10-KPeriod: FY2019

Apple Inc. Annual Report, Year Ended Sep 28, 2019

Filed October 31, 2019For Securities:AAPL

Summary

Apple Inc. reported total net sales of $260.17 billion for the fiscal year ended September 28, 2019, a decrease of 2% compared to the prior year. This decline was primarily driven by lower iPhone sales, although this was partially offset by growth in the Wearables, Home and Accessories, and Services segments. The company continues to see strong performance in its Services division, which posted a 16% increase in net sales. Despite the slight dip in overall revenue, Apple demonstrated robust profitability, with net income of $55.26 billion. The company also continued its significant capital return program, repurchasing $67.1 billion of its common stock and increasing its quarterly dividend. Apple faces a highly competitive market and risks associated with global economic conditions, supply chain disruptions, and evolving regulatory landscapes, but remains focused on innovation and product integration to maintain its competitive advantage. The company's substantial cash reserves provide financial flexibility.

Financial Highlights

55 data points
Beta

Revenue

$260.17B

37.8% Gross Margin

Net Income

$55.26B

21.2% Net Margin

EPS (Diluted)

$2.97

Total Assets

$338.52B

Cash & Equivalents

$48.84B

Free Cash Flow

$58.90B

Financial Statements
Beta
Revenue$260.17B
Cost of Revenue$161.78B
Gross Profit$98.39B
R&D Expenses$16.22B
SG&A Expenses$18.25B
Operating Expenses$34.46B
Operating Income$63.93B
Interest Expense$3.58B
Net Income$55.26B
EPS (Basic)$2.99
EPS (Diluted)$2.97
Shares Outstanding (Basic)18.47B
Shares Outstanding (Diluted)18.60B

Key Highlights

  • 1Total net sales for fiscal year 2019 were $260.17 billion, a 2% decrease from $265.60 billion in fiscal year 2018, primarily due to a decline in iPhone sales.
  • 2Net income for fiscal year 2019 was $55.26 billion, down from $59.53 billion in fiscal year 2018.
  • 3Services revenue continued to grow, increasing by 16% year-over-year to $46.29 billion, driven by strong performance in the App Store, licensing, and AppleCare.
  • 4The Wearables, Home and Accessories segment saw significant growth, up 41% year-over-year to $24.48 billion, fueled by sales of AirPods and Apple Watch.
  • 5Apple returned $67.1 billion to shareholders through share repurchases and paid $14.1 billion in dividends during fiscal year 2019.
  • 6The company maintained a strong liquidity position with $205.9 billion in cash, cash equivalents, and marketable securities as of September 28, 2019.
  • 7Greater China sales declined by 16% to $43.68 billion, largely impacted by lower iPhone sales.

Frequently Asked Questions

The primary driver for the 2% decline in total net sales ($260.17 billion) was a decrease in iPhone sales. However, this was partially offset by strong growth in the Wearables, Home and Accessories segment (+41% to $24.48 billion) and the Services segment (+16% to $46.29 billion).

Apple continued its aggressive capital return program. In fiscal year 2019, the company repurchased $67.1 billion of its common stock, utilizing a significant portion of its $175 billion repurchase authorization. Additionally, the quarterly dividend was increased from $0.73 to $0.77 per share. As of September 28, 2019, Apple held $205.9 billion in cash, cash equivalents, and marketable securities, indicating substantial financial flexibility.

Key risks identified include global and regional economic conditions impacting demand, intense competition in highly competitive markets characterized by rapid technological change and pricing pressure, supply chain disruptions due to reliance on single-source components and international manufacturing, and potential negative impacts from unfavorable legal proceedings and evolving regulatory environments worldwide, particularly concerning antitrust and data privacy.

The Services segment is a significant and growing contributor to Apple's revenue, reaching $46.29 billion in fiscal year 2019, a 16% increase. Growth drivers include the App Store, licensing agreements, and AppleCare. The company has also reclassified certain amortization of bundled services (Maps, Siri, iCloud) to Services revenue starting in Q1 2019, further boosting its reported performance.