Review the 2023 Annual Report (Form 10-K) for Apple, Inc. (financial statements begin on page 30 of the PDF) and respond to the questions / requirements below.
Apple has several stock compensation plans available for employees and directors (see Note 9, on pages 46-47 of the PDF). Think about your current or former employer. Does your employer offer stock compensation? If so, what specific types of stock compensation are offered (include as much detail as possible)?
If you could design a stock compensation plan for your employer / job, what specific requirements would you have for the plan (such as vesting periods, vesting conditions, etc.)?
Choose another company to evaluate their liquidity and profitability and locate their Annual Report / financial statements. Compute and interpret the same four ratios for this other company for the most recent fiscal year. How does this other company’s liquidity and profitability compare to Apple?
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 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
1.375% Notes due 2024
0.000% Notes due 2025
0.875% Notes due 2025
1.625% Notes due 2026
2.000% Notes due 2027
1.375% Notes due 2029
3.050% Notes due 2029
0.500% Notes due 2031
3.600% Notes due 2042
AAPL
—
—
—
—
—
—
—
—
—
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒
No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐
No ☒
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
Non-accelerated filer
☒
☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report.
☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included
in the filing reflect the correction of an error to previously issued financial statements.
☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐
No ☒
The aggregate market value of the voting and non-voting stock held by non-affiliates of the Registrant, as of March 31, 2023, the last business
day of the Registrant’s most recently completed second fiscal quarter, was approximately $2,591,165,000,000. Solely for purposes of this
disclosure, shares of common stock held by executive officers and directors of the Registrant as of such date have been excluded because such
persons may be deemed to be affiliates. This determination of executive officers and directors as affiliates is not necessarily a conclusive
determination for any other purposes.
15,552,752,000 shares of common stock were issued and outstanding as of October 20, 2023.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement relating to its 2024 annual meeting of shareholders are incorporated by reference into Part
III of this Annual Report on Form 10-K where indicated. The Registrant’s definitive proxy statement will be filed with the U.S. Securities and
Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
Apple Inc.
Form 10-K
For the Fiscal Year Ended September 30, 2023
TABLE OF CONTENTS
Page
Part I
Item 1.
Business
1
Item 1A.
Risk Factors
5
Item 1B.
Unresolved Staff Comments
16
Item 1C.
Cybersecurity
16
Item 2.
Properties
17
Item 3.
Legal Proceedings
17
Item 4.
Mine Safety Disclosures
17
Part II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
18
Item 6.
[Reserved]
19
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
20
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
26
Item 8.
Financial Statements and Supplementary Data
27
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
52
Item 9A.
Controls and Procedures
52
Item 9B.
Other Information
53
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
53
Item 10.
Directors, Executive Officers and Corporate Governance
53
Item 11.
Executive Compensation
53
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
53
Item 13.
Certain Relationships and Related Transactions, and Director Independence
53
Item 14.
Principal Accountant Fees and Services
53
Part III
Part IV
Item 15.
Exhibit and Financial Statement Schedules
54
Item 16.
Form 10-K Summary
57
This Annual Report on Form 10-K (“Form 10-K”) contains forward-looking statements, within the meaning of the Private
Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Many of the forward-looking statements are
located in Part I, Item 1 of this Form 10-K under the heading “Business” and Part II, Item 7 of this Form 10-K under the heading
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements
provide current expectations of future events based on certain assumptions and include any statement that does not directly
relate to any historical or current fact. For example, statements in this Form 10-K regarding the potential future impact of
macroeconomic conditions on the Company’s business and results of operations are forward-looking statements. Forwardlooking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,”
“intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not
guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I,
Item 1A of this Form 10-K under the heading “Risk Factors.” The Company assumes no obligation to revise or update any
forward-looking statements for any reason, except as required by law.
Unless otherwise stated, all information presented herein is based on the Company’s fiscal calendar, and references to
particular years, quarters, months or periods refer to the Company’s fiscal years ended in September and the associated
quarters, months and periods of those fiscal years. Each of the terms the “Company” and “Apple” as used herein refers
collectively to Apple Inc. and its wholly owned subsidiaries, unless otherwise stated.
PART I
Item 1.
Business
Company Background
The Company designs, manufactures and markets smartphones, personal computers, tablets, wearables and accessories, and
sells a variety of related services. The Company’s fiscal year is the 52- or 53-week period that ends on the last Saturday of
September.
Products
iPhone
iPhone® is the Company’s line of smartphones based on its iOS operating system. The iPhone line includes iPhone 15 Pro,
iPhone 15, iPhone 14, iPhone 13 and iPhone SE®.
Mac
Mac® is the Company’s line of personal computers based on its macOS® operating system. The Mac line includes laptops
MacBook Air® and MacBook Pro®, as well as desktops iMac®, Mac mini®, Mac Studio® and Mac Pro®.
iPad
iPad® is the Company’s line of multipurpose tablets based on its iPadOS® operating system. The iPad line includes iPad Pro®,
iPad Air®, iPad and iPad mini®.
Wearables, Home and Accessories
Wearables includes smartwatches and wireless headphones. The Company’s line of smartwatches, based on its watchOS®
operating system, includes Apple Watch Ultra™ 2, Apple Watch® Series 9 and Apple Watch SE®. The Company’s line of
wireless headphones includes AirPods®, AirPods Pro®, AirPods Max™ and Beats® products.
Home includes Apple TV®, the Company’s media streaming and gaming device based on its tvOS® operating system, and
HomePod® and HomePod mini®, high-fidelity wireless smart speakers.
Accessories includes Apple-branded and third-party accessories.
Apple Inc. | 2023 Form 10-K | 1
Services
Advertising
The Company’s advertising services include third-party licensing arrangements and the Company’s own advertising platforms.
AppleCare
The Company offers a portfolio of fee-based service and support products under the AppleCare® brand. The offerings provide
priority access to Apple technical support, access to the global Apple authorized service network for repair and replacement
services, and in many cases additional coverage for instances of accidental damage or theft and loss, depending on the country
and type of product.
Cloud Services
The Company’s cloud services store and keep customers’ content up-to-date and available across multiple Apple devices and
Windows personal computers.
Digital Content
The Company operates various platforms, including the App Store®, that allow customers to discover and download applications
and digital content, such as books, music, video, games and podcasts.
The Company also offers digital content through subscription-based services, including Apple Arcade®, a game subscription
service; Apple Fitness+SM, a personalized fitness service; Apple Music®, which offers users a curated listening experience with
on-demand radio stations; Apple News+®, a subscription news and magazine service; and Apple TV+®, which offers exclusive
original content and live sports.
Payment Services
The Company offers payment services, including Apple Card®, a co-branded credit card, and Apple Pay®, a cashless payment
service.
Segments
The Company manages its business primarily on a geographic basis. The Company’s reportable segments consist of the
Americas, Europe, Greater China, Japan and Rest of Asia Pacific. Americas includes both North and South America. Europe
includes European countries, as well as India, the Middle East and Africa. Greater China includes China mainland, Hong Kong
and Taiwan. Rest of Asia Pacific includes Australia and those Asian countries not included in the Company’s other reportable
segments. Although the reportable segments provide similar hardware and software products and similar services, each one is
managed separately to better align with the location of the Company’s customers and distribution partners and the unique market
dynamics of each geographic region.
Markets and Distribution
The Company’s customers are primarily in the consumer, small and mid-sized business, education, enterprise and government
markets. The Company sells its products and resells third-party products in most of its major markets directly to customers
through its retail and online stores and its direct sales force. The Company also employs a variety of indirect distribution
channels, such as third-party cellular network carriers, wholesalers, retailers and resellers. During 2023, the Company’s net
sales through its direct and indirect distribution channels accounted for 37% and 63%, respectively, of total net sales.
Competition
The markets for the Company’s products and services are highly competitive, and are characterized by aggressive price
competition and resulting downward pressure on gross margins, frequent introduction of new products and services, short
product life cycles, evolving industry standards, continual improvement in product price and performance characteristics, rapid
adoption of technological advancements by competitors, and price sensitivity on the part of consumers and businesses. Many of
the Company’s competitors seek to compete primarily through aggressive pricing and very low cost structures, and by imitating
the Company’s products and infringing on its intellectual property.
Apple Inc. | 2023 Form 10-K | 2
The Company’s ability to compete successfully depends heavily on ensuring the continuing and timely introduction of innovative
new products, services and technologies to the marketplace. The Company designs and develops nearly the entire solution for
its products, including the hardware, operating system, numerous software applications and related services. Principal
competitive factors important to the Company include price, product and service features (including security features), relative
price and performance, product and service quality and reliability, design innovation, a strong third-party software and
accessories ecosystem, marketing and distribution capability, service and support, and corporate reputation.
The Company is focused on expanding its market opportunities related to smartphones, personal computers, tablets, wearables
and accessories, and services. The Company faces substantial competition in these markets from companies that have
significant technical, marketing, distribution and other resources, as well as established hardware, software, and service offerings
with large customer bases. In addition, some of the Company’s competitors have broader product lines, lower-priced products
and a larger installed base of active devices. Competition has been particularly intense as competitors have aggressively cut
prices and lowered product margins. Certain competitors have the resources, experience or cost structures to provide products
at little or no profit or even at a loss. The Company’s services compete with business models that provide content to users for
free and use illegitimate means to obtain third-party digital content and applications. The Company faces significant competition
as competitors imitate the Company’s product features and applications within their products, or collaborate to offer integrated
solutions that are more competitive than those they currently offer.
Supply of Components
Although most components essential to the Company’s business are generally available from multiple sources, certain
components are currently obtained from single or limited sources. The Company also competes for various components with
other participants in the markets for smartphones, personal computers, tablets, wearables and accessories. Therefore, many
components used by the Company, including those that are available from multiple sources, are at times subject to industry-wide
shortage and significant commodity pricing fluctuations.
The Company uses some custom components that are not commonly used by its competitors, and new products introduced by
the Company often utilize custom components available from only one source. When a component or product uses new
technologies, initial capacity constraints may exist until the suppliers’ yields have matured or their manufacturing capacities have
increased. The continued availability of these components at acceptable prices, or at all, may be affected if suppliers decide to
concentrate on the production of common components instead of components customized to meet the Company’s requirements.
The Company has entered into agreements for the supply of many components; however, there can be no guarantee that the
Company will be able to extend or renew these agreements on similar terms, or at all.
Research and Development
Because the industries in which the Company competes are characterized by rapid technological advances, the Company’s
ability to compete successfully depends heavily upon its ability to ensure a continual and timely flow of competitive products,
services and technologies to the marketplace. The Company continues to develop new technologies to enhance existing
products and services, and to expand the range of its offerings through research and development (“R&D”), licensing of
intellectual property and acquisition of third-party businesses and technology.
Intellectual Property
The Company currently holds a broad collection of intellectual property rights relating to certain aspects of its hardware devices,
accessories, software and services. This includes patents, designs, copyrights, trademarks and other forms of intellectual
property rights in the U.S. and various foreign countries. Although the Company believes the ownership of such intellectual
property rights is an important factor in differentiating its business and that its success does depend in part on such ownership,
the Company relies primarily on the innovative skills, technical competence and marketing abilities of its personnel.
The Company regularly files patent, design, copyright and trademark applications to protect innovations arising from its research,
development, design and marketing, and is currently pursuing thousands of applications around the world. Over time, the
Company has accumulated a large portfolio of issued and registered intellectual property rights around the world. No single
intellectual property right is solely responsible for protecting the Company’s products and services. The Company believes the
duration of its intellectual property rights is adequate relative to the expected lives of its products and services.
In addition to Company-owned intellectual property, many of the Company’s products and services are designed to include
intellectual property owned by third parties. It may be necessary in the future to seek or renew licenses relating to various
aspects of the Company’s products, processes and services. While the Company has generally been able to obtain such
licenses on commercially reasonable terms in the past, there is no guarantee that such licenses could be obtained in the future
on reasonable terms or at all.
Apple Inc. | 2023 Form 10-K | 3
Business Seasonality and Product Introductions
The Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in
part to seasonal holiday demand. Additionally, new product and service introductions can significantly impact net sales, cost of
sales and operating expenses. The timing of product introductions can also impact the Company’s net sales to its indirect
distribution channels as these channels are filled with new inventory following a product launch, and channel inventory of an
older product often declines as the launch of a newer product approaches. Net sales can also be affected when consumers and
distributors anticipate a product introduction.
Human Capital
The Company believes it has a talented, motivated and dedicated team, and works to create an inclusive, safe and supportive
environment for all of its team members. As of September 30, 2023, the Company had approximately 161,000 full-time
equivalent employees.
Workplace Practices and Policies
The Company is an equal opportunity employer committed to inclusion and diversity and to providing a workplace free of
harassment or discrimination.
Compensation and Benefits
The Company believes that compensation should be competitive and equitable, and should enable employees to share in the
Company’s success. The Company recognizes its people are most likely to thrive when they have the resources to meet their
needs and the time and support to succeed in their professional and personal lives. In support of this, the Company offers a wide
variety of benefits for employees around the world and invests in tools and resources that are designed to support employees’
individual growth and development.
Inclusion and Diversity
The Company is committed to its vision to build and sustain a more inclusive workforce that is representative of the communities
it serves. The Company continues to work to increase diverse representation at every level, foster an inclusive culture, and
support equitable pay and access to opportunity for all employees.
Engagement
The Company believes that open and honest communication among team members, managers and leaders helps create an
open, collaborative work environment where everyone can contribute, grow and succeed. Team members are encouraged to
come to their managers with questions, feedback or concerns, and the Company conducts surveys that gauge employee
sentiment in areas like career development, manager performance and inclusivity.
Health and Safety
The Company is committed to protecting its team members everywhere it operates. The Company identifies potential workplace
risks in order to develop measures to mitigate possible hazards. The Company supports employees with general safety, security
and crisis management training, and by putting specific programs in place for those working in potentially high-hazard
environments. Additionally, the Company works to protect the safety and security of its team members, visitors and customers
through its global security team.
Available Information
The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and
amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), are filed with the U.S. Securities and Exchange Commission (the “SEC”). Such reports and other information
filed by the Company with the SEC are available free of charge at investor.apple.com/investor-relations/sec-filings/default.aspx
when such reports are available on the SEC’s website. The Company periodically provides certain information for investors on its
corporate website, www.apple.com, and its investor relations website, investor.apple.com. This includes press releases and
other information about financial performance, information on environmental, social and governance matters, and details related
to the Company’s annual meeting of shareholders. The information contained on the websites referenced in this Form 10-K is not
incorporated by reference into this filing. Further, the Company’s references to website URLs are intended to be inactive textual
references only.
Apple Inc. | 2023 Form 10-K | 4
Item 1A.
Risk Factors
The Company’s business, reputation, results of operations, financial condition and stock price can be affected by a number of
factors, whether currently known or unknown, including those described below. When any one or more of these risks materialize
from time to time, the Company’s business, reputation, results of operations, financial condition and stock price can be materially
and adversely affected.
Because of the following factors, as well as other factors affecting the Company’s results of operations and financial condition,
past financial performance should not be considered to be a reliable indicator of future performance, and investors should not
use historical trends to anticipate results or trends in future periods. This discussion of risk factors contains forward-looking
statements.
This section should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and the consolidated financial statements and accompanying notes in Part II, Item 8, “Financial
Statements and Supplementary Data” of this Form 10-K.
Macroeconomic and Industry Risks
The Company’s operations and performance depend significantly on global and regional economic conditions and
adverse economic conditions can materially adversely affect the Company’s business, results of operations and financial
condition.
The Company has international operations with sales outside the U.S. representing a majority of the Company’s total net sales.
In addition, the Company’s global supply chain is large and complex and a majority of the Company’s supplier facilities, including
manufacturing and assembly sites, are located outside the U.S. As a result, the Company’s operations and performance depend
significantly on global and regional economic conditions.
Adverse macroeconomic conditions, including slow growth or recession, high unemployment, inflation, tighter credit, higher
interest rates, and currency fluctuations, can adversely impact consumer confidence and spending and materially adversely
affect demand for the Company’s products and services. In addition, consumer confidence and spending can be materially
adversely affected in response to changes in fiscal and monetary policy, financial market volatility, declines in income or asset
values, and other economic factors.
In addition to an adverse impact on demand for the Company’s products and services, uncertainty about, or a decline in, global
or regional economic conditions can have a significant impact on the Company’s suppliers, contract manufacturers, logistics
providers, distributors, cellular network carriers and other channel partners, and developers. Potential outcomes include financial
instability; inability to obtain credit to finance business operations; and insolvency.
Adverse economic conditions can also lead to increased credit and collectibility risk on the Company’s trade receivables; the
failure of derivative counterparties and other financial institutions; limitations on the Company’s ability to issue new debt; reduced
liquidity; and declines in the fair values of the Company’s financial instruments. These and other impacts can materially
adversely affect the Company’s business, results of operations, financial condition and stock price.
The Company’s business can be impacted by political events, trade and other international disputes, war, terrorism,
natural disasters, public health issues, industrial accidents and other business interruptions.
Political events, trade and other international disputes, war, terrorism, natural disasters, public health issues, industrial accidents
and other business interruptions can harm or disrupt international commerce and the global economy, and could have a material
adverse effect on the Company and its customers, suppliers, contract manufacturers, logistics providers, distributors, cellular
network carriers and other channel partners.
Apple Inc. | 2023 Form 10-K | 5
The Company has a large, global business with sales outside the U.S. representing a majority of the Company’s total net sales,
and the Company believes that it generally benefits from growth in international trade. Substantially 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. Restrictions on international trade, such as tariffs and other controls on imports or exports of goods,
technology or data, can materially adversely affect the Company’s operations and supply chain and limit the Company’s ability to
offer and distribute its products and services to customers. The impact can be particularly significant if these restrictive measures
apply to countries and regions where the Company derives a significant portion of its revenues and/or has significant supply
chain operations. Restrictive measures can require the Company to take various actions, including changing suppliers,
restructuring business relationships, and ceasing to offer third-party applications on its platforms. Changing the Company’s
operations in accordance with new or changed restrictions on international trade can be expensive, time-consuming and
disruptive to the Company’s operations. Such restrictions can be announced with little or no advance notice and the Company
may not be able to effectively mitigate all adverse impacts from such measures. For example, tensions between governments,
including the U.S. and China, have in the past led to tariffs and other restrictions being imposed on the Company’s business. If
disputes and conflicts further escalate in the future, actions by governments in response could be significantly more severe and
restrictive and could materially adversely affect the Company’s business. Political uncertainty surrounding trade and other
international disputes could also have a negative effect on consumer confidence and spending, which could adversely affect the
Company’s business.
Many of the Company’s operations and facilities, as well as critical business operations of the Company’s suppliers and contract
manufacturers, are in locations that are prone to earthquakes and other natural disasters. In addition, such operations and
facilities are subject to the risk of interruption by fire, power shortages, nuclear power plant accidents and other industrial
accidents, terrorist attacks and other hostile acts, ransomware and other cybersecurity attacks, labor disputes, public health
issues, including pandemics such as the COVID-19 pandemic, and other events beyond the Company’s control. Global climate
change is resulting in certain types of natural disasters, such as droughts, floods, hurricanes and wildfires, occurring more
frequently or with more intense effects. Such events can make it difficult or impossible for the Company to manufacture and
deliver products to its customers, create delays and inefficiencies in the Company’s supply and manufacturing chain, and result
in slowdowns and outages to the Company’s service offerings, and negatively impact consumer spending and demand in
affected areas. Following an interruption to its business, the Company can require substantial recovery time, experience
significant expenditures to resume operations, and lose significant sales. Because the Company relies on single or limited
sources for the supply and manufacture of many critical components, a business interruption affecting such sources would
exacerbate any negative consequences to the Company.
The Company’s operations are also subject to the risks of industrial accidents at its suppliers and contract manufacturers. While
the Company’s suppliers are required to maintain safe working environments and operations, an industrial accident could occur
and could result in serious injuries or loss of life, disruption to the Company’s business, and harm to the Company’s reputation.
Major public health issues, including pandemics such as the COVID-19 pandemic, have adversely affected, and could in the
future materially adversely affect, the Company due to their impact on the global economy and demand for consumer products;
the imposition of protective public safety measures, such as stringent employee travel restrictions and limitations on freight
services and the movement of products between regions; and disruptions in the Company’s operations, supply chain and sales
and distribution channels, resulting in interruptions to the supply of current products and offering of existing services, and delays
in production ramps of new products and development of new services.
While the Company maintains insurance coverage for certain types of losses, such insurance coverage may be insufficient to
cover all losses that may arise.
Global markets for the Company’s products and services are highly competitive and subject to rapid technological
change, and the Company may be unable to compete effectively in these markets.
The Company’s products and services are offered in highly competitive global markets characterized by aggressive price
competition and resulting downward pressure on gross margins, frequent introduction of new products and services, short
product life cycles, evolving industry standards, continual improvement in product price and performance characteristics, rapid
adoption of technological advancements by competitors, and price sensitivity on the part of consumers and businesses.
The Company’s ability to compete successfully depends heavily on ensuring the continuing and timely introduction of innovative
new products, services and technologies to the marketplace. The Company designs and develops nearly the entire solution for
its products, including the hardware, operating system, numerous software applications and related services. As a result, the
Company must make significant investments in R&D. There can be no assurance these investments will achieve expected
returns, and the Company may not be able to develop and market new products and services successfully.
Apple Inc. | 2023 Form 10-K | 6
The Company currently holds a significant number of patents, trademarks and copyrights and has registered, and applied to
register, additional patents, trademarks and copyrights. In contrast, many of the Company’s competitors seek to compete
primarily through aggressive pricing and very low cost structures, and by imitating the Company’s products and infringing on
its intellectual property. Effective intellectual property protection is not consistently available in every country in which the
Company operates. If the Company is unable to continue to develop and sell innovative new products with attractive margins or if
competitors infringe on the Company’s intellectual property, the Company’s ability to maintain a competitive advantage could be
materially adversely affected.
The Company has a minority market share in the global smartphone, personal computer and tablet markets. The Company faces
substantial competition in these markets from companies that have significant technical, marketing, distribution and other
resources, as well as established hardware, software and digital content supplier relationships. In addition, some of the
Company’s competitors have broader product lines, lower-priced products and a larger installed base of active devices.
Competition has been particularly intense as competitors have aggressively cut prices and lowered product margins. Certain
competitors have the resources, experience or cost structures to provide products at little or no profit or even at a loss. Some of
the markets in which the Company competes have from time to time experienced little to no growth or contracted overall.
Additionally, the Company faces significant competition as competitors imitate the Company’s product features and applications
within their products or collaborate to offer solutions that are more competitive than those they currently offer. The Company also
expects competition to intensify as competitors imitate the Company’s approach to providing components seamlessly within their
offerings or work collaboratively to offer integrated solutions.
The Company’s services also face substantial competition, including from companies that have significant resources and
experience and have established service offerings with large customer bases. The Company competes with business models
that provide content to users for free. The Company also competes with illegitimate means to obtain third-party digital content
and applications.
The Company’s business, results of operations and financial condition depend substantially on the Company’s ability to
continually improve its products and services to maintain their functional and design advantages. There can be no assurance the
Company will be able to continue to provide products and services that compete effectively.
Business Risks
To remain competitive and stimulate customer demand, the Company must successfully manage frequent introductions
and transitions of products and services.
Due to the highly volatile and competitive nature of the markets and industries in which the Company competes, the Company
must continually introduce new products, services and technologies, enhance existing products and services, effectively
stimulate customer demand for new and upgraded products and services, and successfully manage the transition to these new
and upgraded products and services. The success of new product and service introductions depends on a number of factors,
including timely and successful development, market acceptance, the Company’s ability to manage the risks associated with new
technologies and production ramp-up issues, the availability of application software for the Company’s products, the effective
management of purchase commitments and inventory levels in line with anticipated product demand, the availability of products
in appropriate quantities and at expected costs to meet anticipated demand, and the risk that new products and services may
have quality or other defects or deficiencies. There can be no assurance the Company will successfully manage future
introductions and transitions of products and services.
The Company depends on component and product manufacturing and logistical services provided by outsourcing
partners, many of which are located outside of the U.S.
Substantially 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. Changes or additions to the Company’s
supply chain require considerable time and resources and involve significant risks and uncertainties. The Company has also
outsourced much of its transportation and logistics management. While these arrangements can lower operating costs, they also
reduce the Company’s direct control over production and distribution. Such diminished control has from time to time and may in
the future have an adverse effect on the quality or quantity of products manufactured or services provided, or adversely affect the
Company’s flexibility to respond to changing conditions. Although arrangements with these partners may contain provisions for
product defect expense reimbursement, the Company generally remains responsible to the consumer for warranty and out-ofwarranty service in the event of product defects and experiences unanticipated product defect liabilities from time to time. While
the Company relies on its partners to adhere to its supplier code of conduct, violations of the supplier code of conduct occur from
time to time and can materially adversely affect the Company’s business, reputation, results of operations and financial condition.
Apple Inc. | 2023 Form 10-K | 7
The Company relies on single-source outsourcing partners in the U.S., Asia and Europe to supply and manufacture many
components, and on outsourcing partners primarily located in Asia, for final assembly of substantially all of the Company’s
hardware products. Any failure of these partners to perform can have a negative impact on the Company’s cost or supply of
components or finished goods. In addition, manufacturing or logistics in these locations or transit to final destinations can be
disrupted for a variety of reasons, including natural and man-made disasters, information technology system failures, commercial
disputes, armed conflict, economic, business, labor, environmental, public health or political issues, or international trade
disputes.
The Company has invested in manufacturing process equipment, much of which is held at certain of its outsourcing partners,
and has made prepayments to certain of its suppliers associated with long-term supply agreements. While these arrangements
help ensure the supply of components and finished goods, if these outsourcing partners or suppliers experience severe financial
problems or other disruptions in their business, such continued supply can be reduced or terminated, and the recoverability of
manufacturing process equipment or prepayments can be negatively impacted.
Future operating results depend upon the Company’s ability to obtain components in sufficient quantities on
commercially reasonable terms.
Because the Company currently obtains certain components from single or limited sources, the Company is subject to significant
supply and pricing risks. Many components, including those that are available from multiple sources, are at times subject to
industry-wide shortages and significant commodity pricing fluctuations that can materially adversely affect the Company’s
business, results of operations and financial condition. For example, the global semiconductor industry has in the past
experienced high demand and shortages of supply, which adversely affected the Company’s ability to obtain sufficient quantities
of components and products on commercially reasonable terms or at all. Such disruptions could occur in the future. While the
Company has entered into agreements for the supply of many components, there can be no assurance the Company will be able
to extend or renew these agreements on similar terms, or at all. Component suppliers may suffer from poor financial conditions,
which can lead to business failure for the supplier or consolidation within a particular industry, further limiting the Company’s
ability to obtain sufficient quantities of components on commercially reasonable terms or at all. The effects of global or regional
economic conditions on the Company’s suppliers, described in “The Company’s operations and performance depend
significantly on global and regional economic conditions and adverse economic conditions can materially adversely affect the
Company’s business, results of operations and financial condition,” above, can also affect the Company’s ability to obtain
components. Therefore, the Company remains subject to significant risks of supply shortages and price increases that can
materially adversely affect its business, results of operations and financial condition.
The Company’s new products often utilize custom components available from only one source. When a component or product
uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or their manufacturing
capacities have increased. The continued availability of these components at acceptable prices, or at all, can be affected for any
number of reasons, including if suppliers decide to concentrate on the production of common components instead of components
customized to meet the Company’s requirements. When the Company’s supply of components for a new or existing product has
been delayed or constrained, or when an outsourcing partner has delayed shipments of completed products to the Company, the
Company’s business, results of operations and financial condition have been adversely affected and future delays or constraints
could materially adversely affect the Company’s business, results of operations and financial condition. The Company’s business
and financial performance could also be materially adversely affected depending on the time required to obtain sufficient
quantities from the source, or to identify and obtain sufficient quantities from an alternative source.
The Company’s products and services may be affected from time to time by design and manufacturing defects that could
materially adversely affect the Company’s business and result in harm to the Company’s reputation.
The Company offers complex hardware and software products and services that can be affected by design and manufacturing
defects. Sophisticated operating system software and applications, such as those offered by the Company, often have issues
that can unexpectedly interfere with the intended operation of hardware or software products and services. Defects can also exist
in components and products the Company purchases from third parties. Component defects could make the Company’s
products unsafe and create a risk of environmental or property damage and personal injury. These risks may increase as the
Company’s products are introduced into specialized applications, including health. In addition, the Company’s service offerings
can have quality issues and from time to time experience outages, service slowdowns or errors. As a result, from time to time the
Company’s services have not performed as anticipated and may not meet customer expectations. There can be no assurance
the Company will be able to detect and fix all issues and defects in the hardware, software and services it offers. Failure to do so
can result in widespread technical and performance issues affecting the Company’s products and services. In addition, the
Company can be exposed to product liability claims, recalls, product replacements or modifications, write-offs of inventory,
property, plant and equipment or intangible assets, and significant warranty and other expenses, including litigation costs and
regulatory fines. Quality problems can also adversely affect the experience for users of the Company’s products and services,
and result in harm to the Company’s reputation, loss of competitive advantage, poor market acceptance, reduced demand for
products and services, delay in new product and service introductions and lost sales.
Apple Inc. | 2023 Form 10-K | 8
The Company is exposed to the risk of write-downs on the value of its inventory and other assets, in addition to purchase
commitment cancellation risk.
The Company records a write-down for product and component inventories that have become obsolete or exceed anticipated
demand, or for which cost exceeds net realizable value. The Company also accrues necessary cancellation fee reserves for
orders of excess products and components. The Company reviews long-lived assets, including capital assets held at its
suppliers’ facilities and inventory prepayments, for impairment whenever events or circumstances indicate the assets may not be
recoverable. If the Company determines that an impairment has occurred, it records a write-down equal to the amount by which
the carrying value of the asset exceeds its fair value. Although the Company believes its inventory, capital assets, inventory
prepayments and other assets and purchase commitments are currently recoverable, there can be no assurance the Company
will not incur write-downs, fees, impairments and other charges given the rapid and unpredictable pace of product obsolescence
in the industries in which the Company competes.
The Company orders components for its products and builds inventory in advance of product announcements and shipments.
Manufacturing purchase obligations cover the Company’s forecasted component and manufacturing requirements, typically for
periods up to 150 days. Because the Company’s markets are volatile, competitive and subject to rapid technology and price
changes, there is a risk the Company will forecast incorrectly and order or produce excess or insufficient amounts of components
or products, or not fully utilize firm purchase commitments.
The Company relies on access to third-party intellectual property, which may not be available to the Company on
commercially reasonable terms or at all.
The Company’s products and services are designed to include intellectual property owned by third parties, which requires
licenses from those third parties. In addition, because of technological changes in the industries in which the Company currently
competes or in the future may compete, current extensive patent coverage and the rapid rate of issuance of new patents, the
Company’s products and services can unknowingly infringe existing patents or intellectual property rights of others. From time to
time, the Company has been notified that it may be infringing certain patents or other intellectual property rights of third parties.
Based on experience and industry practice, the Company believes licenses to such third-party intellectual property can generally
be obtained on commercially reasonable terms. However, there can be no assurance the necessary licenses can be obtained on
commercially reasonable terms or at all. Failure to obtain the right to use third-party intellectual property, or to use such
intellectual property on commercially reasonable terms, can preclude the Company from selling certain products or services, or
otherwise have a material adverse impact on the Company’s business, results of operations and financial condition.
The Company’s future performance depends in part on support from third-party software developers.
The Company believes decisions by customers to purchase its hardware products depend in part on the availability of third-party
software applications and services. There can be no assurance third-party developers will continue to develop and maintain
software applications and services for the Company’s products. If third-party software applications and services cease to be
developed and maintained for the Company’s products, customers may choose not to buy the Company’s products.
The Company believes the availability of third-party software applications and services for its products depends in part on the
developers’ perception and analysis of the relative benefits of developing, maintaining and upgrading such software and services
for the Company’s products compared to competitors’ platforms, such as Android for smartphones and tablets, Windows for
personal computers and tablets, and PlayStation, Nintendo and Xbox for gaming platforms. This analysis may be based on
factors such as the market position of the Company and its products, the anticipated revenue that may be generated, expected
future growth of product sales, and the costs of developing such applications and services.
The Company’s minority market share in the global smartphone, personal computer and tablet markets can make developers
less inclined to develop or upgrade software for the Company’s products and more inclined to devote their resources to
developing and upgrading software for competitors’ products with larger market share. When developers focus their efforts on
these competing platforms, the availability and quality of applications for the Company’s devices can suffer.
The Company relies on the continued availability and development of compelling and innovative software applications for its
products. The Company’s products and operating systems are subject to rapid technological change, and when third-party
developers are unable to or choose not to keep up with this pace of change, their applications can fail to take advantage of these
changes to deliver improved customer experiences, can operate incorrectly, and can result in dissatisfied customers and lower
customer demand for the Company’s products.
Apple Inc. | 2023 Form 10-K | 9
The Company distributes third-party applications for its products through the App Store. For the vast majority of applications,
developers keep all of the revenue they generate on the App Store. The Company retains a commission from sales of
applications and sales of digital services or goods initiated within an application. From time to time, the Company has made
changes to its App Store, including actions taken in response to competition, market conditions and legal and regulatory
requirements. The Company expects to make further business changes in the future, including as a result of legislative initiatives
impacting the App Store, such as the European Union (“EU”) Digital Markets Act, which the Company is required to comply with
by March 2024. The Company is also subject to litigation and investigations relating to the App Store, which have resulted in
changes to the Company’s business practices, and may in the future result in further changes. Changes have included how
developers communicate with consumers outside the App Store regarding alternative purchasing mechanisms. Future changes
could also affect what the Company charges developers for access to its platforms, how it manages distribution of apps outside
of the App Store, and how and to what extent it allows developers to communicate with consumers inside the App Store
regarding alternative purchasing mechanisms. This could reduce the volume of sales, and the commission that the Company
earns on those sales, would decrease. If the rate of the commission that the Company retains on such sales is reduced, or if it is
otherwise narrowed in scope or eliminated, the Company’s business, results of operations and financial condition could be
materially adversely affected.
Failure to obtain or create digital content that appeals to the Company’s customers, or to make such content available
on commercially reasonable terms, could have a material adverse impact on the Company’s business, results of
operations and financial condition.
The Company contracts with numerous third parties to offer their digital content to customers. This includes the right to sell, or
offer subscriptions to, third-party content, as well as the right to incorporate specific content into the Company’s own services.
The licensing or other distribution arrangements for this content can be for relatively short time periods and do not guarantee the
continuation or renewal of these arrangements on commercially reasonable terms, or at all. Some third-party content providers
and distributors currently or in the future may offer competing products and services, and can take actions to make it difficult or
impossible for the Company to license or otherwise distribute their content. Other content owners, providers or distributors may
seek to limit the Company’s access to, or increase the cost of, such content. The Company may be unable to continue to offer a
wide variety of content at commercially reasonable prices with acceptable usage rules.
The Company also produces its own digital content, which can be costly to produce due to intense and increasing competition for
talent, content and subscribers, and may fail to appeal to the Company’s customers.
Some third-party digital content providers require the Company to provide digital rights management and other security solutions.
If requirements change, the Company may have to develop or license new technology to provide these solutions. There can be
no assurance the Company will be able to develop or license such solutions at a reasonable cost and in a timely manner.
The Company’s success depends largely on the talents and efforts of its team members, the continued service and
availability of highly skilled employees, including key personnel, and the Company’s ability to nurture its distinctive and
inclusive culture.
Much of the Company’s future success depends on the talents and efforts of its team members and the continued availability and
service of key personnel, including its Chief Executive Officer, executive team and other highly skilled employees. Experienced
personnel in the technology industry are in high demand and competition for their talents is intense, especially in Silicon Valley,
where most of the Company’s key personnel are located. In addition to intense competition for talent, workforce dynamics are
constantly evolving. If the Company does not manage changing workforce dynamics effectively, it could materially adversely
affect the Company’s culture, reputation and operational flexibility.
The Company believes that its distinctive and inclusive culture is a significant driver of its success. If the Company is unable to
nurture its culture, it could materially adversely affect the Company’s ability to recruit and retain the highly skilled employees who
are critical to its success, and could otherwise materially adversely affect the Company’s business, reputation, results of
operations and financial condition.
The Company depends on the performance of carriers, wholesalers, retailers and other resellers.
The Company distributes its products and certain of its services through cellular network carriers, wholesalers, retailers and
resellers, many of which distribute products and services from competitors. The Company also sells its products and services
and resells third-party products in most of its major markets directly to consumers, small and mid-sized businesses, and
education, enterprise and government customers through its retail and online stores and its direct sales force.
Some carriers providing cellular network service for the Company’s products offer financing, installment payment plans or
subsidies for users’ purchases of the device. There can be no assurance such offers will be continued at all or in the same
amounts.
Apple Inc. | 2023 Form 10-K | 10
The Company has invested and will continue to invest in programs to enhance reseller sales, including staffing selected
resellers’ stores with Company employees and contractors, and improving product placement displays. These programs can
require a substantial investment while not assuring return or incremental sales. The financial condition of these resellers could
weaken, these resellers could stop distributing the Company’s products, or uncertainty regarding demand for some or all of the
Company’s products could cause resellers to reduce their ordering and marketing of the Company’s products.
The Company’s business and reputation are impacted by information technology system failures and network
disruptions.
The Company and its global supply chain are dependent on complex information technology systems and are exposed to
information technology system failures or network disruptions caused by natural disasters, accidents, power disruptions,
telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, ransomware or other
cybersecurity incidents, or other events or disruptions. System upgrades, redundancy and other continuity measures may be
ineffective or inadequate, and the Company’s or its vendors’ business continuity and disaster recovery planning may not be
sufficient for all eventualities. Such failures or disruptions can adversely impact the Company’s business by, among other things,
preventing access to the Company’s online services, interfering with customer transactions or impeding the manufacturing and
shipping of the Company’s products. These events could materially adversely affect the Company’s business, reputation, results
of operations and financial condition.
Losses or unauthorized access to or releases of confidential information, including personal information, could subject
the Company to significant reputational, financial, legal and operational consequences.
The Company’s business requires it to use and store confidential information, including personal information, with respect to the
Company’s customers and employees. The Company devotes significant resources to network and data security, including
through the use of encryption and other security measures intended to protect its systems and data. But these measures cannot
provide absolute security, and losses or unauthorized access to or releases of confidential information occur and could materially
adversely affect the Company’s business, reputation, results of operations and financial condition.
The Company’s business also requires it to share confidential information with suppliers and other third parties. The Company
relies on global suppliers that are also exposed to ransomware and other malicious attacks that can disrupt business operations.
Although the Company takes steps to secure confidential information that is provided to or accessible by third parties working on
the Company’s behalf, such measures are not always effective and losses or unauthorized access to, or releases of, confidential
information occur. Such incidents and other malicious attacks could materially adversely affect the Company’s business,
reputation, results of operations and financial condition.
The Company experiences malicious attacks and other attempts to gain unauthorized access to its systems on a regular basis.
These attacks seek to compromise the confidentiality, integrity or availability of confidential information or disrupt normal
business operations, and can, among other things, impair the Company’s ability to attract and retain customers for its products
and services, impact the Company’s stock price, materially damage commercial relationships, and expose the Company to
litigation or government investigations, which could result in penalties, fines or judgments against the Company. Globally, attacks
are expected to continue accelerating in both frequency and sophistication with increasing use by actors of tools and techniques
that are designed to circumvent controls, avoid detection, and remove or obfuscate forensic evidence, all of which hinders the
Company’s ability to identify, investigate and recover from incidents. In addition, attacks against the Company and its customers
can escalate during periods of severe diplomatic or armed conflict.
Although malicious attacks perpetrated to gain access to confidential information, including personal information, affect many
companies across various industries, the Company is at a relatively greater risk of being targeted because of its high profile and
the value of the confidential information it creates, owns, manages, stores and processes.
The Company has implemented systems and processes intended to secure its information technology systems and prevent
unauthorized access to or loss of sensitive data, and mitigate the impact of unauthorized access, including through the use of
encryption and authentication technologies. As with all companies, these security measures may not be sufficient for all
eventualities and may be vulnerable to hacking, ransomware attacks, employee error, malfeasance, system error, faulty
password management or other irregularities. For example, third parties can fraudulently induce the Company’s or its vendors’
employees or customers into disclosing usernames, passwords or other sensitive information, which can, in turn, be used for
unauthorized access to the Company’s or its vendors’ systems and services. To help protect customers and the Company, the
Company deploys and makes available technologies like multifactor authentication, monitors its services and systems for
unusual activity and may freeze accounts under suspicious circumstances, which, among other things, can result in the delay or
loss of customer orders or impede customer access to the Company’s products and services.
While the Company maintains insurance coverage that is intended to address certain aspects of data security risks, such
insurance coverage may be insufficient to cover all losses or all types of claims that may arise.
Apple Inc. | 2023 Form 10-K | 11
Investment in new business strategies and acquisitions could disrupt the Company’s ongoing business, present risks not
originally contemplated and materially adversely affect the Company’s business, reputation, results of operations and
financial condition.
The Company has invested, and in the future may invest, in new business strategies or acquisitions. Such endeavors may
involve significant risks and uncertainties, including distraction of management from current operations, greater-than-expected
liabilities and expenses, economic, political, legal and regulatory challenges associated with operating in new businesses,
regions or countries, inadequate return on capital, potential impairment of tangible and intangible assets, and significant writeoffs. Investment and acquisition transactions are exposed to additional risks, including failing to obtain required regulatory
approvals on a timely basis or at all, or the imposition of onerous conditions that could delay or prevent the Company from
completing a transaction or otherwise limit the Company’s ability to fully realize the anticipated benefits of a transaction. These
new ventures are inherently risky and may not be successful. The failure of any significant investment could materially adversely
affect the Company’s business, reputation, results of operations and financial condition.
The Company’s retail stores are subject to numerous risks and uncertainties.
The Company’s retail operations are subject to many factors that pose risks and uncertainties and could adversely impact the
Company’s business, results of operations and financial condition, including macroeconomic factors that could have an adverse
effect on general retail activity. Other factors include the Company’s ability to: manage costs associated with retail store
construction and operation; manage relationships with existing retail partners; manage costs associated with fluctuations in the
value of retail inventory; and obtain and renew leases in quality retail locations at a reasonable cost.
Legal and Regulatory Compliance Risks
The Company’s business, results of operations and financial condition could be adversely impacted by unfavorable
results of legal proceedings or government investigations.
The Company is subject to various claims, legal proceedings and government investigations that have arisen in the ordinary
course of business and have not yet been fully resolved, and new matters may arise in the future. In addition, agreements
entered into by the Company sometimes include indemnification provisions which can subject the Company to costs and
damages in the event of a claim against an indemnified third party. The number of claims, legal proceedings and government
investigations involving the Company, and the alleged magnitude of such claims, proceedings and government investigations,
has generally increased over time and may continue to increase.
The Company has faced and continues to face a significant number of patent claims relating to its cellular-enabled products, and
new claims may arise in the future, including as a result of new legal or regulatory frameworks. For example, technology and
other patent-holding companies frequently assert their patents and seek royalties and often enter into litigation based on
allegations of patent infringement or other violations of intellectual property rights. The Company is vigorously defending
infringement actions in courts in several U.S. jurisdictions, as well as internationally in various countries. The plaintiffs in these
actions frequently seek injunctions and substantial damages.
Regardless of the merit of particular claims, defending against litigation or responding to government investigations can be
expensive, time-consuming and disruptive to the Company’s operations. In recognition of these considerations, the Company
may enter into agreements or other arrangements to settle litigation and resolve such challenges. There can be no assurance
such agreements can be obtained on acceptable terms or that litigation will not occur. These agreements can also significantly
increase the Company’s cost of sales and operating expenses and require the Company to change its business practices and
limit the Company’s ability to offer certain products and services.
Except as described in Part I, Item 3 of this Form 10-K under the heading “Legal Proceedings” and in Part II, Item 8 of this Form
10-K in the Notes to Consolidated Financial Statements in Note 12, “Commitments, Contingencies and Supply Concentrations”
under the heading “Contingencies,” 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.
The outcome of litigation or government investigations is inherently uncertain. If one or more legal matters were resolved against
the Company or an indemnified third party in a reporting period for amounts above management’s expectations, the Company’s
results of operations and financial condition for that reporting period could be materially adversely affected. Further, such an
outcome can result in significant compensatory, punitive or trebled monetary damages, disgorgement of revenue or profits,
remedial corporate measures or injunctive relief against the Company, and has from time to time required, and can in the future
require, the Company to change its business practices and limit the Company’s ability to offer certain products and services, all
of which could materially adversely affect the Company’s business, reputation, results of operations and financial condition.
While the Company maintains insurance coverage for certain types of claims, such insurance coverage may be insufficient to
cover all losses or all types of claims that may arise.
Apple Inc. | 2023 Form 10-K | 12
The Company is subject to complex and changing laws and regulations worldwide, which exposes the Company to
potential liabilities, increased costs and other adverse effects on the Company’s business.
The Company’s global operations are subject to complex and changing laws and regulations on subjects, including antitrust;
privacy, data security and data localization; consumer protection; advertising, sales, billing and e-commerce; financial services
and technology; product liability; intellectual property ownership and infringement; digital platforms; machine learning and
artificial intelligence; internet, telecommunications and mobile communications; media, television, film and digital content;
availability of third-party software applications and services; labor and employment; anticorruption; import, export and trade;
foreign exchange controls and cash repatriation restrictions; anti–money laundering; foreign ownership and investment; tax; and
environmental, health and safety, including electronic waste, recycling, product design and climate change.
Compliance with these laws and regulations is onerous and expensive. New and changing laws and regulations can adversely
affect the Company’s business by increasing the Company’s costs, limiting the Company’s ability to offer a product, service or
feature to customers, imposing changes to the design of the Company’s products and services, impacting customer demand for
the Company’s products and services, and requiring changes to the Company’s supply chain and its business. New and
changing laws and regulations can also create uncertainty about how such laws and regulations will be interpreted and applied.
These risks and costs may increase as the Company’s products and services are introduced into specialized applications,
including health and financial services. The Company has implemented policies and procedures designed to ensure compliance
with applicable laws and regulations, but there can be no assurance the Company’s employees, contractors or agents will not
violate such laws and regulations or the Company’s policies and procedures. If the Company is found to have violated laws and
regulations, it could materially adversely affect the Company’s business, reputation, results of operations and financial condition.
Regulatory changes and other actions that materially adversely affect the Company’s business may be announced with little or
no advance notice and the Company may not be able to effectively mitigate all adverse impacts from such measures. For
example, the Company is subject to changing regulations relating to the export and import of its products. Although the Company
has programs, policies and procedures in place that are designed to satisfy regulatory requirements, there can be no assurance
that such policies and procedures will be effective in preventing a violation or a claim of a violation. As a result, the Company’s
products could be banned, delayed or prohibited from importation, which could materially adversely affect the Company’s
business, reputation, results of operations and financial condition.
Expectations relating to environmental, social and governance considerations and related reporting obligations expose
the Company to potential liabilities, increased costs, reputational harm, and other adverse effects on the Company’s
business.
Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on
environmental, social and governance considerations relating to businesses, including climate change and greenhouse gas
emissions, human and civil rights, and diversity, equity and inclusion. In addition, the Company makes statements about its goals
and initiatives through its various non-financial reports, information provided on its website, press statements and other
communications. Responding to these environmental, social and governance considerations and implementation of these goals
and initiatives involves risks and uncertainties, requires investments, and depends in part on third-party performance or data that
is outside the Company’s control. The Company cannot guarantee that it will achieve its announced environmental, social and
governance goals and initiatives. In addition, some stakeholders may disagree with the Company’s goals and initiatives. Any
failure, or perceived failure, by the Company to achieve its goals, further its initiatives, adhere to its public statements, comply
with federal, state or international environmental, social and governance laws and regulations, or meet evolving and varied
stakeholder expectations and standards could result in legal and regulatory proceedings against the Company and materially
adversely affect the Company’s business, reputation, results of operations, financial condition and stock price.
The technology industry, including, in some instances, the Company, is subject to intense media, political and regulatory
scrutiny, which exposes the Company to increasing regulation, government investigations, legal actions and penalties.
From time to time, the Company has made changes to its App Store, including actions taken in response to litigation,
competition, market conditions and legal and regulatory requirements. The Company expects to make further business changes
in the future, including as a result of legislative initiatives impacting the App Store, such as the EU Digital Markets Act, which the
Company is required to comply with by March 2024, or similar laws in other jurisdictions. Changes have included how developers
communicate with consumers outside the App Store regarding alternative purchasing mechanisms. Future changes could also
affect what the Company charges developers for access to its platforms, how it manages distribution of apps outside of the App
Store, and how and to what extent it allows developers to communicate with consumers inside the App Store regarding
alternative purchasing mechanisms.
Apple Inc. | 2023 Form 10-K | 13
The Company is also currently subject to antitrust investigations in various jurisdictions around the world, which can result in
legal proceedings and claims against the Company that could, individually or in the aggregate, have a materially adverse impact
on the Company’s business, results of operations and financial condition. For example, the Company is the subject of
investigations in Europe and other jurisdictions relating to App Store terms and conditions. If such investigations result in adverse
findings against the Company, the Company could be exposed to significant fines and may be required to make changes to its
App Store business, all of which could materially adversely affect the Company’s business, results of operations and financial
condition. The Company is also subject to litigation relating to the App Store, which has resulted in changes to the Company’s
business practices, and may in the future result in further changes.
Further, the Company has commercial relationships with other companies in the technology industry that are or may become
subject to investigations and litigation that, if resolved against those other companies, could materially adversely affect the
Company’s commercial relationships with those business partners and materially adversely affect the Company’s business,
results of operations and financial condition. For example, the Company earns revenue from licensing arrangements with other
companies to offer their search services on the Company’s platforms and applications, and certain of these arrangements are
currently subject to government investigations and legal proceedings.
There can be no assurance the Company’s business will not be materially adversely affected, individually or in the aggregate, by
the outcomes of such investigations, litigation or changes to laws and regulations in the future. Changes to the Company’s
business practices to comply with new laws and regulations or in connection with other legal proceedings could negatively
impact the reputation of the Company’s products for privacy and security and otherwise adversely affect the experience for users
of the Company’s products and services, and result in harm to the Company’s reputation, loss of competitive advantage, poor
market acceptance, reduced demand for products and services, and lost sales.
The Company’s business is subject to a variety of U.S. and international laws, rules, policies and other obligations
regarding data protection.
The Company is subject to an increasing number of federal, state and international laws relating to the collection, use, retention,
security and transfer of various types of personal information. In many cases, these laws apply not only to third-party
transactions, but also restrict transfers of personal information among the Company and its international subsidiaries. Several
jurisdictions have passed laws in this area, and additional jurisdictions are considering imposing additional restrictions or have
laws that are pending. These laws continue to develop and may be inconsistent from jurisdiction to jurisdiction. Complying with
emerging and changing requirements causes the Company to incur substantial costs and has required and may in the future
require the Company to change its business practices. Noncompliance could result in significant penalties or legal liability.
The Company makes statements about its use and disclosure of personal information through its privacy policy, information
provided on its website, press statements and other privacy notices provided to customers. Any failure by the Company to
comply with these public statements or with other federal, state or international privacy or data protection laws and regulations
could result in inquiries or proceedings against the Company by governmental entities or others. In addition to reputational
impacts, penalties could include ongoing audit requirements and significant legal liability.
In addition to the risks generally relating to the collection, use, retention, security and transfer of personal information, the
Company is also subject to specific obligations relating to information considered sensitive under applicable laws, such as health
data, financial data and biometric data. Health data and financial data are subject to additional privacy, security and breach
notification requirements, and the Company is subject to audit by governmental authorities regarding the Company’s compliance
with these obligations. If the Company fails to adequately comply with these rules and requirements, or if health data or financial
data is handled in a manner not permitted by law or under the Company’s agreements with healthcare or financial institutions,
the Company can be subject to litigation or government investigations, and can be liable for associated investigatory expenses,
and can also incur significant fees or fines.
Payment card data is also subject to additional requirements. Under payment card rules and obligations, if cardholder
information is potentially compromised, the Company can be liable for associated investigatory expenses and can also incur
significant fees or fines if the Company fails to follow payment card industry data security standards. The Company could also
experience a significant increase in payment card transaction costs or lose the ability to process payment cards if it fails to follow
payment card industry data security standards, which could materially adversely affect the Company’s business, reputation,
results of operations and financial condition.
Apple Inc. | 2023 Form 10-K | 14
Financial Risks
The Company expects its quarterly net sales and results of operations to fluctuate.
The Company’s profit margins vary across its products, services, geographic segments and distribution channels. For example,
the gross margins on the Company’s products and services vary significantly and can change over time. The Company’s gross
margins are subject to volatility and downward pressure due to a variety of factors, including: continued industry-wide global
product pricing pressures and product pricing actions that the Company may take in response to such pressures; increased
competition; the Company’s ability to effectively stimulate demand for certain of its products and services; compressed product
life cycles; supply shortages; potential increases in the cost of components, outside manufacturing services, and developing,
acquiring and delivering content for the Company’s services; the Company’s ability to manage product quality and warranty costs
effectively; shifts in the mix of products and services, or in the geographic, currency or channel mix, including to the extent that
regulatory changes require the Company to modify its product and service offerings; fluctuations in foreign exchange rates;
inflation and other macroeconomic pressures; and the introduction of new products or services, including new products or
services with higher cost structures. These and other factors could have a materially adverse impact on the Company’s results of
operations and financial condition.
The Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in
part to seasonal holiday demand. Additionally, new product and service introductions can significantly impact net sales, cost of
sales and operating expenses. Further, the Company generates a significant portion of its net sales from a single product and a
decline in demand for that product could significantly impact quarterly net sales. The Company could also be subject to
unexpected developments, such as lower-than-anticipated demand for the Company’s products or services, issues with new
product or service introductions, information technology system failures or network disruptions, or failure of one of the
Company’s logistics, components supply, or manufacturing partners.
The Company’s financial performance is subject to risks associated with changes in the value of the U.S. dollar relative
to local currencies.
The Company’s primary exposure to movements in foreign exchange rates relates to non–U.S. dollar–denominated sales, cost
of sales and operating expenses worldwide. Gross margins on the Company’s products in foreign countries and on products that
include components obtained from foreign suppliers have in the past been adversely affected and could in the future be
materially adversely affected by foreign exchange rate fluctuations.
The weakening of foreign currencies relative to the U.S. dollar adversely affects the U.S. dollar value of the Company’s foreign
currency–denominated sales and earnings, and generally leads the Company to raise international pricing, potentially reducing
demand for the Company’s products. In some circumstances, for competitive or other reasons, the Company may decide not to
raise international pricing to offset the U.S. dollar’s strengthening, which would adversely affect the U.S. dollar value of the gross
margins the Company earns on foreign currency–denominated sales.
Conversely, a strengthening of foreign currencies relative to the U.S. dollar, while generally beneficial to the Company’s foreign
currency–denominated sales and earnings, could cause the Company to reduce international pricing or incur losses on its
foreign currency derivative instruments, thereby limiting the benefit. Additionally, strengthening of foreign currencies may
increase the Company’s cost of product components denominated in those currencies, thus adversely affecting gross margins.
The Company uses derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to
fluctuations in foreign exchange rates. The use of such hedging activities may not be effective to offset any, or more than a
portion, of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are
in place.
The Company is exposed to credit risk and fluctuations in the values of its investment portfolio.
The Company’s investments can be negatively affected by changes in liquidity, credit deterioration, financial results, market and
economic conditions, political risk, sovereign risk, interest rate fluctuations or other factors. As a result, the value and liquidity of
the Company’s cash, cash equivalents and marketable securities may fluctuate substantially. Therefore, although the Company
has not realized any significant losses on its cash, cash equivalents and marketable securities, future fluctuations in their value
could result in significant losses and could have a material adverse impact on the Company’s results of operations and financial
condition.
Apple Inc. | 2023 Form 10-K | 15
The Company is exposed to credit risk on its trade accounts receivable, vendor non-trade receivables and prepayments
related to long-term supply agreements, and this risk is heightened during periods when economic conditions worsen.
The Company distributes its products and certain of its services through third-party cellular network carriers, wholesalers,
retailers and resellers. The Company also sells its products and services directly to small and mid-sized businesses and
education, enterprise and government customers. A substantial majority of the Company’s outstanding trade receivables are not
covered by collateral, third-party bank support or financing arrangements, or credit insurance, and a significant portion of the
Company’s trade receivables can be concentrated within cellular network carriers or other resellers. The Company’s exposure to
credit and collectibility risk on its trade receivables is higher in certain international markets and its ability to mitigate such risks
may be limited. The Company also has unsecured vendor non-trade receivables resulting from purchases of components by
outsourcing partners and other vendors that manufacture subassemblies or assemble final products for the Company. In
addition, the Company has made prepayments associated with long-term supply agreements to secure supply of inventory
components. As of September 30, 2023, the Company’s vendor non-trade receivables and prepayments related to long-term
supply agreements were concentrated among a few individual vendors located primarily in Asia. While the Company has
procedures to monitor and limit exposure to credit risk on its trade and vendor non-trade receivables, as well as long-term
prepayments, there can be no assurance such procedures will effectively limit its credit risk and avoid losses.
The Company is subject to changes in tax rates, the adoption of new U.S. or international tax legislation and exposure to
additional tax liabilities.
The Company is subject to taxes in the U.S. and numerous foreign jurisdictions, including Ireland and Singapore, where a
number of the Company’s subsidiaries are organized. Due to economic and political conditions, tax laws and tax rates for income
taxes and other non-income taxes in various jurisdictions may be subject to significant change. For example, the Organisation for
Economic Co-operation and Development continues to advance proposals for modernizing international tax rules, including the
introduction of global minimum tax standards. The Company’s effective tax rates are affected by changes in the mix of earnings
in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, the introduction of
new taxes, and changes in tax laws or their interpretation. The application of tax laws may be uncertain, require significant
judgment and be subject to differing interpretations.
The Company is also subject to the examination of its tax returns and other tax matters by the U.S. Internal Revenue Service
and other tax authorities and governmental bodies. The Company regularly assesses the likelihood of an adverse outcome
resulting from these examinations to determine the adequacy of its provision for taxes. There can be no assurance as to the
outcome of these examinations. If the Company’s effective tax rates were to increase, or if the ultimate determination of the
Company’s taxes owed is for an amount in excess of amounts previously accrued, the Company’s business, results of
operations and financial condition could be materially adversely affected.
General Risks
The price of the Company’s stock is subject to volatility.
The Company’s stock has experienced substantial price volatility in the past and may continue to do so in the future. Additionally,
the Company, the technology industry and the stock market as a whole have, from time to time, experienced extreme stock price
and volume fluctuations that have affected stock prices in ways that may have been unrelated to these companies’ operating
performance. Price volatility may cause the average price at which the Company repurchases its stock in a given period to
exceed the stock’s price at a given point in time. The Company believes the price of its stock should reflect expectations of future
growth and profitability. The Company also believes the price of its stock should reflect expectations that its cash dividend will
continue at current levels or grow, and that its current share repurchase program will be fully consummated. Future dividends are
subject to declaration by the Company’s Board of Directors, and the Company’s share repurchase program does not obligate it
to acquire any specific number of shares. If the Company fails to meet expectations related to future growth, profitability,
dividends, share repurchases or other market expectations, the price of the Company’s stock may decline significantly, which
could have a material adverse impact on investor confidence and employee retention.
Item 1B.
Unresolved Staff Comments
None.
Item 1C.
Cybersecurity
Not applicable.
Apple Inc. | 2023 Form 10-K | 16
Item 2.
Properties
The Company’s headquarters is located in Cupertino, California. As of September 30, 2023, the Company owned or leased
facilities and land for corporate functions, R&D, data centers, retail and other purposes at locations throughout the U.S. and in
various places outside the U.S. The Company believes its existing facilities and equipment, which are used by all reportable
segments, are in good operating condition and are suitable for the conduct of its business.
Item 3.
Legal Proceedings
Epic Games
Epic Games, Inc. (“Epic”) filed a lawsuit in the U.S. District Court for the Northern District of California (the “District Court”)
against the Company alleging violations of federal and state antitrust laws and California’s unfair competition law based upon the
Company’s operation of its App Store. On September 10, 2021, the District Court ruled in favor of the Company with respect to
nine out of the ten counts included in Epic’s claim. The District Court found that certain provisions of the Company’s App Store
Review Guidelines violate California’s unfair competition law and issued an injunction enjoining the Company from prohibiting
developers from including in their apps external links that direct customers to purchasing mechanisms other than Apple in-app
purchasing. The injunction applies to apps on the U.S. storefront of the iOS and iPadOS App Store. On April 24, 2023, the U.S.
Court of Appeals for the Ninth Circuit (the “Circuit Court”) affirmed the District Court’s ruling. On June 7, 2023, the Company and
Epic filed petitions with the Circuit Court requesting further review of the decision. On June 30, 2023, the Circuit Court denied
both petitions. On July 17, 2023, the Circuit Court granted Apple’s motion to stay enforcement of the injunction pending appeal to
the U.S. Supreme Court. If the U.S. Supreme Court denies Apple’s petition, the stay of the injunction will expire.
Masimo
Masimo Corporation and Cercacor Laboratories, Inc. (together, “Masimo”) filed a complaint before the U.S. International Trade
Commission (the “ITC”) alleging infringement by the Company of five patents relating to the functionality of the blood oxygen
feature in Apple Watch Series 6 and 7. In its complaint, Masimo sought a permanent exclusion order prohibiting importation to
the United States of certain Apple Watch models that include blood oxygen sensing functionality. On October 26, 2023, the ITC
entered a limited exclusion order (the “Order”) prohibiting importation and sales in the United States of Apple Watch models with
blood oxygen sensing functionality, which includes Apple Watch Series 9 and Ultra 2. The Order will not go into effect until the
end of the administrative review period, which is currently expected to end on December 25, 2023. The Company intends to
appeal the Order and seek a stay pending the appeal.
Other Legal Proceedings
The Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the
ordinary course of business. The Company settled certain matters during the fourth quarter of 2023 that did not individually or in
the aggregate have a material impact on the Company’s financial condition or operating results. The outcome of litigation is
inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above
management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially
adversely affected.
Item 4.
Mine Safety Disclosures
Not applicable.
Apple Inc. | 2023 Form 10-K | 17
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
The Company’s common stock is traded on The Nasdaq Stock Market LLC under the symbol AAPL.
Holders
As of October 20, 2023, there were 23,763 shareholders of record.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Share repurchase activity during the three months ended September 30, 2023 was as follows (in millions, except number of
shares, which are reflected in thousands, and per-share amounts):
Average
Price
Paid Per
Share
Total Number
of Shares
Purchased
Periods
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
Approximate
Dollar Value of
Shares That May
Yet Be Purchased
Under the Plans
or Programs (1)
July 2, 2023 to August 5, 2023:
Open market and privately negotiated purchases
33,864
$
191.62
33,864
(2)
22,085
August 6, 2023 to September 2, 2023:
(2)
August 2023 ASRs
22,085
Open market and privately negotiated purchases
30,299
$
178.99
30,299
20,347
$
176.31
20,347
(2)
September 3, 2023 to September 30, 2023:
Open market and privately negotiated purchases
Total
106,595
$
(1)
As of September 30, 2023, the Company was authorized by the Board of Directors to purchase up to $90 billion of the
Company’s common stock under a share repurchase program announced on May 4, 2023, of which $15.9 billion had been
utilized. During the fourth quarter of 2023, the Company also utilized the final $4.6 billion under its previous repurchase
program, which was most recently authorized in April 2022. The 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 Exchange Act.
(2)
In August 2023, the Company entered into new accelerated share repurchase agreements (“ASRs”). Under the terms of the
ASRs, two financial institutions committed to deliver shares of the Company’s common stock during the purchase periods in
exchange for up-front payments totaling $5.0 billion. The total number of shares ultimately delivered under the ASRs, and
therefore the average repurchase price paid per share, is determined based on the volume-weighted average price of the
Company’s common stock during the ASRs’ purchase periods, which end in the first quarter of 2024.
Apple Inc. | 2023 Form 10-K | 18
74,069
Company Stock Performance
The following graph shows a comparison of five-year cumulative total shareholder return, calculated on a dividend-reinvested
basis, for the Company, the S&P 500 Index and the Dow Jones U.S. Technology Supersector Index. The graph assumes $100
was invested in each of the Company’s common stock, the S&P 500 Index and the Dow Jones U.S. Technology Supersector
Index as of the market close on September 28, 2018. Past stock price performance is not necessarily indicative of future stock
price performance.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
Among Apple Inc., the S&P 500 Index and the Dow Jones U.S. Technology Supersector Index
$400
$300
$200
$100
$0
9/28/18
9/28/19
Apple Inc.
9/26/20
9/25/21
S&P 500 Index
9/24/22
9/30/23
Dow Jones U.S. Technology Supersector Index
September
2018
September
2019
September
2020
September
2021
September
2022
September
2023
Apple Inc.
$
100
$
98
$
204
$
269
$
277
$
317
S&P 500 Index
$
100
$
104
$
118
$
161
$
136
$
160
Dow Jones U.S. Technology Supersector Index
$
100
$
105
$
154
$
227
$
164
$
226
Item 6.
[Reserved]
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