Apple Inc. Q2 2022 10-Q Summary
Business Context and Reporting Period
This filing is a Quarterly Report on Form 10-Q for Apple Inc. for the fiscal quarter ended March 26, 2022. The company operates as a large accelerated filer, reporting on a 52-week fiscal year ending in September. The period covers the second quarter of fiscal year 2022.
Key Financial Metrics
| Metric | Q2 2022 (3 Months) | Q2 2021 (3 Months) | YTD 2022 (6 Months) | YTD 2021 (6 Months) |
|---|---|---|---|---|
| Total Net Sales | $97,278 million | $89,584 million | $221,223 million | $201,023 million |
| Net Income | $25,010 million | $23,630 million | $59,640 million | $52,385 million |
| Diluted EPS | $1.52 | $1.40 | $3.62 | $3.08 |
| Gross Margin % | 43.7% | 42.5% | 43.8% | 41.0% |
| Operating Cash Flow (YTD) | $75,132 million | |||
| Total Debt (Term + CP) | $120.0 billion (as of March 26, 2022) | |||
| Cash & Equivalents | $28,098 million (as of March 26, 2022) |
Material Changes vs. Prior Period
- Revenue Growth: Total net sales increased 9% year-over-year in Q2 2022, driven by growth in Services (+17%), iPhone (+5%), and Mac (+15%).
- Product Performance: iPad sales declined 2% year-over-year due to lower sales of the 10-inch model. Wearables, Home, and Accessories grew 12%.
- Geographic Trends: Americas sales rose 19%, while Japan sales were flat and Rest of Asia Pacific declined 7%, largely due to foreign currency fluctuations.
- Expenses: Operating expenses increased to $12.58 billion (up from $10.58 billion), with R&D rising to $6.39 billion due to headcount and engineering costs.
- Shareholder Returns: The company repurchased $22.9 billion of common stock in Q2 and paid $3.6 billion in dividends.
Guidance, Outlook, and Risks
- Capital Allocation: On April 28, 2022, the Board increased the share repurchase authorization by $90 billion and raised the quarterly dividend to $0.23 per share.
- Liquidity: Management expects cash, cash equivalents, and marketable securities to be sufficient for operations and capital return programs for the next 12 months.
- Risks: The filing highlights ongoing impacts from the COVID-19 pandemic, including supply chain disruptions and store closures. Foreign currency weakness relative to the U.S. dollar negatively impacted sales in Europe, Japan, and Rest of Asia Pacific.
- Legal: The company is involved in ongoing litigation with Epic Games regarding App Store practices; a district court ruled largely in Apple's favor, but the case is on appeal.
Investor Verification Checklist
- Verify the impact of foreign exchange rates on reported revenue growth in international segments.
- Monitor supply chain constraints and their effect on inventory levels and future product launches.
- Review the status of the Epic Games litigation and potential regulatory implications for the App Store.
- Assess the sustainability of gross margin expansion given global inflationary pressures on component costs.
- Confirm the execution of the new $90 billion share repurchase authorization and dividend increase.