What is This Post

This will break down Apple's Q4 earnings (though this is typically thought of as Q3 for most companies, this is not a requirement and Apple can do what they want so here we are). We're going to talk about things like how much money they made, what they spent on different things like R&D, profit margins, etc.. This is all information that's publicly available as they are a publicly traded corporation. I went to school for Information Systems and have taken multiple business and finance classes at both the undergraduate and MBA-level so I will try my best to work through this in a way that's understandable to someone who hasn't taken any kind of accounting or finance classes. You can check out the official documents from Apple here.

Quick Stats

Here is basically the TL;DR, because this is going to be really long and maybe boring for you.

• Sales: $95 Billion - Increased from $89 Billion (~6%)
• Expenses: $80.2 Billion - Increased from $66.5 Billion (~20.5%)
• Net Income: $14.7 Billion - Decreased from $23 Billion (~56%)
• Profit Margin: 15.5% - Decreased from 25.6%
  Expenses increased YoY seemingly because of "Provision for Income Taxes" which is the money they set aside to pay their taxes, which is a little more than 3.5x higher this year than the last. Couldn't tell you why, that's just what the numbers are saying. This is a difference of a little over $10 Billion.

Statements of Operations

Breakdown

So this first section is going to be about what money Apple made as a result of selling things pretty much. It will go over how much money they brought in, how much money they spent, and how much they came away with at the end. If you're looking at the PDF Apple supplied, these numbers are reflected in millions, so there's an additional 6 zeros that aren't being shown (for the sake of space, this is typical of a company at this scale).

Net Sales

Apple made $69,958,000,000 (roughly $70 Billion) from their hardware business this quarter, which includes—well—all of their hardware. On top of that they made $24,972,000,000 (roughly $25 Billion) from their services. This isn't just things like Apple Music and AppleTV+, this also includes any and all revenue from the App Store's 30% fee as well as Google's default search deal, which is about $18 Billion a year, so it would account for about $4.5 Billion on this sheet (since it's just this past quarter). If you were to exclude the Google search deal, Apple would be making about $21.5 Billion from their own services and the App Store.

Breakdown by Product

iPhone

The iPhone was responsible for $46 Billion in sales which is 48.6% of all of Apple's net sales, up about 5.5% year-over-year (YoY).

Mac

The Mac was responsible for $7.7 Billion, about 8% of Apple's revenue, up 1.7% YoY.

iPad

The iPad was responsible for $6.95 Billion, about 7% of Apple's revenue, up 7.9% YoY.

Wearables, Home, and Accessories

This includes things like Apple Watch, HomePod, AppleTV, and any sort of accessories like AirPods, AirTags, Magic Keyboards, etc. which is all grouped into one segment and that accounted for $9 Billion in sales, about 9.5% of Apple's revenue, down about 3% YoY.

Services

Lastly, services isn't broken down by the specific services, so we've got about $25 Billion, about 26% of Apple's revenue, up 11.9% YoY.

Expenses

Cost of Sales

This is the amount of money Apple has to pay in order to provide these products. For hardware this is going to include the Bill of Materials (BoM) and for services this is mostly going to cover things like datacenter costs, the costs of running the servers, the costs of the servers, and so on. For Apple's hardware, on that $70 Billion in sales, Apple had to pay $44.57 Billion, which means, just the costs of the products to Apple is about 64% of Apple's money gone. This is up about 4.6% YoY.

For services, this is much less, as the server costs are way lower than hardware parts and such, coming in at around $6.4 Billion, meaning Apple's costs are about 26% of their earnings for services, which was actually flat YoY, Apple didn't take on any new costs as far as running their service infrastructure it would seem.

Keep in mind, this is not Apple's profit margin.

Operating Expenses and Taxes

This includes mostly things like R&D, advertising, and salaries. Apple spent $7.7 Billion on R&D this quarter, or about 8% of their revenue, increasing 6% YoY. Additional operating expenses accounted for $6.5 Billion, or about 6.9% of their revenue, increasing about 6% YoY (anyone else noticing a theme here?).

On top of that, Apple has to pay taxes, apparently, and they paid about $14.8 Billion in taxes this year, which is up almost 3.5x from last year. Don't know why. That's about 15.6% of their revenue.

Profit Margin

So people like to talk a lot about this number, even if they really don't know what it means. People are usually saying things like "Apple's margin is probably so high" or "iPhones only cost Apple like $6 to make" so here are the numbers. Apple's total sales are $94.93 Billion, their net income, after all expenses are taken out including the costs of materials, shipping, taxes, research, salaries, and the like, is $14.736 Billion dollars. This means Apple's profit margin is a whopping...15.5%. AMD's is about 11% and Google's was about 25.6%.

Conclusion

There is a lot more information available in these different sheets that I'm not going to go through including things like sales by continent, how much cash Apple has, and more. It's a lot of stuff and you can go look through it and see for yourself. I personally think it's really fun to go through these and see what's going on, because it's not always what you expect. Have any thoughts or comments, reach out to me on Mastodon.