How Apple Makes Money

iPhones are the company’s biggest source of revenue

Apple Inc. (AAPL) is a global technology company that designs, manufactures, and sells smartphones, personal computers, tablets, wearables, and accessories. Some of its main products include the iPhone, the Mac line of personal computers and laptops, the 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. (005930) and LG Electronics Inc. (066570), computer manufacturers Lenovo Group Ltd. (0992) 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).

Key Takeaways

  • Apple sells smartphones, personal computers, tablets, wearables and accessories, and services.
  • iPhones are Apple’s biggest source of revenue by product.
  • Apple’s services business generates the highest gross margins compared to its products business.
  • Apple faces antitrust challenges regarding its App Store fees and setbacks to its planned autonomous vehicle development.

Apple’s Financials

Apple posted a net income of $99.8 billion on revenue of $394.3 billion for its 2022 fiscal year (FY), ended Sept. 24, 2022. Apple refers to revenue as net sales in its financial reports. Both net income and revenue rose compared to the prior fiscal year. Net income grew 5.4% as revenue climbed 7.8%.

Apple breaks down its business by geographical segment, and it also reports on Products and Services business. Both Apple’s Products and Services businesses grew during the last year. Revenue for the Products business rose 6.3% compared to FY 2021, comprising about 80.2% of Apple’s total revenue. Among its products, iPhones comprised 52.1% of total revenue; Macs, 10.2%; iPads, 7.4%; and Wearables, Home and Accessories, 10.5%. Services revenue grew 14.2% compared to the same quarter a year ago, comprising about 19.8% 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. Apple has introduced many new services in recent years, including Apple Arcade, Apple TV+, Apple News+, and Apple Card. The company offers many of its services in one simple plan called Apple One.

The high margins in Apple’s Services business have continued to rise. Gross margin as a percentage of sales was 71.7% in FY 2022, compared with 69.7% for FY 2021 and 66.0% for FY 2020. Gross margin as a percentage of sales for Products was 36.3% for FY 2022, while it was 35.3% for FY 2021 and 31.5% for FY 2020.

iPhone

Apple’s iPhone is the company’s smartphone and its top-selling product category by revenue. For FY 2022, iPhone net sales were $205.5 billion, 52.1% of total revenue and an increase of 7% relative to FY 2021. iPhone sales were boosted during 2022 thanks to new iPhone models released during that time.

Mac

The company’s Mac category includes personal computers such as the MacBook Air and MacBook Pro laptops and the iMac, Mac Studio, and Mac Pro desktop computers. Mac sales generated $40.2 billion in revenue for FY 2022, 10.2% of total revenue for the year. Though Mac revenue is the second-lowest across Apple’s product categories, above iPad, it was the fastest-growing category for the year. Mac net sales climbed by 14% compared with FY 2021, driven by higher net sales of laptops.

iPad

Apple’s iPad products include a range of multipurpose tablets such as the iPad Air, iPad mini, and iPad Pro. iPad net sales for FY 2022 were $29.3 billion, or 7.4% of total revenue. Apple’s iPad product category generated the least revenue for the last year, and it was the only category that saw a year-over-year (YOY) decline in net sales relative to FY 2021. iPad revenue fell by 8% over that period, as sales of the iPad Pro slumped.

Wearables, Home and Accessories

Apple groups several of its other products together under the Wearables, Home and Accessories category. This portion of the company’s business includes its AirPods wireless headphone line, the Apple TV media streaming and gaming device, the Apple Watch line of smartwatches, and HomePod and Beats products for the home. Apple’s Wearables, Home and Accessories products accounted for $41.2 billion in revenue in FY 2022, or 10.5% of overall revenue for the year. Net sales for this category climbed by 7% YOY thanks to higher net sales of Apple Watch and AirPods.

Services

Apple combines a variety of its revenue streams under the Services category. This part of Apple’s business includes advertising services on Apple’s platforms as well as through third-party licensing deals. It also comprises the AppleCare brand, which includes fee-based service and support products. Cloud services and payment services with Apple Card and Apple Pay are also part of the broader Services category, as is the company’s digital content sales such as the App Store and Apple Arcade. It’s important to note that Apple does not provide a breakdown in its financials of the revenue generated by each one of these services individually, but only as a larger category.

In 2020, Epic Games, the maker of the popular Fortnite title, sued Apple regarding its App Store practices. Apple’s longtime practice has been to take a 30% cut of many app sales through the store. Epic’s suit accused Apple of breaking antitrust laws as a result of the fee. In September 2021, the court ruled in Apple’s favor on most counts but found that Apple violated certain unfair competition laws when it barred app developers from redirecting customers to other ways to pay for services.

Apple’s Services category was its second-largest source of revenue in FY 2022, although it accounted for less than half of iPhone revenue. Services net sales were $78.1 billion last year, 19.8% of total revenue. As mentioned above, Services revenue has grown rapidly, climbing by 14% YOY for FY 2022 as a result of growth in advertising, cloud services, and the App Store.

Apple’s Recent Developments

Both Apple and Epic Games appealed the results of the 2021 ruling of the aforementioned lawsuit. Oral arguments began on Nov. 14, 2022, at the U.S. Court of Appeals for the Ninth Circuit. Meanwhile, impending changes to European Union (EU) requirements have prompted Apple to allow alternative app stores on many of its products in that region. Tesla Inc. (TSLA) CEO and Twitter owner Elon Musk has also been vocal about Apple’s App Store fees, saying in a tweet in November 2022 that he was “going to war” with the tech giant. On Dec. 12, 2022, Twitter relaunched its Twitter Blue subscription service, charging $8 per month for web users and $11 per month for customers buying their subscriptions through the App Store as a result of Apple’s 30% fee.

As of early December 2022, Apple has adapted its plans for a fully autonomous self-driving vehicle. Originally slated to launch in 2025, the line of vehicles is now expected to be released in 2026. The vehicles are also now planned to have a steering wheel and pedals, making use of fully autonomous technology only in certain areas.

How Apple Reports Diversity and 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 its diversity by race, gender, ability, veteran status, and membership in the LGBTQ+ community.

Apple Diversity and Inclusiveness Reporting
  Race Gender Ability Veteran Status Sexual Orientation
Board of Directors          
C-Suite          
General Management ✔ (U.S. Only)      
Employees ✔ (U.S. Only)      

What are Apple’s biggest sources of revenue?

Apple’s iPhone sales account for the largest portion of its revenue. iPhone net sales were more than half of total revenue for fiscal year (FY) 2022. Next after iPhone sales is Apple’s Services business.

What is the fastest-growing part of Apple’s business?

Based on year-over-year (YOY) revenue growth for FY 2022, the fastest-growing parts of Apple’s business are its Services revenue category and its line of Mac laptop and desktop computers.

Which Apple product generates the least revenue?

For FY 2022, Apple’s iPad sales generated just 7% of total revenue, the smallest portion of any of the business’ products.

The Bottom Line

Apple is one of the largest and most ubiquitous companies in the world, and its massive annual revenue reflects that. The company’s iPhone sales dominate many of its other products, and its various services are growing revenue at a fast pace. But the company faces challenges to its continued revenue gains, including ongoing legal action regarding its App Store fees and mounting challenges from a variety of rivals.

Article Sources
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  1. Apple, via U.S. Securities and Exchange Commission. “Form 10-K for the Fiscal Year Ended September 24, 2022,” Pages 1–2 (Pages 4–5 of PDF).

  2. Apple, via U.S. Securities and Exchange Commission. “Form 10-K for the Fiscal Year Ended September 24, 2022,” Page 29 (Page 32 of PDF).

  3. Apple, via U.S. Securities and Exchange Commission. “Form 10-K for the Fiscal Year Ended September 24, 2022,” Page 37 (Page 40 of PDF).

  4. Apple. “Apple Rings in New Era of Services Following Landmark Year.”

  5. Apple. “Apple One Makes Enjoying Apple Subscription Services Easier Than Ever.”

  6. Apple, via U.S. Securities and Exchange Commission. “Form 10-K for the Fiscal Year Ended September 24, 2022,” Page 23 (Page 26 of PDF).

  7. Apple, via U.S. Securities and Exchange Commission. “Form 10-K for the Fiscal Year Ended September 24, 2022,” Page 21 (Page 24 of PDF).

  8. Apple, via U.S. Securities and Exchange Commission. “Form 10-K for the Fiscal Year Ended September 24, 2022,” Page 1 (Page 4 of PDF).

  9. Apple, via U.S. Securities and Exchange Commission. “Form 10-K for the Fiscal Year Ended September 24, 2022,” Page 2 (Page 5 of PDF).

  10. The New York Times. “How Apple’s 30% App Store Cut Became a Boon and a Headache.”

  11. The New York Times. “Judge Orders Apple to Ease Restrictions on App Developers.”

  12. TechCrunch. “The Epic Games-Apple Antitrust Battle Resumes Today in Appeals Court.”

  13. Bloomberg. “Apple to Allow Outside App Stores in Overhaul Spurred by EU Laws.”

  14. CNBC. “Elon Musk May Be Luring Apple into a Fight with Republicans.”

  15. CNBC. “Twitter Blue Relaunches, Now Costs $11 Per Month If You Subscribe from an iPhone.”

  16. Bloomberg. “Apple Scales Back Self-Driving Car and Delays Debut Until 2026.”

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