How Apple Makes Money

Apple's biggest revenue sources are the iPhone and its Americas segment

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, and the Americas is its largest revenue generator among its geographic regions.
  • Apple's services business generates the highest gross margins compared to its products business.
  • Apple is launching a new tap-to-pay feature that would allow payment platforms and apps to accept payment from customers using iPhones with no extra hardware.

Apple’s Financials

Apple posted a net income of $34.6 billion on revenue of $123.9 billion in Q1 of its 2022 fiscal year (FY), the three-month period that ended Dec. 25, 2021. Apple refers to revenue as net sales in its financial reports. Both net income and revenue rose compared to the year-ago quarter. Net income grew 20.4% as revenue climbed 11.2%.

Both Apple's Products and Services businesses grew during the quarter. Revenue for the Products business rose 9.1% compared to the year-ago quarter, comprising about 84% of Apple's total revenue. Among its products, iPhones comprised 58% of total revenue; Macs (9%); iPads (6%); and Wearables, Home, and Accessories (12%). Services revenue grew 23.8% compared to the same quarter a year ago, comprising about 16% 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 now 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 72.4% in Q1 FY 2022. Its annual gross margin in FY 2021 was 69.7% compared to 66.0% in FY 2020 and 63.7% in FY 2019. Gross margin as a percentage of sales for Products was 38.4% in Q1 FY 2022. It was 35.3% in FY 2021, up from 31.5% in FY 2020 and from 32.2% in FY 2019.

Apple’s Business Segments

Apple provides a breakdown of revenue and operating income for the following geographical segments: Americas; Europe; Greater China; Japan; and the rest of Asia Pacific.

Though the U.S. is still the dominant market, Asia is rapidly catching up. In Q1 FY 2022, markets in China, Japan, and Asia Pacific contributed more than 37% of operating income and more than 34% of revenue. That makes the Asia region dramatically more important than Europe to Apple for growth and profits.

Americas

The Americas segment includes both North and South America. Revenue grew 11.2% in Q1 FY 2022 to $51.5 billion, comprising about 42% of Apple's total revenue. Operating income grew 24.1% to $19.6 billion, comprising about 39% of the operating income for all segments.

Europe

The Europe segment includes European countries, as well as India, the Middle East, and Africa. Revenue grew 8.9% in Q1 FY 2022 to $29.7 billion, comprising about 24% of Apple's total revenue. Operating income grew 20.4% to $11.5 billion, comprising about 23% of combined operating income for all segments.

Greater China

The Greater China segment includes mainland China, Hong Kong, and Taiwan. Revenue rose 21.0% in Q1 FY 2022 to $25.8 billion, comprising about 21% of Apple's total revenue. Operating income rose 31.1% to $11.2 billion, comprising about 23% of the combined operating income for all segments.

Japan

Revenue for the segment fell 14.2% in Q1 FY 2022 to $7.1 billion, comprising about 6% of Apple's total revenue. Operating income fell 4.4% to $3.3 billion, comprising about 7% of the combined operating income for all segments.

Rest of Asia Pacific

The rest of the Asia Pacific segment includes Australia and those Asian countries not included in the company's other reportable geographic segments. Revenue for the segment grew 19.3% in Q1 FY 2022 to $9.8 billion, comprising about 8% of Apple's total revenue. Operating income grew 35.3% to $4.0 billion, comprising about 8% 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 $49.7 billion in Q1 FY 2022. To arrive at Apple's lower, reported consolidated operating income of $41.5 billion for the quarter, Apple makes deductions for research and development expenses and other corporate expenses.

Apple's Recent Developments

On Feb. 8, 2022, Apple said that it would be launching a tap-to-pay feature for the iPhone that would act as another payment option for customers of payment platforms and app developers. The new feature would allow merchants to accept payments from their customers using just iPhones without any extra hardware. Stripe Inc., a payment processor, will become the first platform to offer the new feature to customers this spring.

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)      
Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Apple Inc. "Form 10-K for the fiscal year ended September 25, 2021," Pages 1 & 2.

  2. Apple Inc. "Form 10-Q for the quarterly period ended December 25, 2021," Page 1.

  3. Apple Inc. "Form 10-Q for the quarterly period ended December 25, 2021," Page 7.

  4. Apple Inc. "Apple rings in new era of Services following landmark year,"

  5. Apple Inc. "Apple One makes enjoying Apple subscription services easier than ever."

  6. Apple Inc. "Form 10-Q for the quarterly period ended December 25, 2021," Page 17.

  7. Apple Inc. "Form 10-K for the fiscal year ended September 25, 2021," Page 23.

  8. Apple Inc. "Form 10-Q for the quarterly period ended December 25, 2021," Page 13.

  9. Apple Inc. "Form 10-K for the fiscal year ended September 25, 2021," Page 22.

  10. The Wall Street Journal. "Apple Will Let Businesses Use iPhones to Take Customer Payments."

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