Apple 10-Q 2023-07-01

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 1, 2023

or

☐ 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

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

15,634,232,000 shares of common stock were issued and outstanding as of July 21, 2023.

Apple Inc.

Form 10-Q

For the Fiscal Quarter Ended July 1, 2023

TABLE OF CONTENTS

						Page
Part I
Item 1.			Financial Statements			1
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			14
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			19
Item 4.			Controls and Procedures			19
Part II
Item 1.			Legal Proceedings			20
Item 1A.			Risk Factors			20
Item 2.			Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities			21
Item 3.			Defaults Upon Senior Securities			21
Item 4.			Mine Safety Disclosures			21
Item 5.			Other Information			21
Item 6.			Exhibits			22

PART I — FINANCIAL INFORMATION

Apple Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In millions, except number of shares which are reflected in thousands and per share amounts)

			Three Months Ended												Nine Months Ended
			July 1, 2023						June 25, 2022						July 1, 2023						June 25, 2022
Net sales:
Products			$	60,584					$	63,355					$	230,901					$	245,241
Services			21,213						19,604						62,886						58,941
Total net sales			81,797						82,959						293,787						304,182
Cost of sales:
Products			39,136						41,485						146,696						155,084
Services			6,248						5,589						18,370						16,411
Total cost of sales			45,384						47,074						165,066						171,495
Gross margin			36,413						35,885						128,721						132,687
Operating expenses:
Research and development			7,442						6,797						22,608						19,490
Selling, general and administrative			5,973						6,012						18,781						18,654
Total operating expenses			13,415						12,809						41,389						38,144
Operating income			22,998						23,076						87,332						94,543
Other income/(expense), net			(265)						(10)						(594)						(97)
Income before provision for income taxes			22,733						23,066						86,738						94,446
Provision for income taxes			2,852						3,624						12,699						15,364
Net income			$	19,881					$	19,442					$	74,039					$	79,082
Earnings per share:
Basic			$	1.27					$	1.20					$	4.69					$	4.86
Diluted			$	1.26					$	1.20					$	4.67					$	4.82
Shares used in computing earnings per share:
Basic			15,697,614						16,162,945						15,792,497						16,277,824
Diluted			15,775,021						16,262,203						15,859,263						16,394,937

See accompanying Notes to Condensed Consolidated Financial Statements.

Apple Inc. | Q3 2023 Form 10-Q | 1

Apple Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In millions)

			Three Months Ended												Nine Months Ended
			July 1, 2023						June 25, 2022						July 1, 2023						June 25, 2022
Net income			$	19,881					$	19,442					$	74,039					$	79,082
Other comprehensive income/(loss):
Change in foreign currency translation, net of tax			(385)						(721)						(494)						(1,102)
Change in unrealized gains/losses on derivative instruments, net of tax:
Change in fair value of derivative instruments			509						852						(492)						1,548
Adjustment for net (gains)/losses realized and included in net income			103						121						(1,854)						(87)
Total change in unrealized gains/losses on derivative instruments			612						973						(2,346)						1,461
Change in unrealized gains/losses on marketable debt securities, net of tax:
Change in fair value of marketable debt securities			(340)						(3,150)						1,963						(9,959)
Adjustment for net (gains)/losses realized and included in net income			58						95						185						140
Total change in unrealized gains/losses on marketable debt securities			(282)						(3,055)						2,148						(9,819)
Total other comprehensive income/(loss)			(55)						(2,803)						(692)						(9,460)
Total comprehensive income			$	19,826					$	16,639					$	73,347					$	69,622

See accompanying Notes to Condensed Consolidated Financial Statements.

Apple Inc. | Q3 2023 Form 10-Q | 2

Apple Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In millions, except number of shares which are reflected in thousands and par value)

			July 1, 2023						September 24, 2022
ASSETS:
Current assets:
Cash and cash equivalents			$	28,408					$	23,646
Marketable securities			34,074						24,658
Accounts receivable, net			19,549						28,184
Inventories			7,351						4,946
Vendor non-trade receivables			19,637						32,748
Other current assets			13,640						21,223
Total current assets			122,659						135,405
Non-current assets:
Marketable securities			104,061						120,805
Property, plant and equipment, net			43,550						42,117
Other non-current assets			64,768						54,428
Total non-current assets			212,379						217,350
Total assets			$	335,038					$	352,755
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Accounts payable			$	46,699					$	64,115
Other current liabilities			58,897						60,845
Deferred revenue			8,158						7,912
Commercial paper			3,993						9,982
Term debt			7,216						11,128
Total current liabilities			124,963						153,982
Non-current liabilities:
Term debt			98,071						98,959
Other non-current liabilities			51,730						49,142
Total non-current liabilities			149,801						148,101
Total liabilities			274,764						302,083
Commitments and contingencies
Shareholders’ equity:
Common stock and additional paid-in capital, $0.00001 par value: 50,400,000 shares authorized; 15,647,868 and 15,943,425 shares issued and outstanding, respectively			70,667						64,849
Retained earnings/(Accumulated deficit)			1,408						(3,068)
Accumulated other comprehensive income/(loss)			(11,801)						(11,109)
Total shareholders’ equity			60,274						50,672
Total liabilities and shareholders’ equity			$	335,038					$	352,755

See accompanying Notes to Condensed Consolidated Financial Statements.

Apple Inc. | Q3 2023 Form 10-Q | 3

Apple Inc.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

(In millions, except per share amounts)

			Three Months Ended												Nine Months Ended
			July 1, 2023						June 25, 2022						July 1, 2023						June 25, 2022
Total shareholders’ equity, beginning balances			$	62,158					$	67,399					$	50,672					$	63,090
Common stock and additional paid-in capital:
Beginning balances			69,568						61,181						64,849						57,365
Common stock issued			—						—						690						593
Common stock withheld related to net share settlement of equity awards			(1,595)						(1,371)						(3,310)						(2,783)
Share-based compensation			2,694						2,305						8,438						6,940
Ending balances			70,667						62,115						70,667						62,115
Retained earnings/(Accumulated deficit):
Beginning balances			4,336						12,712						(3,068)						5,562
Net income			19,881						19,442						74,039						79,082
Dividends and dividend equivalents declared			(3,811)						(3,760)						(11,207)						(11,058)
Common stock withheld related to net share settlement of equity awards			(858)						(1,403)						(1,988)						(3,323)
Common stock repurchased			(18,140)						(21,702)						(56,368)						(64,974)
Ending balances			1,408						5,289						1,408						5,289
Accumulated other comprehensive income/(loss):
Beginning balances			(11,746)						(6,494)						(11,109)						163
Other comprehensive income/(loss)			(55)						(2,803)						(692)						(9,460)
Ending balances			(11,801)						(9,297)						(11,801)						(9,297)
Total shareholders’ equity, ending balances			$	60,274					$	58,107					$	60,274					$	58,107
Dividends and dividend equivalents declared per share or RSU			$	0.24					$	0.23					$	0.70					$	0.67

See accompanying Notes to Condensed Consolidated Financial Statements.

Apple Inc. | Q3 2023 Form 10-Q | 4

Apple Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In millions)

			Nine Months Ended
			July 1, 2023						June 25, 2022
Cash, cash equivalents and restricted cash, beginning balances			$	24,977					$	35,929
Operating activities:
Net income			74,039						79,082
Adjustments to reconcile net income to cash generated by operating activities:
Depreciation and amortization			8,866						8,239
Share-based compensation expense			8,208						6,760
Other			(1,651)						2,695
Changes in operating assets and liabilities:
Accounts receivable, net			7,609						4,561
Inventories			(2,570)						1,049
Vendor non-trade receivables			13,111						4,789
Other current and non-current assets			(4,863)						(3,289)
Accounts payable			(16,790)						(6,108)
Other current and non-current liabilities			2,986						246
Cash generated by operating activities			88,945						98,024
Investing activities:
Purchases of marketable securities			(20,956)						(70,178)
Proceeds from maturities of marketable securities			27,857						24,203
Proceeds from sales of marketable securities			3,959						33,609
Payments for acquisition of property, plant and equipment			(8,796)						(7,419)
Other			(753)						(1,352)
Cash generated by/(used in) investing activities			1,311						(21,137)
Financing activities:
Payments for taxes related to net share settlement of equity awards			(5,119)						(5,915)
Payments for dividends and dividend equivalents			(11,267)						(11,138)
Repurchases of common stock			(56,547)						(64,974)
Proceeds from issuance of term debt, net			5,228						—
Repayments of term debt			(11,151)						(6,750)
Proceeds from/(Repayments of) commercial paper, net			(5,971)						4,970
Other			(508)						(148)
Cash used in financing activities			(85,335)						(83,955)
Increase/(Decrease) in cash, cash equivalents and restricted cash			4,921						(7,068)
Cash, cash equivalents and restricted cash, ending balances			$	29,898					$	28,861
Supplemental cash flow disclosure:
Cash paid for income taxes, net			$	7,020					$	12,251
Cash paid for interest			$	2,590					$	1,910

See accompanying Notes to Condensed Consolidated Financial Statements.

Apple Inc. | Q3 2023 Form 10-Q | 5

Apple Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 – Summary of Significant Accounting Policies

Basis of Presentation and Preparation

The condensed consolidated financial statements include the accounts of Apple Inc. and its wholly owned subsidiaries (collectively “Apple” or the “Company”). Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these condensed consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. Certain prior period amounts in the condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the fiscal year ended September 24, 2022.

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 years 2023 and 2022 span 53 and 52 weeks, respectively. 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.

Earnings Per Share

The following table shows the computation of basic and diluted earnings per share for the three- and nine-month periods ended July 1, 2023 and June 25, 2022 (net income in millions and shares in thousands):

			Three Months Ended												Nine Months Ended
			July 1, 2023						June 25, 2022						July 1, 2023						June 25, 2022
Numerator:
Net income			$	19,881					$	19,442					$	74,039					$	79,082
Denominator:
Weighted-average basic shares outstanding			15,697,614						16,162,945						15,792,497						16,277,824
Effect of dilutive securities			77,407						99,258						66,766						117,113
Weighted-average diluted shares			15,775,021						16,262,203						15,859,263						16,394,937
Basic earnings per share			$	1.27					$	1.20					$	4.69					$	4.86
Diluted earnings per share			$	1.26					$	1.20					$	4.67					$	4.82

Approximately 32 million restricted stock units (“RSUs”) were excluded from the computation of diluted earnings per share for the nine months ended July 1, 2023 because their effect would have been antidilutive.

Apple Inc. | Q3 2023 Form 10-Q | 6

Note 2 – Revenue

Net sales disaggregated by significant products and services for the three- and nine-month periods ended July 1, 2023 and June 25, 2022 were as follows (in millions):

			Three Months Ended												Nine Months Ended
			July 1, 2023						June 25, 2022						July 1, 2023						June 25, 2022
iPhone®			$	39,669					$	40,665					$	156,778					$	162,863
Mac®			6,840						7,382						21,743						28,669
iPad®			5,791						7,224						21,857						22,118
Wearables, Home and Accessories			8,284						8,084						30,523						31,591
Services			21,213						19,604						62,886						58,941
Total net sales			$	81,797					$	82,959					$	293,787					$	304,182

Total net sales include $3.3 billion of revenue recognized in the three months ended July 1, 2023 that was included in deferred revenue as of April 1, 2023, $3.1 billion of revenue recognized in the three months ended June 25, 2022 that was included in deferred revenue as of March 26, 2022, $7.0 billion of revenue recognized in the nine months ended July 1, 2023 that was included in deferred revenue as of September 24, 2022, and $6.3 billion of revenue recognized in the nine months ended June 25, 2022 that was included in deferred revenue as of September 25, 2021.

The Company’s proportion of net sales by disaggregated revenue source was generally consistent for each reportable segment in Note 10, “Segment Information and Geographic Data” for the three- and nine-month periods ended July 1, 2023 and June 25, 2022, except in Greater China, where iPhone revenue represented a moderately higher proportion of net sales.

As of July 1, 2023 and September 24, 2022, the Company had total deferred revenue of $12.2 billion and $12.4 billion, respectively. As of July 1, 2023, the Company expects 67% of total deferred revenue to be realized in less than a year, 26% within one-to-two years, 6% within two-to-three years and 1% in greater than three years.

Note 3 – 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 July 1, 2023 and September 24, 2022 (in millions):

			July 1, 2023
			Adjusted Cost						Unrealized Gains						Unrealized Losses						Fair Value						Cash and Cash Equivalents						Current Marketable Securities						Non-Current****Marketable Securities
Cash			$	25,337					$	—					$	—					$	25,337					$	25,337					$	—					$	—
Level 1 (1):
Money market funds			1,108						—						—						1,108						1,108						—						—
Mutual funds			366						15						(19)						362						—						362						—
Subtotal			1,474						15						(19)						1,470						1,108						362						—
Level 2 (2):
U.S. Treasury securities			22,274						—						(1,354)						20,920						—						8,076						12,844
U.S. agency securities			5,709						—						(594)						5,115						3						272						4,840
Non-U.S. government securities			17,588						19						(927)						16,680						—						11,262						5,418
Certificates of deposit and time deposits			2,315						—						—						2,315						1,960						355						—
Commercial paper			364						—						—						364						—						364						—
Corporate debt securities			79,621						22						(6,079)						73,564						—						13,005						60,559
Municipal securities			713						—						(23)						690						—						213						477
Mortgage- and asset-backed securities			22,383						4						(2,299)						20,088						—						165						19,923
Subtotal			150,967						45						(11,276)						139,736						1,963						33,712						104,061
Total (3)			$	177,778					$	60					$	(11,295)					$	166,543					$	28,408					$	34,074					$	104,061

Apple Inc. | Q3 2023 Form 10-Q | 7

			September 24, 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 (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 (2):
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 (3)			$	183,061					$	11					$	(13,963)					$	169,109					$	23,646					$	24,658					$	120,805

(1)Level 1 fair value estimates are based on quoted prices in active markets for identical assets or liabilities.

(2)Level 2 fair value estimates are based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

(3)As of July 1, 2023 and September 24, 2022, total marketable securities included $14.1 billion and $12.7 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 5, “Income Taxes”) and other agreements.

The following table shows the fair value of the Company’s non-current marketable debt securities, by contractual maturity, as of July 1, 2023 (in millions):

Due after 1 year through 5 years			$	76,267
Due after 5 years through 10 years			11,148
Due after 10 years			16,646
Total fair value			$	104,061

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.

Foreign Exchange Risk

To protect gross margins from fluctuations in foreign currency exchange rates, the Company may enter into forward contracts, option contracts 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 currency exchange rates, the Company may enter into forward contracts, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value hedges. As of July 1, 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.

Apple Inc. | Q3 2023 Form 10-Q | 8

The Company may also enter into derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in foreign currency exchange rates, as well as to offset a portion of the foreign currency exchange 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 enter into 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 July 1, 2023 and September 24, 2022 were as follows (in millions):

			July 1, 2023						September 24, 2022
Derivative instruments designated as accounting hedges:
Foreign exchange contracts			$	45,425					$	102,670
Interest rate contracts			$	19,375					$	20,125
Derivative instruments not designated as accounting hedges:
Foreign exchange contracts			$	90,977					$	185,381

The gross fair values of the Company’s derivative assets and liabilities as of September 24, 2022 were as follows (in millions):

			September 24, 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 Condensed 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 Condensed 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 enters into 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 enters into 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 July 1, 2023 and September 24, 2022 were as follows (in millions):

			July 1, 2023						September 24, 2022
Hedged assets/(liabilities):
Current and non-current marketable securities			$	14,863					$	13,378
Current and non-current term debt			$	(17,986)					$	(18,739)

Apple Inc. | Q3 2023 Form 10-Q | 9

Accounts Receivable

Trade Receivables

The Company has considerable trade receivables outstanding with its third-party cellular network carriers, wholesalers, retailers, resellers, small and mid-sized businesses and education, enterprise and government customers. The Company generally does not require collateral from its customers; however, the Company will require collateral or third-party credit support in certain instances to limit credit risk. In addition, when possible, the Company attempts to limit credit risk on trade receivables with credit insurance for certain customers or by requiring third-party financing, loans or leases to support credit exposure. These credit-financing arrangements are directly between the third-party financing company and the end customer. As such, the Company generally does not assume any recourse or credit risk sharing related to any of these arrangements.

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 cellular network carriers accounted for 44% of total trade receivables as of September 24, 2022.

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. As of July 1, 2023, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 54% and 14%. 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%.

Note 4 – Condensed Consolidated Financial Statement Details

The following tables show the Company’s condensed consolidated financial statement details as of July 1, 2023 and September 24, 2022 (in millions):

Inventories

			July 1, 2023						September 24, 2022
Components			$	3,788					$	1,637
Finished goods			3,563						3,309
Total inventories			$	7,351					$	4,946

Property, Plant and Equipment, Net

			July 1, 2023						September 24, 2022
Gross property, plant and equipment			$	114,337					$	114,457
Accumulated depreciation and amortization			(70,787)						(72,340)
Total property, plant and equipment, net			$	43,550					$	42,117

Other Income/(Expense), Net

The following table shows the detail of other income/(expense), net for the three- and nine-month periods ended July 1, 2023 and June 25, 2022 (in millions):

			Three Months Ended												Nine Months Ended
			July 1, 2023						June 25, 2022						July 1, 2023						June 25, 2022
Interest and dividend income			$	980					$	722					$	2,766					$	2,072
Interest expense			(998)						(719)						(2,931)						(2,104)
Other expense, net			(247)						(13)						(429)						(65)
Total other income/(expense), net			$	(265)					$	(10)					$	(594)					$	(97)

Apple Inc. | Q3 2023 Form 10-Q | 10

Note 5 – Income Taxes

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 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.

Note 6 – Debt

Commercial Paper

The Company issues unsecured short-term promissory notes (“Commercial Paper”) 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 July 1, 2023 and September 24, 2022, the Company had $4.0 billion and $10.0 billion of Commercial Paper outstanding, respectively. The following table provides a summary of cash flows associated with the issuance and maturities of Commercial Paper for the nine months ended July 1, 2023 and June 25, 2022 (in millions):

			Nine Months Ended
			July 1, 2023						June 25, 2022
Maturities 90 days or less:
Proceeds from/(Repayments of) commercial paper, net			$	(3,326)					$	4,383
Maturities greater than 90 days:
Proceeds from commercial paper			—						5,731
Repayments of commercial paper			(2,645)						(5,144)
Proceeds from/(Repayments of) commercial paper, net			(2,645)						587
Total proceeds from/(repayments of) commercial paper, net			$	(5,971)					$	4,970

Term Debt

As of July 1, 2023 and September 24, 2022, the Company had outstanding fixed-rate notes with varying maturities for an aggregate carrying amount of $105.3 billion and $110.1 billion, respectively (collectively the “Notes”). As of July 1, 2023 and September 24, 2022, the fair value of the Company’s Notes, based on Level 2 inputs, was $95.3 billion and $98.8 billion, respectively.

Note 7 – Shareholders’ Equity

Share Repurchase Program

During the nine months ended July 1, 2023, the Company repurchased 365 million shares of its common stock for $56.1 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 Securities Exchange Act of 1934, as amended.

Apple Inc. | Q3 2023 Form 10-Q | 11

Note 8 – Benefit Plans

Restricted Stock Units

A summary of the Company’s RSU activity and related information for the nine months ended July 1, 2023 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 24, 2022			201,501						$	109.48
RSUs granted			86,896						$	150.23
RSUs vested			(96,681)						$	95.97
RSUs canceled			(7,000)						$	126.48
Balance as of July 1, 2023			184,716						$	135.08					$	35,829

The fair value as of the respective vesting dates of RSUs was $7.0 billion and $14.9 billion for the three- and nine-month periods ended July 1, 2023, respectively, and was $7.8 billion and $17.3 billion for the three- and nine-month periods ended June 25, 2022, respectively.

Share-Based Compensation

The following table shows share-based compensation expense and the related income tax benefit included in the Condensed Consolidated Statements of Operations for the three- and nine-month periods ended July 1, 2023 and June 25, 2022 (in millions):

			Three Months Ended												Nine Months Ended
			July 1, 2023						June 25, 2022						July 1, 2023						June 25, 2022
Share-based compensation expense			$	2,617					$	2,243					$	8,208					$	6,760
Income tax benefit related to share-based compensation expense			$	(993)					$	(1,231)					$	(2,791)					$	(3,416)

As of July 1, 2023, the total unrecognized compensation cost related to outstanding RSUs and stock options was $20.9 billion, which the Company expects to recognize over a weighted-average period of 2.7 years.

Note 9 – Commitments and Contingencies

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 July 1, 2023, are as follows (in millions):

2023 (remaining three months)			$	1,260
2024			3,417
2025			1,990
2026			3,079
2027			1,013
Thereafter			8,198
Total			$	18,957

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.

Apple Inc. | Q3 2023 Form 10-Q | 12

Note 10 – Segment Information and Geographic Data

The following table shows information by reportable segment for the three- and nine-month periods ended July 1, 2023 and June 25, 2022 (in millions):

			Three Months Ended												Nine Months Ended
			July 1, 2023						June 25, 2022						July 1, 2023						June 25, 2022
Americas:
Net sales			$	35,383					$	37,472					$	122,445					$	129,850
Operating income			$	13,117					$	13,914					$	44,908					$	48,778
Europe:
Net sales			$	20,205					$	19,287					$	71,831					$	72,323
Operating income			$	7,995					$	7,124					$	27,380					$	27,174
Greater China:
Net sales			$	15,758					$	14,604					$	57,475					$	58,730
Operating income			$	6,207					$	5,760					$	24,175					$	25,055
Japan:
Net sales			$	4,821					$	5,446					$	18,752					$	20,277
Operating income			$	2,443					$	2,418					$	9,073					$	9,263
Rest of Asia Pacific:
Net sales			$	5,630					$	6,150					$	23,284					$	23,002
Operating income			$	2,328					$	2,367					$	9,447					$	9,185

A reconciliation of the Company’s segment operating income to the Condensed Consolidated Statements of Operations for the three- and nine-month periods ended July 1, 2023 and June 25, 2022 is as follows (in millions):

			Three Months Ended												Nine Months Ended
			July 1, 2023						June 25, 2022						July 1, 2023						June 25, 2022
Segment operating income			$	32,090					$	31,583					$	114,983					$	119,455
Research and development expense			(7,442)						(6,797)						(22,608)						(19,490)
Other corporate expenses, net			(1,650)						(1,710)						(5,043)						(5,422)
Total operating income			$	22,998					$	23,076					$	87,332					$	94,543

Apple Inc. | Q3 2023 Form 10-Q | 13