Apple Inc. (AAPL) 10-K 2024: AI Summary

Summary

Full summary

The Print

Apple's FY2024 total net sales rose 2.0% to $391.0B while net income fell 3.4% to $93.7B, as a one-time $10.2B net income tax charge related to the State Aid Decision raised the effective tax rate to 24.1%.

Total net sales increased 2.0% to $391.0B in 2024 from $383.3B in 2023, driven by Services net sales growth of 12.9% to $96.2B, partially offset by a 1.1% decline in Products net sales to $294.9B. Net income decreased 3.4% to $93.7B, and the effective tax rate rose to 24.1% from 14.7%, which management attributes primarily to a one-time income tax charge of $10.2B, net, related to the State Aid Decision.

Total net sales $391.0B (+2.0% YoY) with Services $96.2B (+12.9%) offsetting a 1.1% decline in Products to $294.9B.
Net income $93.7B (-3.4% YoY) and diluted EPS $6.08 (vs. $6.13), reflecting a one-time income tax charge of $10.2B, net, related to the State Aid Decision.
Gross margin expanded to 46.2% from 44.1%, with Services gross margin at 73.9% and Products gross margin at 37.2%.
Cash generated by operating activities was $118.3B; the Company repurchased $95.0B of common stock and paid $15.2B of dividends and dividend equivalents.

Results That Matter

Total net sales
Current period
$391.0B
Prior period
$383.3B
Change
+2.0%
Growth driven by Services net sales, which increased 12.9% to $96.2B, partially offset by a 1.1% decline in Products net sales to $294.9B.
Products net sales
Current period
$294.9B
Prior period
$298.1B
Change
−1.1%
iPhone net sales were relatively flat; declines in iPad and Wearables, Home and Accessories more than offset Mac growth.
Services net sales
Current period
$96.2B
Prior period
$85.2B
Change
+12.9%
Management attributes the increase primarily to higher net sales from advertising, the App Store and cloud services.
Gross margin
Current period
$180.7B
Prior period
$169.1B
Change
+6.9%
Total gross margin percentage expanded to 46.2% from 44.1%, with Services gross margin percentage at 73.9% and Products gross margin percentage at 37.2%.
Operating income
Current period
$123.2B
Prior period
$114.3B
Change
+7.8%
Operating income increased as gross margin growth of 6.8% outpaced a 4.8% increase in total operating expenses to $57.5B.
Net income
Current period
$93.7B
Prior period
$97.0B
Change
−3.4%
Net income declined despite higher operating income, as the provision for income taxes rose to $29.7B from $16.7B, which management attributes primarily to a one-time income tax charge of $10.2B, net, related to the State Aid Decision.
Diluted earnings per share
Current period
$6.1
Prior period
$6.1
Change
−0.8%
Diluted EPS declined less than net income on a percentage basis as the weighted-average diluted share count fell to 15,408,095 thousand from 15,812,547 thousand.
Basic earnings per share
Current period
$6.1
Prior period
$6.2
Change
−0.8%
Basic EPS declined in line with the reduction in net income, partly offset by a lower weighted-average basic share count.

Financial highlights: current period, prior period, change, and investor takeaway per metric
Metric	Current Period	Prior Period	Change	Investor Takeaway
Total net sales	$391.0B	$383.3B	+2.0%	Growth driven by Services net sales, which increased 12.9% to $96.2B, partially offset by a 1.1% decline in Products net sales to $294.9B.
Products net sales	$294.9B	$298.1B	−1.1%	iPhone net sales were relatively flat; declines in iPad and Wearables, Home and Accessories more than offset Mac growth.
Services net sales	$96.2B	$85.2B	+12.9%	Management attributes the increase primarily to higher net sales from advertising, the App Store and cloud services.
Gross margin	$180.7B	$169.1B	+6.9%	Total gross margin percentage expanded to 46.2% from 44.1%, with Services gross margin percentage at 73.9% and Products gross margin percentage at 37.2%.
Operating income	$123.2B	$114.3B	+7.8%	Operating income increased as gross margin growth of 6.8% outpaced a 4.8% increase in total operating expenses to $57.5B.
Net income	$93.7B	$97.0B	−3.4%	Net income declined despite higher operating income, as the provision for income taxes rose to $29.7B from $16.7B, which management attributes primarily to a one-time income tax charge of $10.2B, net, related to the State Aid Decision.
Diluted earnings per share	$6.1	$6.1	−0.8%	Diluted EPS declined less than net income on a percentage basis as the weighted-average diluted share count fell to 15,408,095 thousand from 15,812,547 thousand.
Basic earnings per share	$6.1	$6.2	−0.8%	Basic EPS declined in line with the reduction in net income, partly offset by a lower weighted-average basic share count.

Earnings Quality & Cash Conversion

The provision for income taxes of $29.7B includes a one-time income tax charge of $10.2B, net, related to the State Aid Decision, which represents $15.8B payable to Ireland via release of the escrow, partially offset by a U.S. foreign tax credit of $4.8B and a decrease in unrecognized tax benefits of $823M. Excluding this item, the effective tax rate would have been lower than the reported 24.1%.

Red flag

Accounts receivable, net increased 13.2% to $33.4B while total net sales grew 2.0%, and the change in accounts receivable used $3.8B of operating cash flow in 2024 versus $1.7B in 2023.

Red flag

Other current liabilities increased 33.1% to $78.3B, driven by income taxes payable rising to $26.6B from $8.8B.

Value Drivers & Capital Allocation

Capital expenditures $9.4B (prior $11.0B) (selected cash-flow amount, not necessarily total capital investment).

“In May 2024, the Company announced a new share repurchase program of up to $110 billion and raised its quarterly dividend from $0.24 to $0.25 per share beginning in May 2024. During 2024, the Company repurchased $95.0 billion of its common stock and paid dividends and dividend equivalents of $15.2 billion.”
— Filing statement

Return on equity was 164.6% (prior 156.1%) (period net income / period-end equity, not annualized); return on assets 25.7% (prior 27.5%) (period net income / period-end assets, not annualized).

Forward Signals

The filing does not provide specific revenue or earnings guidance. Management states that future gross margins can be impacted by a variety of factors and that the Company believes, in general, gross margins will be subject to volatility and downward pressure.

Known trends

The Company expects to adopt ASU 2023-09 in its fourth quarter of 2026 and ASU 2023-07 in its fourth quarter of 2025.
The Company believes it is reasonably possible that its gross unrecognized tax benefits could decrease between approximately $5 billion and $13 billion in the next 12 months, primarily related to intercompany transfer pricing and deemed repatriation tax.

Subsequent events

Not disclosed—no material subsequent events are described in the provided filing excerpts.

“The Company believes its balances of unrestricted cash, cash equivalents and marketable securities, which totaled $140.8 billion as of September 28, 2024, 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.”
— Apple Inc. management

“The Company intends to increase its dividend on an annual basis, subject to declaration by the Board.”
— Apple Inc. management

Risks

4 source-verified filing excerpts. Selected excerpts are not a complete risk inventory.

Filing excerpt 1

EvidenceAs of September 28, 2024, the total amount of gross unrecognized tax benefits was $22.0 billion, of which $10.8 billion, if recognized, would impact the Company’s effective tax rate.

Filing excerpt 2

EvidenceSubstantially 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.

Filing excerpt 3

EvidenceBecause the Company currently obtains certain components from single or limited sources, the Company is subject to significant supply and pricing risks.

Filing excerpt 4

EvidenceChanges to the Company’s products and services could materially adversely affect the Company’s business, results of operations and financial condition, including if such business changes result in reduced App Store or other sales, reductions in the rate of the commission that the Company retains on such sales, or if the rate of the commission is otherwise narrowed in scope or eliminated.

Balance Sheet & Liquidity

Leverage: Identified debt as of 2024-09-28: reported debt balance of unestablished maturity scope of $85.8B. The concept behind this balance does not establish which maturities it covers. Total debt, net debt and debt-to-equity are therefore not stated.

Liquidity: Unrestricted cash, cash equivalents and marketable securities totaled $140.8B as of September 28, 2024. Cash and cash equivalents were $29.9B, current marketable securities were $35.2B, and non-current marketable securities were $91.5B.

Cash flow: Cash flow — operating $118.3B, investing $2.9B, financing $-122.0B.

Working capital: Current assets $153.0B vs. current liabilities $176.4B (current ratio 0.87x). Prior reported balance sheet as of 2023-09-30: $143.6B vs. $145.3B (0.99x).

Maturities & covenants

Future principal payments for the Company's Notes as of September 28, 2024 include $10.9B due in 2025, $12.3B in 2026, $9.9B in 2027, $7.8B in 2028, $5.2B in 2029, and $51.2B thereafter.
As of September 28, 2024, the Company had an obligation to pay €14.2 billion or $15.8 billion to Ireland in connection with the State Aid Decision, all of which was expected to be paid within 12 months.

Notable Footnotes

Item	Impact
European Commission State Aid Decision	During the fourth quarter of 2024 the Company recorded a one-time income tax charge of $10.2B, net, which represents $15.8B payable to Ireland via release of the escrow, partially offset by a U.S. foreign tax credit of $4.8B and a decrease in unrecognized tax benefits of $823M.
Uncertain Tax Positions	As of September 28, 2024, the total amount of gross unrecognized tax benefits was $22.0B, of which $10.8B, if recognized, would impact the effective tax rate.
Share Repurchase Program	During 2024, the Company repurchased 499 million shares of its common stock for $95.0B.
Segment Information	The Company's reportable segments consist of the Americas, Europe, Greater China, Japan and Rest of Asia Pacific, managed primarily on a geographic basis.

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AI-generated. Informational only, not investment advice. May be incomplete or contain errors. The authoritative source is always the original SEC filing.