Apple Inc. is a global technology company that designs, manufactures, and sells smartphones, personal computers, tablets, wearables and accessories. Apple Inc. is listed on the Nasdaq exchange under the ticker symbol, AAPL. Some of its main products include the iPhone, the Mac line of personal computers and laptops, iPad, Apple Watch, and Apple TV. The company also has a fast-growing services business that includes its iCloud cloud service, and its digital content streaming services such as Apple Music and Apple TV+, the latter launched in November 2019.
Apple faces numerous competitors including smartphone manufacturers Samsung Electronics Co. Ltd. and LG Electronics Inc., computer manufacturers Lenovo Group Ltd. and Dell Technologies Inc. (DELL), streaming-content providers Spotify Technology S.A. (SPOT) and Netflix Inc. (NFLX), and other technology companies like Microsoft Corp. (MSFT), Alphabet Inc. (GOOGL), and Amazon.com Inc. (AMZN).
Apple's Latest Developments
- Apple held its highly anticipated annual event on September 15 at the company's Steve Jobs Theater in Cupertino, California. The event was held exclusively via streaming video this time due to coronavirus concerns. Typically, Apple has debuted its latest products at this event, most notably the newest version of the iPhone. This time around, however, the company instead unveiled its latest Apple Watches and its updated iPad Air, among other new products and services. The new iPhone debut is currently slated for October.
- Apple's stock split 4-for-1 on August 31, 2020, the fifth split in the stock's history. On the day of the split, AAPL surged to hit a new record high (split-adjusted).
- In its Q3 FY 2020 quarterly filing, Apple said that certain aspects of its business continued to be adversely affect by the COVID-19 pandemic. Many of the company's stores remained temporarily closed during the quarter and a large number of its employees were working remotely. Apple said that it was gradually re-opening its offices and retail stores in accordance with local rules and regulations.
- Apple Inc. (AAPL) sells smartphones, personal computers, tablets, wearables and accessories, and services.
- iPhones are Apple's biggest source of revenue by product, and the Americas is the largest revenue generator among its geographic regions.
- Apple's services business generates the highest gross margins.
- The company is gradually re-opening stores that were temporarily closed in response to the COVID-19 pandemic.
Apple posted net income of $11.3 billion on revenue of $59.7 billion for Q3 of its 2020 fiscal year (FY), which ended June 27, 2020. Apple refers to revenue as net sales in its reports. Both net income and revenue rose during the quarter compared to the same three-month period a year ago. Net income climbed 12.0% as revenue grew 10.9%.
It was a record quarter for Apple driven by growth in both the Products and Services businesses as well as each of its geographic segments. Revenue for the Products business grew 9.8% in Q3 to comprise 78% of Apple's total Revenue. Among its products, iPhones comprised 44% of total revenue; followed by Macs (12%); iPads (11%); and Wearables, Home and Accessories (11%). Services revenue grew 14.8%, comprising 22% of Apple's total revenue.
Apple has mounted a major corporate strategy to reduce its dependence on lower-margin hardware products, which face slowing growth, while accelerating the growth of its Services business, which has higher margins and a more predictable, recurring revenue stream. Last year was a landmark year for Apple's Services offerings, having introduced Apple Arcade, Apple TV+, Apple News+, and Apple Card.
The high margins in Apple's Services business have continued to rise. Gross margin as a percentage of sales was 67.2% for Q3 FY 2020 compared to 64.1% in the year-ago quarter. Gross margin as a percentage of sales for Products was just 29.7% for Q3 versus 30.4% a year ago.
Apple’s Business Segments
Apple provides a breakdown of revenue and operating income for the following geographical segments: Americas; Europe; Greater China; Japan; and Rest of Asia Pacific.
While the U.S. is still the dominant market, Asia is rapidly catching up. In Q3 FY 2020, markets in China, Japan and Asia Pacific contributed 36% of operating income and 31% of revenue. That makes the Asia region dramatically more important than Europe to Apple for growth and profits.
The Americas segment includes both North and South America. Revenue grew 7.8% during Q3 FY 2020 to $27.0 billion, comprising about 45% of Apple's total revenue. Operating income grew 7.1% to $8.0 billion, comprising about 41% of the operating income for all segments.
The Europe segment includes European countries, as well as India, the Middle East and Africa. Revenue grew 18.9% during Q3 FY 2020 to $14.2 billion, comprising about 24% of Apple's total revenue. Operating income grew 19.9% to $4.4 billion, comprising about 23% of combined operating income for all segments.
The Greater China segment includes China, Hong Kong, and Taiwan. Revenue grew 1.9% during Q3 FY 2020 to $9.3 billion, comprising about 16% of Apple's total revenue. Operating income grew 6.0% to $3.4 billion, comprising about 18% of the combined operating income for all segments.
Revenue for the segment grew 21.7% during Q3 FY 2020 to $5.0 billion, comprising about 8% of Apple's total revenue. Operating income grew 17.8% to $2.1 billion, comprising about 11% of the combined operating income for all segments.
Rest of Asia Pacific
The Rest of Asia Pacific segment includes Australia and those Asian countries not included in the company’s other reportable geographic segments. Revenue for the segment grew 17.0% during Q3 FY 2020 to $4.2 billion, comprising about 7% of Apple's total revenue. Operating income grew 19.0% to $1.4 billion, comprising 7% of the combined operating income for all segments.
A note to readers that the combined operating income used in the segment breakdowns above and in the pie charts was $19.3 billion in Q3 FY 2020. To arrive at Apple's lower, reported consolidated operating income of $13.1 billion for the quarter, Apple makes deductions for research and development expenses and other corporate expenses.
Top 3 Individual Insider Shareholders of Apple
Arthur Levinson owns 1,133,283 shares of Apple stock, representing 0.03% of all outstanding shares. Levinson has been the chairman of the board of Apple since 2011, and a co-lead director since 2005, having originally joined in 2000. In his role as director, Levinson has served on all three board committees: audit and finance, nominating and corporate governance, and compensation.
Levinson is a former chairman of biotech company Genentech Inc. and is founder and currently CEO of biotech company Calico.
"Insider" refers to people in senior management positions and members of the board of directors, as well as people or entities that own more than 10% of the company's stock. In this context, it has nothing to do with insider trading.
Tim Cook owns 847,969 shares of Apple stock, representing 0.02% of all outstanding shares. Cook rose to CEO of Apple in 2011 after the death of founder and longtime CEO Steve Jobs. Cook, who arrived at Apple in 1998, previously was chief operating officer, responsible for all worldwide sales and operations.
Cook also headed Apple’s Macintosh division and played a key role in the continued development of strategic reseller and supplier relationships. Prior to joining Apple, Cook was Vice President for Corporate Materials for Compaq, and Director of North American fulfillment for IBM.
Al Gore owns 113,585 shares of Apple stock, representing less than 0.01% of all outstanding shares. Gore was the Democratic Party's nominee for president in the 2000 election, the 45th Vice President of the United States, and a U.S. Senator and Congressman from Tennessee. An investor, author, and entrepreneur, Gore is the co-founder and Chairman of investment firm Generation Investment Management, among other ventures.
A Nobel Prize laureate, Gore also is a leading environmental advocate and the founder of The Climate Reality Project. He joined Apple's board of directors in 2003.
Top 3 Institutional Shareholders of Apple
Institutional investors own the majority of Apple shares at about 62% of shares outstanding.
Vanguard Group Inc.
Vanguard Group owns 336.7 million shares of Apple, representing 7.8% of total shares outstanding, according to the company's 13F filing for the period ending March 31, 2020. Vanguard is primarily a mutual fund and ETF management company with about $6.2 trillion in global assets under management (AUM).
The Vanguard S&P 500 ETF (VOO) is one of the company's largest exchange-traded funds (ETFs) with about $150.5 billion in AUM. Apple is the second-largest holding, comprising 5.2% of the VOO portfolio.
BlackRock owns 274.7 million shares of Apple, representing 6.3% of total shares outstanding, according to the company's 13F filing as of March 31, 2020. BlackRock is primarily a mutual fund and ETF management company with approximately $6.47 trillion in AUM.
The iShares Core S&P 500 ETF (IVV) is among one of BlackRock's largest ETFs with approximately $197.6 billion in AUM. Apple is the second-largest holding, comprising 6.0% of the IVV portfolio.
Berkshire Hathaway Inc.
Berkshire Hathaway owns 245.2 million shares of Apple, representing 5.7% of total shares outstanding, according to the company's 13F filing as of March 31, 2020. Led by billionaire investor Warren Buffett, Berkshire Hathaway is a diversified holding company with investments in a broad range of industries including insurance, railroads, gas and electric utilities, and more.
The company, whose market cap is $447.2 billion, also holds a sizable portfolio of equity securities valued at hundreds of billions of dollars.
Companies Owned by Apple
In recent months, Apple has made a higher-than-usual number of acquisitions, including the popular weather app named Dark Sky. The company also may spend $100 million to purchase virtual reality streaming service NextVR. Below, we look in more detail at 5 of Apple's most important acquisitions. The company does not provide a breakdown of how much profit or revenue each acquisition currently contributes.
Beats Electronics and Beats Music
- Type of Business: Audio products
- Acquisition price: $3 billion
- Date purchased: August 1, 2014
Apple's largest acquisition to date is the $3 billion purchase in cash and stock of audio products maker Beats Electronics and its streaming service, Beats Music. Beats Electronics was founded in 2006 by music producer and rapper Dr. Dre and record executive Jimmy Iovine and released its first headphones in 2008. The acquisition has allowed Apple to sell the Beats line of headphones in its retail stores and also with resellers. At the time of the acquisition, Beats was an independent company with minority stakeholders including Dr. Dre, Iovine, and private equity firm Carlyle Group.
Apple used several elements of Beats Music to help build its Apple Music streaming service. Beats Music was shut in 2015 and its subscribers were transferred to Apple. Apple has been aggressive about making Beats Electronics products a key part of the company's offerings, including its Beats-branded headphones, earphones, and speakers.
- Type of Business: Voice-activated personal assistant technology
- Acquisition price: Estimated more than $200 million
- Date purchased: April 28, 2010
SRI International Artificial Intelligence Center originally developed Siri in conjunction with Nuance Communications, a company focused on speech technology. SRI International spun off Siri as an independent company in 2008. Early on, Siri was developed as an individual app to be used for everyday tasks like booking reservations at restaurants, getting weather reports, or buying tickets to a sports event. Apple integrated the voice-activated technology into its early iPhone models. Siri technology is now used on many Apple products, including the iPhone, Apple Watch, Mac PCs and Apple TV. Siri reflects Apple's strategy of acquiring a tech company for a specific technology, then integrating that technology into its existing products.
- Type of Business: Music identifier app
- Acquisition price: Estimated $400 million
- Date purchased: September 24, 2018
Founded as Shazam Entertainment Limited in 1999, Shazam is the company behind the namesake music identifier app. Apple completed its purchase of Shazam in 2018 for an estimated $400 million with the goal of integrating the technology into iPhones and other smart devices. Although Apple already had a music identifying system built into Siri, Shazam's was regarded as more robust. The company announced that it would remove advertisements from all tiers of Shazam service, relying instead on revenue generated from song purchases made through the app.
- Type of Business: Hardware and software developer
- Acquisition price: $400 million
- Date purchased: December 20, 1996
Founded in 1985 by Apple co-founder Steve Jobs during a period in which he had been forced out of Apple, NeXT developed hardware and software platforms. The company was perhaps best known for its NeXT computer, built for higher education and business use. Apple announced the agreement to acquire NeXT in December of 1996, which was followed by Jobs' return to the company as CEO. For roughly two decades, NeXT remained the most expensive acquisition for Apple, but its technology played a key role in the development of Apple products.
- Type of Business: Computer security and touch control software
- Acquisition price: $356 million
- Date purchased: July 27, 2012
AuthenTec Inc. was founded in 1998 as a spin-off of Harris Corp. (then known as Harris Semiconductor). At the time of its acquisition by Apple in 2012, AuthenTec held roughly 200 patents in a multitude of computer and technology security applications and products. One of those turned out to be the most useful to Apple, and the one which the tech giant would integrate into a huge array of its devices: its biometric security tool. That tool would later become Apple's Touch ID. This technology now enables users to unlock iPhones and other devices with the touch of a finger. As with many other Apple acquisitions, AuthenTec's products have been integrated in Apple's existing offerings as added features.
If You'd Invested in Apple at its IPO
Apple went public on December 12, 1980 at a price of $22.00, or about $0.10 when adjusting for stock splits. Apple's current stock price at market close on September 9, 2020 was $117.32. If you'd purchased $1,000 of Apple stock at its initial public offering (IPO), that investment would currently be worth about $1,159,000 as of September 9, 2020. Over the same period, if you had put your $1000 in the Vanguard 500 Index Fund (VFINX), which invests in the market as a whole, your investment would be worth about $68,000. That's a 115,900% total return for Apple versus a 6,800% total return for an investment in the market as a whole. Annualized, Apple had a 19.7% compound annual growth rate (CAGR) , whereas VFINX had a CAGR of 11.3%.
Interestingly, Apple's stock didn't start to regularly outperform the broader market until more than 25 years after its IPO, roughly coinciding with the release of the first iPhone in 2007. Furthermore, almost all of Apple's outperformance happened in the last decade of its nearly 40 years as a public company; and more than three quarters of the total growth an investment in Apple since its IPO would have garnered has come in the last five years.
Apple's Stock Split History
|AAPL Stock Splits|
|6/16/1987||2 for 1|
|6/21/2000||2 for 1|
|2/28/2005||2 for 1|
|6/9/2014||7 for 1|
|8/31/2020||4 for 1|
ETFs With Major Holdings of Apple Stock
|ETFs Holding AAPL|
|Ticker||ETF Name||AAPL Weighting|
|XLK||Technology Select Sector SPDR Fund||25.32%|
|VGT||Vanguard Information Technology ETF||23.44%|
|FTEC||Fidelity MSCI Information Technology Index ETF||23.33%|
|IYW||iShares U.S. Technology ETF||22.22%|
|IXN||iShares Global Tech ETF Technology Equities||20.39%|
|HLAL||Wahed FTSE USA Shariah ETF||19.86%|
|JKD||iShares Morningstar Large-Cap ETF||19.84%|
|HIPR||Direxion High Growth ETF||17.57%|
|JOYY||Infusive Compounding Global Equities ETF||15.12%|
|QYLD||Global X NASDAQ 100 Covered Call ETF||14.74%|
How Apple Reports Diversity & Inclusiveness
As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Apple and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Apple releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.
Below is a table of potential diversity measurements. It shows whether Apple discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Apple breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and membership in the LGBTQ+ community.
|Apple Diversity & Inclusiveness Reporting|
|Race||Gender||Ability||Veteran Status||Sexual Orientation|
|Board of Directors|
|General Management||✔ (U.S. Only)||✔|
|Employees||✔ (U.S. Only)||✔|
Frequently Asked Questions
How Profitable Is Apple?
Apple, Inc. is indeed profitable. In its most recent earnings release, the company posted net income of $11.3 billion on revenue of $59.7 billion for Q3 of its 2020 fiscal year, which ended June 27, 2020.
Who Owns the Most Apple Stock?
The biggest individual insider shareholder of Apple is Arthur Levinson, who has been the company's chairman of the board since 2011 and a co-lead director since 2005. By the most recent count, Levinson owns 1,133,283 shares of Apple stock, representing 0.03% of all outstanding shares.
The biggest institutional shareholder of Apple is Vanguard Group, which owns 336.7 million shares representing 7.8% of total shares outstanding, according to the company's most recent 13F filing for the period ending March 31, 2020.
Who Invented Apple's iPhone?
The late Steve Jobs, co-founder and former chairman and CEO of Apple, Inc., invented the iPhone with his team of engineers and designers in the early 2000s. The iPhone beta version was created in 2004, and the first iPhone was released to the public in June 2007.
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