctions, fines or required business changes; defense is costly and disruptive, and insurance may be insufficient. Acquisitions, partnerships and new ventures can divert management, incur unexpected liabilities or fail to deliver returns. Environmental and other stakeholder commitments may depend on third parties and expose Apple to backlash if expectations are not met. Finally, share-price volatility can reflect expectations for growth, profitability, dividends and repurchases; dividends require Board approval and repurchases have no minimum commitment.

Apple integrates cybersecurity into its enterprise risk-management program. Management’s cybersecurity efforts are led by the Head of Corporate Information Security, who has more than 25 years of cybersecurity experience and has led Apple’s security team since 2016.

A dedicated Information Security team develops security policies, trains employees, implements controls, assesses risk and compliance, monitors and responds to security events, and conducts security testing. It coordinates incident prevention and response across Apple and uses third parties where appropriate. A dedicated Supplier Trust team manages information-security risks related to suppliers. Processes are in place to track, address, escalate, and report incidents involving Apple and its suppliers to senior management and the Audit Committee, as appropriate.

The Audit Committee oversees cybersecurity, regularly discusses risks with management and relevant control leaders, and receives incident updates as needed. Its chair reports key discussions to the Board. For cybersecurity-related risks, the filing refers investors to Item 1A, “Risk Factors.”

FY2026 operating performance

Apple’s net sales grew 15% in FY2026, accelerating from 6% growth in FY2025. iPhone and Services were the largest growth contributors. iPhone revenue rose 21%, led by Pro models; Services grew 13%, supported primarily by advertising and cloud services, though its growth moderated from 14% in FY2025.

Revenue by product category

Mac sales increased 13%, driven by laptops. iPad and Wearables, Home and Accessories were essentially flat year over year. Services growth was led by advertising and cloud services.

Revenue by region

iPhone contributed to growth in every region. Services and Mac also supported growth in the Americas, Europe and Rest of Asia Pacific. Greater China rebounded from a 4% decline in FY2025; currency strength aided growth there and in Europe, while yen weakness weighed on Japan.

Margins, expenses and taxes

Total gross margin percentage rose to 48.8% from 46.9%. Products gross margin rate increased to 39.3% from 36.8%, reflecting product mix and tariff refunds, partly offset by higher costs, including memory. Services gross margin rate rose to 76.2% from 75.4%, as higher sales and service mix were partly offset by costs. Apple cautioned that gross margins remain subject to volatility and downward pressure.

Operating expenses increased 22%, reaching 16% of sales versus 15%; expense growth had been 15% in FY2025. R&D increased 32%, compared with 10% growth in FY2025, driven by AI-related infrastructure investment and headcount. SG&A rose 8%.

The effective tax rate increased to 17.0% from 15.6%. The increase primarily reflected a higher tax rate on foreign earnings, U.S. Treasury foreign-currency loss regulations, and foreign-currency revaluations connected with the State Aid Decision, partly offset by valuation-allowance changes. The FY2025 rate had declined from 24.1% in FY2024.

Products, costs and business risks

FY2026 launches included new MacBook, iPad, Vision Pro, iPhone, Apple Watch and AirPods products. Apple also announced iOS 27 and other platform updates, as well as Siri AI.

Apple reported industry-wide supply-demand imbalances and rising costs for advanced semiconductors, memory and storage, with memory and storage pressures expected to intensify. Price increases may not fully offset higher costs and could weaken demand. Tariffs and retaliatory trade measures remain uncertain and could raise component and product costs, disrupt supply chains, and constrain rare earths and other inputs, adversely affecting sales and margins. Tariff refunds are recorded as reductions in product cost of sales; Apple applied for refunds after a Supreme Court ruling invalidated certain tariffs. Currency changes, inflation, interest rates and supply constraints also pose risks.

Liquidity, obligations and capital returns

At September 26, 2026, cash, cash equivalents and marketable securities totaled $136.9B. Apple expects these resources, operating cash generation and access to debt markets to cover cash requirements and capital returns.

In April 2026, Apple authorized up to $100B of additional share repurchases and raised its quarterly dividend from $0.26 to $0.27 per share. FY2026 repurchases totaled $85.8B; dividends and equivalents totaled $15.7B.

Accounting and estimation matters

New expense-disaggregation disclosures are scheduled for adoption in Q4 FY2028. Changes to internal-use software accounting are effective in Q1 FY2029; Apple is evaluating adoption timing and method. Tax positions and legal contingencies require significant judgment, and resolutions inconsistent with management’s estimates could materially affect results or financial condition.

Market risk

Apple is exposed to changes in U.S. interest rates through its investment portfolio and term debt, and to foreign-exchange movements because it is a net receiver of non-U.S.-dollar currencies. A stronger U.S. dollar can reduce reported net sales and gross margins; exchange-rate changes can also affect the fair values of assets and liabilities.

Apple may manage interest-rate exposure using derivatives, offsetting rate-sensitive assets and liabilities, or controlling portfolio duration.

The foreign-currency VAR estimate excludes underlying currency exposures, which Apple says generally offset changes in derivative fair values. Apple may use derivatives, offset exposures, or adjust local-currency pricing to manage currency risk. It may leave some exposures unhedged when hedging would create accounting considerations or be prohibitively costly.

FY2026 results

Apple’s FY2026 revenue grew 15.1%, led by iPhone and Services. Operating income and net income grew faster than revenue; higher R&D contributed to the increase in operating expenses.

FY2026 revenue by product and service category:

iPhone revenue grew 21.2% and Services about 13.0%; iPad and Wearables, Home and Accessories declined slightly. Services includes amortization of consideration allocated to bundled services; some third-party App Store sales are recognized net as commissions.

Geographic segments

Corporate costs comprise R&D of $45.765B (FY2025: $34.550B) and G&A of $8.640B (FY2025: $8.077B), reconciling segment operating income to consolidated operating income. Greater China sales rebounded from $66.952B in FY2024; FY2026 U.S. sales were $167.746B, up from $151.790B. Greater China includes Hong Kong and Taiwan.

Cash flow, capital returns and equity

Operating cash flow growth outpaced earnings, although operating asset and liability changes included outflows of $8.905B for inventory and $21.117B for other current and non-current assets. Marketable-securities purchases rose to $54.945B from $24.407B. Cash, cash equivalents and restricted cash increased $371M to $36.305B. FY2026 repurchases were also reported as 296.699M shares for $85.8B; dividends declared were $15.704B. Shares outstanding fell from 14.773260B at FY2025 year-end (also FY2026 beginning) to 14.532259B at FY2026 year-end; 55.698M shares were issued net of employee-tax withholding. Weighted-average diluted shares declined to 14.720306B from 15.004697B.

Share-based compensation expense was $13.789B (FY2025: $12.863B; FY2024: $11.688B). Year-end RSUs outstanding were 142.405M; $24.1B of unrecognized RSU compensation cost was expected to be recognized over 2.6 years. Apple remitted $6.9B for employee taxes on net-share-settled RSUs in FY2026.

Balance sheet, liquidity and obligations

Net intangible assets comprise $20.943B of licensed amortizable assets, $3.218B of owned amortizable assets and $1.539B of non-amortizable owned assets. The current portion of licensed intangibles was $5.422B. Goodwill is not separately reported. Subtracting the reported non-current intangible balance from equity gives $91.815B; using total net intangible assets including the current portion gives $86.393B. Inventory growth was concentrated in components, which rose to $10.447B from $2.124B. Amortization expense was $4.9B, with FY2027 amortization expected to be $6.617B.

Term debt principal was $78.678B (FY2025: $91.281B); carrying value was $78.114B, comprising $9.906B current and $68.208B non-current. Commercial paper fell to $1.997B from $7.979B. Cash, cash equivalents and marketable securities had fair value of $136.935B versus $132.420B; adjusted cost was $140.970B, with net unrealized losses of $4.035B. Lease liabilities totaled $14.368B, including $12.912B operating and $1.456B finance liabilities. Purchase obligations with remaining terms over one year totaled $24.844B.

Deferred revenue was $14.8B, up from $13.7B; 65% was expected to be recognized within one year.

Tax, risk and controls

The effective tax rate was 17.0% in FY2026, versus 15.6% in FY2025 and 24.1% in FY2024. FY2026 tax provision included $2.510B for Qualified Domestic Minimum Top-up Tax. FY2024 included a one-time $10.2B net charge related to the Ireland State Aid Decision. Gross unrecognized tax benefits were $22.487B at FY2026 year-end, of which $10.6B would affect the effective tax rate if recognized; cash income taxes, net, were $34.588B.

Apple cited current supply constraints and rising costs in advanced semiconductors, memory and storage, with pressures expected to intensify. Outsourced manufacturing, limited sourcing and supplier capacity create exposure to shortages, trade restrictions and cost increases. AI/ML offerings also depend on constrained third-party compute, storage and cloud capacity. One customer represented 13% of trade receivables and cellular carriers 33%; two manufacturing vendors represented 45% and 27% of vendor non-trade receivables. The auditor issued unqualified opinions on the financial statements and internal controls, and identified uncertain tax positions as a critical audit matter.

Item 9B — Rule 10b5-1 Trading Plan

On August 24, 2026, Apple Senior Vice President of Retail + People Deirdre O’Brien entered into a Rule 10b5-1(c) trading plan to sell shares, subject to price limits, that vest from April 1 through October 1, 2027 under certain equity awards. Shares withheld to satisfy tax obligations are excluded from the plan. It expires December 31, 2027, unless terminated earlier under its terms. Trading under the new plan cannot begin until her prior plan, entered into November 24, 2025, terminates or expires.

The section reports no financial results or other material business developments.