Apple Inc. Form 10-Q Summary: Quarter Ended June 27, 2026
Business Context and Reporting Period
This filing is a Quarterly Report (Form 10-Q) for Apple Inc. covering the fiscal quarter ended June 27, 2026, and the nine-month period ended on the same date. Apple is a large accelerated filer incorporated in California. As of July 17, 2026, there were approximately 14.59 billion shares of common stock issued and outstanding.
Key Financial Metrics
| Metric | Q3 2026 (3 Months) | Q3 2025 (3 Months) | YTD 2026 (9 Months) | YTD 2025 (9 Months) |
|---|---|---|---|---|
| Total Net Sales | $109.42 billion | $94.04 billion | $364.36 billion | $313.70 billion |
| Gross Margin | $54.77 billion (50.1%) | $43.72 billion (46.5%) | $178.78 billion (49.1%) | $146.86 billion (46.8%) |
| Operating Income | $35.70 billion | $28.20 billion | $122.43 billion | $100.62 billion |
| Net Income | $29.79 billion | $23.43 billion | $101.46 billion | $84.54 billion |
| Diluted EPS | $2.02 | $1.57 | $6.88 | $5.62 |
| Operating Cash Flow (YTD) | $117.00 billion | |||
| Cash & Equivalents (End of Period) | $39.54 billion | |||
| Total Debt (Current + Non-Current) | $84.34 billion |
Material Changes vs. Prior Period
- Revenue Growth: Total net sales increased 16% year-over-year for both the quarter and the nine-month period. iPhone sales drove significant growth, rising 22% in the quarter and 22% YTD. Services revenue grew 12% in the quarter and 14% YTD.
- Margin Expansion: Gross margin percentage improved to 50.1% in Q3 2026 from 46.5% in Q3 2025. This was driven by a favorable product mix and tariff refunds, partially offset by higher component costs (specifically memory).
- Expense Increases: Research and Development (R&D) expenses surged 32% in the quarter and 33% YTD, primarily due to infrastructure costs for artificial intelligence and increased headcount. SG&A expenses rose 10% in the quarter.
- Shareholder Returns: The company repurchased $25.8 billion of common stock in Q3 2026 and $62.1 billion YTD. Dividends declared were $0.27 per share for the quarter.
- Balance Sheet: Inventories increased significantly to $11.09 billion from $5.72 billion at the prior year-end, reflecting build-up for new product cycles. Intangible assets nearly doubled to $20.34 billion.
Outlook, Risks, and Management Commentary
- Product & AI Strategy: Apple announced iOS 27, macOS 27, and the introduction of "Siri AI" during the quarter. Management highlighted heavy investment in AI infrastructure.
- Supply Chain Constraints: The company faces supply constraints and rising costs for advanced semiconductors, NAND storage, and DRAM. Management expects these trends to intensify, potentially impacting margins and revenue.
- Tariffs and Trade: New tariffs on imports from China, India, Japan, and others announced in 2025 continue to create uncertainty. While Apple received some tariff refunds recognized as cost reductions, future measures under Section 232 and Section 301 remain a risk.
- Legal and Regulatory:
- EU Digital Markets Act (DMA): Apple was fined €500 million in April 2025 for noncompliance regarding App Store steering. The company is appealing and implementing changes to comply with interoperability obligations.
- U.S. Antitrust: The DOJ and state attorneys general filed a civil antitrust lawsuit alleging monopolization in the smartphone market. Additionally, the Supreme Court granted review of the Epic Games case regarding App Store commissions and link-out restrictions.
- Capital Allocation: Apple maintains a robust capital return program with $38.0 billion remaining under the May 2025 repurchase authorization and a new $100 billion authorization announced in April 2026.
Investor Verification Checklist
- Inventory Build: Verify the rationale behind the $5.4 billion increase in inventory YTD and assess potential obsolescence risks given supply chain constraints.
- AI Infrastructure Spend: Scrutinize the 32% increase in R&D expenses to understand the capital intensity of the new "Siri AI" and cloud computing investments.
- Tariff Exposure: Monitor the status of the Section 232 semiconductor investigation and potential new tariffs that could reverse recent margin improvements.
- Legal Contingencies: Track the outcome of the Supreme Court review in the Epic Games case and the EU DMA investigations, as these could materially impact Services revenue and commission structures.
- Component Costs: Assess the sustainability of the 50.1% gross margin given the stated industry-wide shortages and price increases for memory and semiconductors.