Apple Inc.: what changed in the 10-K

The Company is focused on expanding its market opportunities related to smartphones, personal computers, tablets, wearables and accessories, and services. The Company faces Company's products and services face substantial competition in these markets from companies that have significant technical, marketing, distribution and other resources, as well as established hardware, software, and service offerings with large customer bases. In addition, some the Company faces significant competition as competitors imitate the Company's product features and applications within their products to offer more competitive solutions. The Company also expects competition to intensify as competitors imitate the Company's approach to providing components seamlessly within their offerings or work collaboratively to offer integrated solutions. Some of the Company's competitors have broader broad product lines, lower-priced low-priced products and a larger , large installed base bases of active devices , and large customer bases . Competition has been particularly intense as competitors have aggressively cut prices and lowered product margins. Certain competitors have the resources, experience or cost structures to provide products and services at little or no profit or even at a loss. The Company's services compete with business models that provide content Company has a minority market share in the global smartphone, personal computer, tablet and wearables markets, and some of the markets in which the Company competes have from time to users for free and use illegitimate means time experienced little to obtain third-party digital content and applications no growth or contracted overall . The Company faces significant competition as competitors imitate the Company's product features and applications within their products, or collaborate to offer integrated solutions that are more competitive than those they currently offer.

The Company uses some custom components that are not commonly used by its competitors, and new products introduced by the Company often utilize custom components available from only one source. When a component or product uses new technologies, initial capacity constraints may exist until the suppliers' yields have matured or their manufacturing capacities have increased. The continued availability Company has entered into agreements for the supply of these many components at acceptable prices ; however, the Company may not be able to extend or renew agreements for the supply of components on similar terms , or at all, and may not be affected if successful in obtaining sufficient quantities from its suppliers or in a timely manner, or in identifying and obtaining sufficient quantities from an alternative source. In addition, component suppliers may fail, be subject to consolidation within a particular industry, or decide to concentrate on the production of common components instead of components customized to meet the Company's requirements , further limiting the Company's ability to obtain sufficient quantities of components on commercially reasonable terms, or at all .

The Company is committed to protecting the safety and security of its team members everywhere it operates . The Company identifies potential workplace risks in order to develop measures to mitigate possible hazards . The Company supports employees with general safety, security and crisis management training, and by putting specific programs in place for those working in potentially high-hazard environments. Additionally, the Company works to protect the safety and security of its team members, visitors and customers through its global security team.

The Company believes that its people play an important role in its success, and strives to attract, develop and retain the best talent. The Company works to create an inclusive a culture of collaboration , safe one where people with a broad range of backgrounds and supportive environment for all of its team members, so that its people perspectives can come together to innovate and do the best work of their lives. The Company is an equal opportunity employer committed to inclusion and to providing a workplace free of harassment or discrimination. As of September 28 27 , 2024 2025 , the Company had approximately 164,000 166,000 full-time equivalent employees.

The markets for the Company's products and services are highly competitive , and are characterized by aggressive price competition and resulting , downward pressure on gross margins, continual improvement in product performance, and price sensitivity on the part of consumers and businesses. The markets in which the Company competes are further defined by frequent introduction of new products and services, short product life cycles, evolving industry standards, continual improvement in product price and performance characteristics, rapid adoption of technological advancements by competitors , and price sensitivity on the part of consumers and businesses . Many of the Company's competitors seek to compete primarily through aggressive pricing and very low cost structures, and by imitating the Company's products and infringing on its intellectual property.

iPhone ® is the Company's line of smartphones based on its iOS operating system. The iPhone line includes iPhone 16 17 Pro, iPhone 16 Air ™ , iPhone 15 17 , iPhone 14 16 and iPhone SE ® 16e .

The Company's customers are primarily in the consumer, small and mid-sized business, education, enterprise and government markets. The Company sells its products and resells third-party products in most of its major markets directly to customers through its retail and online stores and its direct sales force. The Company sells its services in the same markets through its various service platforms. The Company also employs a variety of indirect distribution channels, such as third-party cellular network carriers and other resellers , wholesalers, retailers for the sale of its products and resellers certain of its services . During 2024 2025 , the Company's net sales through its direct and indirect distribution channels accounted for 38 40 % and 62 60 %, respectively, of total net sales.

Although most components essential to the Company's business are generally available from multiple sources, certain components are currently obtained from single or limited sources. The Company also competes for various components with other participants in the markets for smartphones, personal computers, tablets, wearables and accessories. Therefore, many components used by the Company, including those that are available from multiple sources, are at times subject to industry-wide shortage and significant commodity pricing fluctuations. Restrictions on international trade can increase the cost or limit the availability of the Company's products and the components and rare earths and other raw materials that go into them.

Wearables includes smartwatches, wireless headphones and spatial computers. The Company's line of smartwatches, based on its watchOS ® operating system, includes Apple Watch Ultra ® 2, Apple Watch ® Series 10 and 11, Apple Watch SE ® 3 and Apple Watch Ultra ® 3 . The Company's line of wireless headphones includes AirPods ®, AirPods Pro ®, AirPods Max ® and Beats ® products. Apple Vision Pro ™ is the Company's first spatial computer based on its visionOS ™ ® operating system.

The Company invests in resources to help its people develop and achieve their career goals. The Company offers programs through Apple University on leadership, management and influence, as well as Apple culture and values. Team members can also take advantage of online classes for business, technical and personal development , as well as learning opportunities to support their well-being .

The Company's ability to compete successfully depends heavily on ensuring the continuing and timely introduction of innovative new products, services and technologies to the marketplace. The Company designs and develops nearly the entire solution for its products, including the hardware, operating system, numerous software applications and related services. Principal competitive factors important to the Company include price, product and service features (including security features), relative price and performance, product and service quality and reliability, design and technology innovation, a strong third-party software and accessories ecosystem, marketing and distribution capability, service and support, and corporate reputation , and the ability to effectively protect and enforce the Company's intellectual property rights .

In addition to Company-owned intellectual property, many of the Company's products and services are designed to include technology or intellectual property owned by that must be licensed from third parties. It may be necessary in the future to seek or renew licenses relating to various aspects of the Company's products, processes and services. While the Company has generally been able to obtain such licenses on commercially reasonable terms in the past, there is no guarantee that such licenses could be obtained in the future on reasonable terms or at all.

The Company believes that compensation should be competitive and equitable, and should offers discretionary cash and equity awards to enable employees to share in the Company's success. The Company recognizes its people are most likely to thrive when they have the resources to meet their needs and the time and support to succeed in their professional and personal lives. In support of this, the Company offers a wide variety of benefits for employees around the world, including health, wellness and time away.

The Company also offers digital content through subscription-based services, including Apple Arcade ®, a game subscription service; Apple Fitness + SM ® , a personalized fitness service; Apple Music ®, which offers users a curated listening experience with on-demand radio stations; Apple News + ®, a subscription news and magazine service; and Apple TV + ®, which offers exclusive original content and live sports.

The Company regularly files patent, design, copyright and trademark applications to protect innovations arising from its hardware, software and service research, development, design and marketing, and is currently pursuing thousands of applications around the world. Over time, the Company has accumulated a large portfolio of issued and registered intellectual property rights around the world. No single intellectual property right is solely responsible for protecting the Company's products and services. The Company believes the duration of its intellectual property rights is adequate relative to the expected lives of its products and services.

The Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13 (a) and 15 (d) of the Securities Exchange Act of 1934, as amended ( the " Exchange Act "), are filed with the U.S. Securities and Exchange Commission ( the " SEC "). Such reports and other information filed by the Company with the SEC are available free of charge at investor.apple.com / investor-relations / sec-filings / default.aspx when such reports are available on the SEC's website. The Company periodically provides certain information for investors on its corporate website, www.apple.com, and its investor relations website, investor.apple.com. This includes press releases and other information about financial performance, information on environmental, social and corporate governance matters , and details related to the Company's annual meeting of shareholders. The information contained on the websites referenced in this Form 10-K is not incorporated by reference into this filing. Further, the Company's references to website URLs are intended to be inactive textual references only.

The Company believes that open and honest communication among team members, managers and leaders helps create an open, collaborative work environment where everyone can contribute, grow and succeed. Team members are encouraged to come to their managers with questions, feedback or concerns, and the Company conducts surveys that gauge employee sentiment in areas like career development, manager performance and inclusivity inclusion .

Home includes Apple TV 4K ®, the Company's media streaming and gaming device based on its tvOS ® operating system, and HomePod ® and HomePod mini ®, high-fidelity wireless smart speakers.

The Company manages its business primarily on a geographic basis. The Company's reportable segments consist of the Americas, Europe, Greater China, Japan and Rest of Asia Pacific. Americas includes both North and South America. Europe includes European countries, as well as India, the Middle East and Africa. Greater China includes China mainland, Hong Kong and Taiwan. Rest of Asia Pacific includes Australia , New Zealand and those Asian countries not included in the Company's other reportable segments. Although the reportable segments provide similar hardware and software products and similar services, each one is managed separately to better align with the location of the Company's customers and distribution partners and the unique market dynamics of each geographic region.

The Company currently holds a broad collection of intellectual property rights relating to certain aspects of its hardware , accessories , software and services. This includes patents, designs, copyrights, trademarks, trade secrets and other forms of intellectual property rights in the U.S. and various foreign countries. Although the Company believes the ownership of such intellectual property rights is an important factor in differentiating its business and that its success does depend in part on such ownership, the Company relies primarily on the innovative skills, technical competence and marketing abilities of its personnel.

The Additionally, the Company's new products often utilize custom components available from only one source. When a component or product uses new technologies, initial capacity constraints may exist until the suppliers' yields have matured or their manufacturing capacities have increased. The continued availability Company may not be able to extend or renew agreements for the supply of these components at acceptable prices on similar terms , or at all, can and may not be affected for any number of reasons successful in obtaining sufficient quantities from its suppliers in a timely manner , including if or in identifying and obtaining sufficient quantities from an alternative source. In addition, component suppliers may fail, be subject to consolidation within a particular industry, or decide to concentrate on the production of common components instead of components customized to meet the Company's requirements . When , further limiting the Company's supply ability to obtain sufficient quantities of components for a new or existing product has been delayed or constrained on commercially reasonable terms , or when an outsourcing partner has delayed shipments of completed products to at all. Therefore, the Company , the Company's remains subject to significant risks of supply shortages and price increases that can materially adversely affect its business, results of operations and , financial condition have been adversely affected and future delays or constraints could materially adversely affect the Company's business, results of operations and financial condition stock price . The Company's business and financial performance could also be materially adversely affected depending on the time required to obtain sufficient quantities from the source, or to identify and obtain sufficient quantities from an alternative source.

The Company distributes its products and certain of its services through cellular network carriers , wholesalers, retailers and other resellers, many of which distribute products and services from competitors. The Company also sells its products and services and resells third-party products in most Resellers offer financing, installment payment plans or subsidies for users' purchases of its major markets directly to consumers, small and mid-sized businesses devices , and education, enterprise and government customers through its retail and online stores and its direct sales force such plans may be discontinued or modified any time .

Many Various stakeholders, including governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on environmental others , have differing expectations about a wide range of social and governance considerations relating other issues related to businesses, including climate change and greenhouse gas emissions, human and civil rights, and diversity, equity and inclusion the Company's business . In addition, the The Company makes statements about its goals values, including the environmental and initiatives societal impact of its business, through its various non-financial reports, information provided on its the Company's website, and in press statements and other communications. Responding to these The Company also pursues environmental , social and governance considerations and implementation of the Company's announced other goals and initiatives involves that involve risks and uncertainties, requires require investments, and depends depend in part on third-party performance or data that is outside the Company's control . The , and the Company cannot guarantee that it will may not be able to fully achieve all of its announced environmental, social and governance goals and initiatives. In addition, some stakeholders may disagree with the Company's goals and initiatives. Any failure, or perceived failure, Efforts by the Company to advance its business and values, or achieve its goals , and further its initiatives, adhere or to its public statements align with stakeholders' expectations , or comply with evolving, varied and at times conflicting federal, state and international environmental laws , social executive orders, regulations and governance laws and regulations standards , or meet evolving and varied stakeholder expectations and standards could any failure or perceived failure to do so, can result in adverse reactions by consumers and other stakeholders, including the commencement of legal and regulatory proceedings against the Company , and can materially adversely affect the Company's business, reputation, results of operations, financial condition and stock price.

Further, the Company has commercial relationships with other companies in the technology industry that are or may become subject to investigations and litigation that, if resolved against those other companies, could materially adversely affect the Company's commercial relationships with those business partners and materially adversely affect the Company's business, results of operations and , financial condition and stock price . For example, the Company earns revenue from licensing arrangements with Google LLC (" Google ") and other companies to offer their search services on the Company's platforms and applications, and certain of these arrangements are currently subject to government investigations and legal proceedings. On August 5, 2024, Google was found to have violated U.S. antitrust laws. In connection with this finding, on September 2, 2025, the U.S. District Court for the District of Columbia (" D.C. District Court ") ordered certain remedies. The court's order is subject to further proceedings before the D.C. District Court, which may result in changes to the interpretation or application of the remedies ordered by the court, as well as new or changed remedies being ordered. The court's order is also subject to appeal by both the U.S. Department of Justice (" DOJ ") and Google. A reversal of the order on appeal could result in imposition of certain remedies initially proposed by the DOJ, such as those prohibiting Google from offering the Company commercial terms for search distribution. If implemented, these remedies could materially adversely affect the Company's ability to earn revenue from such licensing arrangements.

The Company has a large, global business with sales outside the U.S. representing a majority of the Company's total net sales, and the Company believes that it generally benefits from growth in international trade. Substantially all A significant majority of the Company's manufacturing is performed in whole or in part by outsourcing partners located primarily in China mainland, India, Japan, South Korea, Taiwan and Vietnam , in addition to sourcing from partners and facilities located in the U.S . Restrictions on international trade, such as tariffs and other controls on imports or exports of goods, technology or data, can materially adversely affect the Company's business and supply chain. The impact can be particularly significant if these restrictive measures apply to countries and regions where the Company derives a significant portion of its revenues and / or has significant supply chain operations. Restrictive measures can increase the cost or limit the availability of the Company's products and the components and rare earths and other raw materials that go into them , and . Restrictive measures can also require the Company to take various actions, including changing change suppliers, restructuring restructure business relationships and operations, refrain from offering and ceasing distributing or cease to offer and distribute affected products, services and third-party applications to its customers , and increase the prices of its products and services . Changing the Company's business and supply chain in accordance with new or changed restrictions on international trade can be expensive, time-consuming and disruptive to the Company's business and results of operations. Trade and other international disputes can also have an adverse impact on the overall macroeconomic environment and result in shifts and reductions in consumer spending and negative consumer sentiment for the Company's products and services, all of which can further adversely affect the Company's business and results of operations. Such restrictions can be announced with little or no advance notice, which can create uncertainty, and the Company may not be able to effectively mitigate any or all adverse impacts from such measures. For example Global supply chains can be highly concentrated , and an escalation of geopolitical tensions between governments or conflict could result in significant disruptions. Beginning in the second quarter of 2025, new tariffs were announced on imports to the U.S. (" U.S. Tariffs ") , including additional tariffs on imports from China, India, Japan, South Korea, Taiwan, Vietnam and the European Union (" EU "), among others. In response, several countries have imposed, or threatened to impose, reciprocal tariffs on imports from the U.S. and China, other retaliatory measures. Various modifications to the U.S. Tariffs have been announced and further changes could be made in the past led future, which may include additional sector-based tariffs or other measures. For example, the U.S. Department of Commerce has initiated an investigation under Section 232 of the Trade Expansion Act of 1962, as amended, into, among other things, imports of semiconductors, semiconductor manufacturing equipment, and their derivative products, including downstream products that contain semiconductors. The ultimate impact remains uncertain and will depend on several factors, including whether additional or incremental U.S. Tariffs or other measures are announced or imposed, to what extent other countries implement tariffs or other retaliatory measures in response, and other restrictions affecting the Company's business overall magnitude and duration of these measures . If disputes and conflicts further escalate in the future , actions by governments in response could be significantly more severe and restrictive and could materially adversely affect the Company's business .

The Company has a minority market share in the global smartphone, personal computer Company's products and tablet markets. The Company faces services face substantial competition in these markets from companies that have significant technical, marketing, distribution and other resources, as well as established hardware, software and digital content supplier relationships service offerings . In addition, some the Company faces significant competition as competitors imitate the Company's product features and applications within their products to offer more competitive solutions. The Company also expects competition to intensify as competitors imitate the Company's approach to providing components seamlessly within their offerings or work collaboratively to offer integrated solutions. Some of the Company's competitors have broader broad product lines, lower-priced low-priced products and a larger , large installed base bases of active devices , and large customer bases . Competition has been particularly intense as competitors have aggressively cut prices and lowered product margins. Certain competitors have the resources, experience or cost structures to provide products and services at little or no profit or even at a loss. Some The Company has a minority market share in the global smartphone, personal computer, tablet and wearables markets, and some of the markets in which the Company competes have from time to time experienced little to no growth or contracted overall.

The Company's products and services are offered in highly competitive global markets . These markets are characterized by aggressive price competition and resulting , downward pressure on gross margins, continual improvement in product performance, and price sensitivity on the part of consumers and businesses. These markets are further defined by frequent introduction of new products and services, short product life cycles, evolving industry standards, continual improvement in product price and performance characteristics, rapid adoption of technological advancements by competitors, and price sensitivity on the part of consumers and businesses .

The Company's products and services are designed to include technology or intellectual property owned by third parties, which requires licenses that must be licensed from those third parties. In addition, because of technological changes in the industries in which the Company currently competes or in the future may compete, current extensive patent intellectual property coverage and the rapid rate of issuance of new patents intellectual property rights generation , the Company's products and services can unknowingly may be alleged to infringe existing patents or intellectual property rights of others . This risk may be exacerbated by the use of new and emerging technologies, including machine learning and artificial intelligence, which can involve, among other things, the acquisition and use of copyrighted materials for training as well as the potential reproduction of copyrighted materials in their outputs . From time to time, the Company has been notified that it may be infringing certain patents or other intellectual property rights of third parties. Based on experience and industry practice, the The Company believes is not always able to obtain all necessary licenses to such third-party intellectual property can generally be obtained on commercially reasonable terms. However, there can be no assurance the necessary licenses can be obtained rights on commercially reasonable terms or at all. Failure to obtain the right to use third-party intellectual property, or to use such intellectual property on commercially reasonable terms, can require the Company to modify certain products, services or features or preclude the Company from selling certain products or services and expose the Company to significant licensing costs , or otherwise have a material adverse impact on all of which can materially adversely affect the Company's business, reputation, results of operations and , financial condition and stock price .

Because the Company currently obtains certain components from single or limited sources, the Company is subject to significant supply and pricing risks. Many components, including those that are available from multiple sources, are at times subject to industry-wide shortages and significant commodity pricing fluctuations that can materially adversely affect the Company's business, results of operations and , financial condition and stock price . For example, the global semiconductor industry has in the past experienced high demand and shortages of supply, which adversely affected the Company's ability to obtain sufficient quantities of components and products on commercially reasonable terms, or at all. Such disruptions could occur in the future. While the Company has entered into agreements for the supply of many components, there can be no assurance the Company will be able to extend or renew these agreements on similar terms, or at all. In addition, component suppliers may suffer from poor financial conditions, which can lead to business failure for the supplier or consolidation within a particular industry, further limiting the Company's ability to obtain sufficient quantities of components on commercially reasonable terms, or at all. Therefore, the Company remains subject to significant risks of supply shortages and price increases that can materially adversely affect its business, results of operations and financial condition.

Much of the Company's future success depends on the talents and efforts of its team members and the continued availability and service of key personnel, including its Chief Executive Officer, executive team and other highly skilled employees. Experienced personnel in the technology industry are in high demand and competition for their talents is intense, especially in Silicon Valley, where most of the Company's key personnel are located. Periods of intense competition for talent in particular fields can lead to increased costs as the Company seeks to offer competitive compensation to recruit and retain highly skilled employees. In addition to intense competition for talent, workforce dynamics are constantly evolving and the Company must navigate changes effectively in order to achieve its strategic initiatives. Laws and regulations, including immigration, labor and employment laws and export controls, among others, can materially adversely affect the Company's ability to recruit and retain a highly skilled, global workforce . If the Company does not effectively manage changing workforce dynamics effectively and regulatory requirements , it could materially adversely affect the Company's culture, reputation and operational flexibility , strategy and costs, all of which can materially adversely affect the Company's business, reputation, results of operations, financial condition and stock price .

Compliance with these laws and regulations is onerous and expensive. New and changing laws , regulations, executive orders, directives, and regulations enforcement priorities can adversely affect the Company's business by increasing the Company's costs, limiting the Company's ability to offer a product, service or feature to customers, imposing changes to the design of the Company's products and services, impacting customer demand for the Company's products and services, and requiring changes to the Company's business or supply chain. New and changing laws , regulations, executive orders, directives, and regulations enforcement priorities can also create uncertainty about how such laws and regulations will be interpreted and applied. These risks and costs may increase as the Company's products and services are introduced into specialized applications, including health and financial services, or as the Company expands the use of technologies, such as machine learning and artificial intelligence features, and must navigate new legal, regulatory and ethical considerations relating to such technologies. The Company has implemented policies and procedures designed to ensure compliance with applicable laws and regulations, but there can be no assurance the Company's employees, contractors or agents will not violate such laws and regulations or the Company's policies and procedures. If the Company is found to have violated such laws and regulations, it could materially adversely affect the Company's business, reputation, results of operations and , financial condition and stock price .

The Company records a write-down for product and component inventories that have become obsolete or exceed anticipated demand, or for which if cost exceeds net realizable value. The Company also accrues necessary cancellation fee reserves for orders of excess products and components. The Company reviews long-lived other assets, including capital assets held at its suppliers' facilities and , inventory prepayments and other long-lived assets , for impairment whenever events or circumstances indicate the assets may not be recoverable . If the Company determines that an impairment has occurred, it records a write-down equal to the amount by which the carrying value of the asset exceeds its fair value . Although the Company believes its inventory, capital assets, inventory prepayments and other assets and purchase commitments are currently recoverable, there can be no assurance the Company will not may incur write-downs , fees , impairments and other charges given the rapid and unpredictable pace of product obsolescence in the industries in which the Company competes.

The Company makes statements about its use and disclosure of personal information data through its privacy policy, information provided on its website, press statements and other privacy notices provided to customers. Any failure or perceived failure by the Company to comply with these public statements or with federal, state or international privacy or data protection laws and regulations could result in inquiries or , proceedings against the Company by and penalties from governmental entities or others. In addition to Such a failure or perceived failure could also result in reputational impacts, penalties could include ongoing audit requirements and significant legal liability. The risks of inadvertent disclosure of personal data can increase with the introduction of new and complex technologies, such as artificial intelligence features, further exacerbating such risks.

Due to the highly volatile and competitive nature of the markets and industries in which the Company competes, the Company must continually introduce new products, services and technologies, enhance existing products and services, effectively stimulate customer demand for new and upgraded products and services, navigate global regulatory requirements and barriers to market access, and successfully manage the transition to these new and upgraded products and services. The success of new product and service introductions depends on a number of factors, including the Company's ability to recruit and retain highly skilled personnel to execute on its strategic initiatives, and the timely and successful development , and market acceptance of new products , services and technologies. Success also relies on the Company's ability to manage the risks associated with new technologies and production ramp-up issues, the effective integration of third-party services and technologies into the Company's products and services, the availability , delivery and performance of application software or other third-party support for the Company's products and services, the effective management of manufacturing and other purchase commitments and the management of inventory levels in line with anticipated product demand, and the availability of products in appropriate quantities and at expected costs to meet anticipated demand . Additionally , and the risk that new products and services may have quality issues or other defects or deficiencies can adversely affect the success of new product and service introductions and market acceptance . New products, services and technologies may replace or supersede existing offerings and may produce lower revenues and lower profit margins , which can materially adversely impact the Company's business, results of operations and financial condition . There can The Company may not be no assurance the Company will able to successfully manage future introductions and transitions of products and services , which can materially adversely affect the Company's business, reputation, results of operations, financial condition and stock price .

Expectations relating to environmental, Varied stakeholder expectations about social and governance considerations and related reporting obligations other issues expose the Company to potential liabilities, increased costs, reputational harm, and other adverse effects on the Company's business.

The Globally, several jurisdictions have adopted, or may in the future adopt, competition-related laws and regulations imposing wide-ranging obligations on technology companies and significant limitations on businesses, including the Company. For example, the Company has also implemented changes to iOS, iPadOS, the App Store and Safari ® in the EU as it seeks to comply with the Digital Markets Act (" DMA ") , including new business terms and alternative fee structures for iOS and iPadOS apps, alternative methods of distribution for iOS and iPadOS apps, alternative payment processing for apps across the Company's operating systems, and additional tools and APIs application programming interfaces for developers. The Company has also continued to make changes to its compliance plan in response to feedback and engagement with the European Commission (the " Commission ") . Although the Company's compliance plan is intended to address the DMA's obligations, it has been challenged by the Commission and may be challenged further by private litigants. The DMA provides for significant fines and penalties for noncompliance , and other jurisdictions may seek to require the Company to make changes to its business . While the changes introduced by the Company in the EU are intended to reduce new privacy and security risks that the DMA poses to EU users, many risks will remain. Changes to the Company's business in response to the DMA or other laws and regulations could materially adversely affect the Company's business, reputation, results of operations, financial condition and stock price.

The Company has invested and will continue to invest in programs to enhance reseller sales, including staffing selected resellers' stores with Company employees and contractors, and improving product placement displays , and developing and making digital marketing assets available to resellers . These programs can require a substantial investment while not assuring return or incremental sales. The For example, the purchasing preferences and behaviors of consumers may change, the financial condition of these resellers could weaken, these resellers could stop distributing the Company's products, or uncertainty regarding demand for some or all of the Company's products could cause resellers to reduce their ordering and marketing of the Company's products , all of which could materially adversely impact the Company's business, results of operations, financial condition and stock price .

Regardless of the merit of particular claims, defending against litigation or responding to government investigations can be expensive, time-consuming and disruptive to the Company's operations. In recognition of these considerations, the Company may enter into agreements or other arrangements to settle litigation and resolve such challenges. There can be no assurance However, such agreements can may not always be obtained available on acceptable terms or that , and litigation will not occur may still arise . These Such agreements can also significantly reduce the Company's revenue and increase the Company's cost of sales and operating expenses , materially adversely affecting the Company's business, results of operations, financial condition and stock price. Additionally, such agreements may require the Company to change its business practices and limit the Company's ability to offer certain products and services.

The Company believes decisions by customers to purchase its hardware products depend in part on the availability of third-party software applications and services. There can be no assurance third-party Third-party developers will continue to develop may discontinue the development and maintain maintenance of software applications and services for the Company's products. If third-party software applications and services cease to be developed and maintained for the Company's products, customers may choose not to buy the Company's products , adversely impacting the Company's business, results of operations, financial condition and stock price .

In addition to the risks generally relating to the collection, use, retention, security protection and transfer of personal information data , the Company is also subject to specific obligations relating to the collection and processing of data associated with minors, as well as information considered sensitive under applicable laws, such as health data , biometric , financial data and biometric payment card data. Health data , biometric, financial and financial payment card data are subject to additional privacy, security and breach notification requirements, and the Company is subject to audit by governmental authorities regarding the Company's compliance with these obligations. If the Company fails to adequately comply with these rules and requirements, or if health data or financial data is handled in a manner not permitted by law or under the Company's agreements with healthcare or financial institutions, the Company can be subject to litigation or government investigations, and can be liable for associated investigatory expenses, and can also incur significant fees or fines.

The Company has faced and continues to face a significant number of patent claims relating to its cellular-enabled standards-enabled products, and new claims may arise in the future, including as a result of new legal or regulatory frameworks. For example, technology , data and other patent-holding intellectual property asset-holding companies frequently assert their patents intellectual property rights and seek royalties and often enter into litigation based on allegations of patent infringement or other violations of intellectual property rights . These risks, and the risks of novel claims being attempted, may be exacerbated as new and emerging technologies, including machine learning and artificial intelligence, are further integrated into the Company's products and services . The Company is vigorously defending infringement actions in courts in several U.S. jurisdictions, as well as internationally in various countries. The plaintiffs in these actions frequently seek broad injunctive relief and substantial damages.

The Company's business is subject to a variety of U.S. and international laws, rules, policies and other obligations regarding the collection, use, protection and transfer of personal data protection .

Substantially all A significant majority of the Company's manufacturing is performed in whole or in part by outsourcing partners located primarily in China mainland, India, Japan, South Korea, Taiwan and Vietnam, in addition to sourcing from partners and a significant concentration facilities located in the U.S. The Company relies on single-source partners in the U.S., Asia and Europe to supply and manufacture many components, and on partners primarily located in Asia, for final assembly of this manufacturing is currently performed by a small number substantially all of outsourcing partners, often in single locations the Company's hardware products . The Company has also outsourced much of its transportation and logistics management. While these arrangements can lower operating costs, they also reduce the Company's direct control over production and distribution. Such diminished control has from time to time had, and may in the future have , an adverse effect on the cost, quality or quantity of products manufactured or services provided, or adversely affect the Company's flexibility to respond to changing conditions. Although arrangements with these partners may contain provisions for product defect expense reimbursement, the Company generally remains responsible to the consumer for warranty and out-of-warranty service in the event of product defects and experiences unanticipated product defect liabilities from time to time. While the Company relies on its partners to adhere to its supplier code of conduct, violations of the supplier code of conduct occur from time to time and can materially adversely affect the Company's business, reputation, results of operations and , financial condition and stock price .

The Company's profit gross margins vary significantly across its products, services, geographic segments and distribution channels . For example, the gross margins on the Company's products and services vary significantly and can change over time. The Company's net sales and gross margins are subject to volatility and downward pressure due to a variety of factors, including: continued industry-wide global product pricing pressures and product pricing actions that the Company may take in response to such pressures; increased competition; the Company's ability to effectively stimulate demand for certain of its products and services; compressed product life cycles; supply shortages; potential increases in the cost of components, outside manufacturing services, and developing, acquiring and delivering content for the Company's services; the Company's ability to manage product quality and warranty costs effectively; shifts in the mix of products and services, or in the geographic, currency or channel mix, including to the extent that regulatory changes require the Company to modify its product and service offerings; fluctuations in foreign exchange rates; inflation and other macroeconomic pressures; the imposition of new or increased tariffs and other trade restrictions, their overall magnitude and duration, and retaliatory actions in response; and the introduction of new products or services, including new products or services with lower profit margins. These and other factors could have a materially adverse impact on the Company's results of operations and , financial condition and stock price . Further, the Company generates a significant portion of its net sales from a single product category and a decline in demand for that product could significantly impact net sales and gross margins.

The Company believes the availability of that third-party software applications and services for its products developer support depends in part on the developers' perception and analysis of the relative perceived benefits of developing, maintaining and upgrading such creating software and services for the Company's products compared to competitors' platforms, such as Android for smartphones and tablets, Windows for personal computers and tablets, and PlayStation, Nintendo and Xbox for gaming platforms. This analysis may be based on factors such as the market position of the Company and its products, the anticipated revenue that may be generated, expected future growth of product sales, and the costs of developing such applications and services.

There can be no assurance the The Company's business will not , results of operations, financial condition and stock price can be materially adversely affected, individually or in the aggregate, by the outcomes of such investigations, litigation or changes to laws and regulations in the future. Changes to the Company's business practices to comply with new laws and regulations or in connection with other legal proceedings can negatively impact the reputation of the Company's products for privacy and security and . Such changes in business practices can also otherwise adversely affect the experience for users of the Company's products and services, and result in harm to the Company's reputation, loss of competitive advantage, poor market acceptance, reduced demand for products and services, and lost sales , and lower profit margins .

The Company depends on the performance of carriers , wholesalers, retailers and other resellers.

The Company has invested, and in the future may invest, in new business strategies or , commercial relationships and acquisitions. Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations, greater-than-expected liabilities and expenses, economic, political, legal and regulatory challenges associated with operating in new businesses, regions or countries, inadequate return on capital, potential impairment of tangible and intangible assets, and significant write-offs. Investment Some transactions, including investments and acquisition transactions acquisitions, are exposed to additional risks, including failing to obtain required regulatory approvals on a timely basis or at all , a counterparty's failure to perform or deliver as anticipated , or the imposition of onerous conditions that could delay or prevent the Company from completing a transaction or otherwise limit the Company's ability to fully realize the anticipated benefits of a transaction. These new New business strategies and ventures are inherently risky and may not be successful. The failure of any significant investment Company's business strategies and investments may not be successful, which could materially adversely affect the Company's business, reputation, results of operations and , financial condition and stock price .

From time to time, the Company has made changes to its App Store business , including actions taken in response to litigation, competition, market conditions and legal and regulatory requirements. The Company expects to make further business changes in the future. For example, in the U.S. , the Company has implemented changes to how developers communicate with consumers within apps on the U.S. storefront of the iOS and iPadOS App Store regarding alternative purchasing mechanisms and is currently subject to a court order preventing it from imposing any commission or fee on certain purchases that consumers make .

The Company has implemented systems and processes intended to secure its information technology systems and prevent unauthorized access to or loss of sensitive data, and mitigate the impact of unauthorized access, including through the use of encryption and authentication technologies. As with all companies, these the security measures the Company has implemented may not be sufficient for all eventualities and are vulnerable to hacking, ransomware attacks, employee error, malfeasance, system error, faulty password management or other irregularities. For example, third parties can fraudulently induce the Company's or its suppliers' and other third parties' employees or customers into disclosing usernames, passwords or other sensitive information, which can, in turn, be used for unauthorized access to the Company's or such suppliers' or third parties' systems and services. To help protect customers and the Company, the Company deploys and makes available technologies like multifactor authentication, monitors its services and systems for unusual activity and may freeze accounts under suspicious circumstances, which, among other things, can result in the delay or loss of customer orders or impede customer access to the Company's products and services.

Regulatory changes and other actions that materially adversely affect the Company's business may be announced with little or no advance notice and the Company may not be able to effectively mitigate all adverse impacts from such measures. For example, the Company is subject to changing regulations relating to the export and import of its products. Although the Company has The Company's programs, policies and procedures in place that are designed to satisfy regulatory requirements, there can be no assurance that such policies and procedures will may not be effective in preventing a violation or a claim of a violation. As a result, the Company's products could be banned, delayed or prohibited from importation, which could materially adversely affect the Company's business, reputation, results of operations and , financial condition and stock price .

In addition to an adverse impact on demand for the Company's products and services, uncertainty Uncertainty about, or a decline in, global or regional economic conditions can also have a significant impact on the Company's suppliers, contract manufacturers, logistics providers, distributors, cellular network carriers and other channel partners, and developers. Potential outcomes include financial instability; inability to obtain credit to finance business operations; and insolvency.

The Company distributes its products and certain of its services through third-party cellular network carriers , wholesalers, retailers and other resellers. The Company also sells its products and services directly to small and mid-sized businesses and education, enterprise and government customers. A substantial majority of the Company's outstanding trade receivables are not covered by collateral, third-party bank support or financing arrangements, or credit insurance, and a significant portion of the Company's trade receivables can be concentrated within cellular network carriers or other resellers. The Company's exposure to credit and collectibility risk on its trade receivables is higher in certain international markets and its ability to mitigate such risks may be limited . The Company also has unsecured vendor non-trade receivables resulting from purchases of components by outsourcing partners and other vendors that manufacture subassemblies or assemble final products for the Company. In addition, the Company has made prepayments associated with long-term supply agreements to secure supply of inventory components. As of September 28 27 , 2024 2025 , the Company's vendor non-trade receivables and prepayments related to long-term supply agreements were concentrated among a few individual vendors located primarily in Asia. While If the Company has procedures is unable to monitor and limit exposure to credit risk on its trade and vendor non-trade receivables, as well as long-term prepayments, there can the Company's results of operations, financial condition and stock price could be no assurance such procedures will effectively limit its credit risk and avoid losses materially adversely affected .

The outcome of litigation or government investigations is inherently uncertain. If one or more legal matters were resolved against the Company or an indemnified third party in a reporting period for amounts above management's expectations, the Company's results of operations and , financial condition and stock price for that reporting period could be materially adversely affected. Further, such an outcome can result in significant monetary damages, disgorgement of revenue or profits, remedial corporate measures or injunctive relief against the Company , and . Adverse resolution of legal matters has from time to time required, and can in the future require, the Company to change its business practices and . It can also limit the Company's ability to enjoin others from using, or to derive value from, its intellectual property rights, and to develop, manufacture, use, import or offer for sale certain products and services, all of which could materially adversely affect the Company's business, reputation, results of operations and , financial condition and stock price .

Following any interruption to its business, the Company can require substantial recovery time, experience incur significant expenditures to resume operations, and lose significant sales. Because the Company relies on single or limited sources for the supply and manufacture of many critical components, a business interruption affecting such sources would exacerbate any negative consequences to the Company. While the Company maintains insurance coverage for certain types of losses, such insurance coverage may be insufficient to cover all losses that may arise. Any of the foregoing can materially adversely affect the Company's business, results of operations, financial condition and stock price.

Many of the Company's operations , retail stores and facilities, as well as critical business operations of the Company's suppliers and contract manufacturers, are in locations that are prone to earthquakes and other natural disasters. Global climate change is resulting in certain types of natural disasters and extreme weather occurring more frequently or with more intense effects. In addition, the Company's and its suppliers' operations , retail stores and facilities are subject to the risk of interruption by fire, power shortages, nuclear power plant accidents and other industrial accidents, terrorist attacks and other hostile acts, ransomware and other cybersecurity attacks, labor disputes, public health issues and other events beyond the Company's control. For example, global supply chains can be highly concentrated and geopolitical tensions or conflict could result in significant disruptions.

The Company experiences malicious attacks and other attempts to gain unauthorized access to its systems on a regular basis. These attacks seek to compromise target the confidentiality, integrity or availability of confidential information or and may disrupt normal business operations , and . Attacks can , among other things, impair the Company's ability to attract and retain customers for its products and services, impact the Company's affect its stock price, materially damage commercial relationships, and expose the Company to litigation or government investigations, which can result potentially resulting in penalties, fines or judgments against the Company . Globally, attacks are expected to continue accelerating in both frequency and sophistication with increasing use by actors of tools and techniques that are designed to circumvent controls, avoid detection, and remove or obfuscate forensic evidence, all of which hinders the Company's ability to identify, investigate and recover from incidents. In addition, attacks against the Company and its customers can escalate during periods of geopolitical tensions or conflict.

The Company orders components for its products and builds inventory in advance of product announcements and shipments. Manufacturing purchase obligations cover the Company's forecasted component and manufacturing requirements, typically for periods up to 150 days. Because the Company's markets are volatile, competitive and subject to rapid technology and price changes, there is a risk the Company will forecast incorrectly and order or produce excess or insufficient amounts of components or products, or not fully utilize firm purchase commitments. The Company accrues necessary cancellation fee reserves for orders of excess products and components.

The Company is also subject to the examination of its tax returns and other tax matters by the U.S. Internal Revenue Service and other tax authorities and governmental bodies. The Company regularly assesses the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of its provision for taxes. There can be no assurance as to the The outcome of these such examinations is inherently uncertain . If the Company's effective tax rates were to increase, or if the ultimate determination of the Company's taxes owed is for an amount in excess of amounts previously accrued, the Company's business, results of operations and , financial condition and stock price could be materially adversely affected.

The Company's operations and performance depend significantly on global and regional economic conditions and adverse economic conditions can materially adversely affect the Company's business, results of operations and , financial condition and stock price .

The Company's business requires it to use and store confidential information, including personal and sensitive health and financial information with respect to the Company's customers and employees. The Company devotes significant resources to systems and data security, including through the use of encryption and other security measures intended to protect its systems and data. But these measures cannot provide absolute security, and losses or unauthorized access to or releases of confidential information occur and could materially adversely affect the Company's business, reputation, results of operations and , financial condition and stock price .

Investment in new business strategies , commercial relationships and acquisitions could disrupt the Company's ongoing business, present risks not originally contemplated , and materially adversely affect the Company's business, reputation, results of operations and financial condition.

The Company's ability to compete successfully depends heavily on ensuring the continuing and timely introduction of innovative new products, services and technologies to the marketplace. The Company designs and develops nearly the entire solution for its products, including the hardware, operating system, numerous software applications and related services. As a result, the Company must make significant investments in R & D. There can be no assurance these These investments will may not achieve expected returns, and the Company may not be able to develop and market new products and services successfully.

The Company is subject to various claims, legal proceedings and government investigations that have arisen in the ordinary course of business and have not yet been fully resolved, and new matters may arise in the future. In addition, agreements entered into by the Company sometimes enters into agreements that include indemnification provisions which that can subject the Company to costs and damages in the event of a claim against an indemnified third party. The number of claims, legal proceedings and government investigations involving the Company, and the alleged magnitude of such claims, proceedings and government investigations, has generally increased over time and may continue to increase.

The Company's global operations are subject to complex and changing laws and regulations worldwide on subjects , including antitrust; privacy, data security and data localization ; online safety; age verification ; consumer protection; advertising, sales, billing and e-commerce; financial services and technology; product liability; intellectual property ownership and infringement; digital platforms; machine learning and artificial intelligence; internet, telecommunications and mobile communications; media, television, film and digital content; availability of third-party software applications and services; labor and employment; anticorruption; import, export and trade; foreign exchange controls and cash repatriation restrictions; anti-money laundering; foreign ownership and investment; national security; tax; and environmental, health and safety, including electronic waste, recycling, product design and climate change.

The Company believes that its distinctive and inclusive culture is a significant driver of its success. If the Company is unable to nurture its culture, it could materially adversely affect the Company's ability to recruit and retain the highly skilled employees who are critical to its success, and could otherwise materially adversely affect the Company's business, reputation, results of operations and , financial condition and stock price .

The Company is also currently subject to antitrust investigations and litigation in various jurisdictions around the world, which can result in legal proceedings and claims against the Company that could, individually or in the aggregate, have a materially material adverse impact on the Company's business, results of operations and , financial condition and stock price . For example, the Company is subject to civil antitrust lawsuits in the U.S. alleging monopolization or attempted monopolization in the markets for " performance smartphones " and " smartphones " generally in violation of U.S. antitrust laws. In addition, the Company is the subject of investigations in Europe and other jurisdictions relating to App Store terms and conditions. If such investigations or litigation are resolved against the Company, the Company can be exposed to significant fines and may be required to make further changes to its business practices, all of which could materially adversely affect the Company's business, reputation, results of operations and , financial condition and stock price .

The Company's minority market share in the global smartphone, personal computer , tablet and tablet wearables markets can make developers less inclined to develop or upgrade software for the Company's products and more inclined to devote their resources to developing and upgrading software for competitors' products with larger market share. When developers focus their efforts on these competing platforms, the availability and quality of applications for the Company's devices can suffer.

The Company offers complex hardware and software products and services that can be affected by design and manufacturing defects. Sophisticated operating system software and applications, such as those offered by the Company, often have issues that can unexpectedly interfere with the intended operation of hardware or software products and services. Defects can also exist in components and products the Company purchases from third parties. Component defects could make the Company's products unsafe and create a risk of environmental or property damage and personal injury. These risks may increase as the Company's products are introduced into specialized applications, including health. In addition, the Company's service offerings can have quality issues and from time to time experience outages, service slowdowns or errors. As a result, from time to time the Company's services have not performed as anticipated and may not meet customer expectations. The introduction of new and complex technologies, such as artificial intelligence features, can increase these and other safety risks, including exposing users to harmful, inaccurate or other negative content and experiences. There can be no assurance the The Company will may not be able to detect and fix all issues and defects in the hardware, software and services it offers . Failure to do so , which can result in widespread technical and performance issues affecting the Company's products and services. Errors, bugs and vulnerabilities can be exploited by third parties, compromising the safety and security of a user's device. In addition, the Company can be exposed to product liability claims, recalls, product replacements or modifications, write-offs of inventory, property, plant and equipment or intangible assets, and significant warranty and other expenses, including litigation costs and regulatory fines. Quality problems can adversely affect the experience for users of the Company's products and services, and result in harm to the Company's reputation, loss of competitive advantage, poor market acceptance, reduced demand for products and services, delay in new product and service introductions and lost sales.

The Company's investments can be negatively affected by changes in liquidity, credit deterioration, financial results, market and economic conditions, political risk, sovereign risk, interest rate fluctuations or other factors. As a result, the value and liquidity of the Company's cash, cash equivalents and marketable securities may fluctuate substantially. Although the Company has not realized significant losses on its cash, cash equivalents and marketable securities, future fluctuations in their value could result in significant losses and could have a material adverse impact on the Company's results of operations and , financial condition and stock price .

The Company's business also requires it to share confidential information with suppliers and other third parties. The Company relies on global suppliers that are also exposed to ransomware and other malicious attacks that can disrupt business operations. Although the Company takes steps to secure confidential information that is provided to or accessible by third parties working on the Company's behalf, such measures are not always effective and losses or unauthorized access to, or releases of, confidential information occur. Such incidents and other malicious attacks could materially adversely affect the Company's business, reputation, results of operations and , financial condition and stock price .

The Company is subject to an increasing number of federal, state and international laws relating to the collection, use, retention, security protection and transfer of various types of personal information data . In many cases, these laws apply not only to third-party transactions, but also restrict transfers of personal information data among the Company and its international subsidiaries. Several jurisdictions have passed laws in this area, and additional jurisdictions are considering imposing additional restrictions or have laws that are pending. These laws continue to develop and may be inconsistent from jurisdiction to jurisdiction. Complying with emerging and changing requirements causes the Company to incur substantial costs and has required and may in the future require the Company to change its business practices. Noncompliance could result in significant penalties or legal liability.

The Company and its global supply chain are dependent on complex information technology systems and are exposed to information technology system failures or network disruptions caused by natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, ransomware or other cybersecurity incidents, or other events or disruptions. System upgrades, redundancy and other continuity measures may be ineffective or inadequate, and the Company's or its vendors' business continuity and disaster recovery planning may not be sufficient for all eventualities. Such failures or disruptions can adversely impact the Company's business by, among other things, preventing access to the Company's online services, interfering with customer transactions or impeding the manufacturing and shipping of the Company's products. These events could materially adversely affect the Company's business, reputation, results of operations and , financial condition and stock price .

The Company's stock has experienced substantial price volatility in the past and may continue to do so in the future. Additionally, the Company, the technology industry and the stock market as a whole have, from time to time, experienced extreme stock price and volume fluctuations that have affected stock prices in ways that may have been unrelated to these companies' operating performance. Price volatility may cause the average price at which the Company repurchases its stock in a given period to exceed the stock's price at a given point in time. The Company believes the price of its stock should reflect expectations of future growth and profitability. The Company also believes the price of its stock should reflect expectations that its cash dividend will continue at current levels or grow, and that its current share repurchase program will be fully consummated. Future dividends are subject to declaration by the Company's Board of Directors ( the " Board "), and the Company's share repurchase program does not obligate it to acquire any specific number of shares. If the Company fails to meet expectations related to future growth, profitability, dividends, share repurchases or other market expectations, the price of the Company's stock may decline significantly, which could have a material adverse impact on investor confidence and employee retention.

The Company's Information Security team coordinates with teams across the Company to prevent, respond to and manage security incidents, and engages third parties, as appropriate, to assess, test or otherwise assist with aspects of its security processes and incident response. A dedicated Supplier Trust team manages information security risks the Company is exposed to through its supplier relationships. The Company has processes to log, track, address, and escalate for further assessment and report, as appropriate, cybersecurity incidents across the Company and its suppliers to senior management and the Audit and Finance Committee ( the " Audit Committee ") of the Board. The Company's enterprise risk management program is designed to identify, assess, and monitor the Company's business risks, including financial, operational, compliance and reputational risks, and reflects management's assessment of cybersecurity risks.

On March 25, 2024, the Commission announced that it had opened two a formal noncompliance investigations investigation against the Company under the DMA. The Commission's investigations concern (1) Article 5 (4) of the EU DMA , which (" Article 5 (4) Investigation "). The Article 5 (4) Investigation relates to how developers may communicate and promote offers to end users for apps distributed through the App Store , as well as how developers may conclude contracts with those end users ; and (2) Article 6 (3) of the DMA, which relates to default settings, uninstallation of apps, and a web browser choice screen on iOS . On June 24, 2024, the Commission announced its preliminary findings in the Article 5 (4) investigation alleging that the Company's App Store rules are in breach of the DMA and announced that it had opened a third an additional formal investigation against the Company regarding whether the Company's new contractual requirements for third-party app developers and app marketplaces may violate the DMA (" Article 6 (4) Investigation "). On April 23, 2025, the Commission fined the Company € 500 million in the Article 5 (4) Investigation and issued a cease and desist order requiring the Company to remove technical and commercial restrictions that prevent developers from steering users to alternative distribution channels outside the App Store. The Company has appealed the Commission's Article 5 (4) decision. Also on April 23, 2025, the Commission issued preliminary findings in the Article 6 (4) Investigation . If the Commission makes a final determination in the Article 6 (4) Investigation that there has been a violation, it can issue a cease and desist order and may impose fines up to 10% of the Company's annual worldwide net sales. Although any decision by The Commission may also seek to impose additional fines if it deems that the Commission can be appealed to the General Court of the EU, the effectiveness of the Commission's Company has violated a cease and desist order would apply immediately while the appeal is pending, unless a stay of the order is granted . The Company believes that it complies with the DMA and has continued to make changes to its compliance plan in response to feedback and engagement with the Commission.

On March 21, 2024, the U.S. Department of Justice (the " DOJ ") and a number of state and district attorneys general filed a civil antitrust lawsuit in the U.S. District Court for the District of New Jersey against the Company alleging monopolization or attempted monopolization in the markets for " performance smartphones " and " smartphones " in violation of U.S. antitrust laws. The DOJ is seeking equitable relief to redress the alleged anticompetitive behavior. In addition, various civil litigation matters have been filed in state and federal courts in the U.S. alleging similar violations of U.S. antitrust laws and seeking monetary damages and other nonmonetary relief. The Company believes it has substantial defenses and intends to vigorously defend itself.

Rest of Asia Pacific net sales increased during 2024 2025 compared to 2023 2024 primarily due primarily to higher net sales of iPhone, Services and Mac . The weakness in foreign currencies relative to the U.S. dollar had a net unfavorable year-over-year impact on Rest of Asia Pacific net sales during 2024.

• iOS 18 26 , macOS Sequoia Tahoe 26 , iPadOS 18 26 , watchOS 11 26 , visionOS 2 26 and tvOS 18, updates to the Company's operating systems; and 26

The Company's effective tax rate for 2025 was lower compared to 2024 was higher than the statutory federal income tax rate due primarily to a one-time $10.7 billion year-over-year decrease in the provision for income tax charge of $10.2 billion, net, taxes related to the State Aid Decision (refer to Note 7, " Income Taxes " in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K) and state income taxes the impact of changes in unrecognized tax benefits , partially offset by a lower change in valuation allowance and a higher effective tax rate on foreign earnings , the impact of the U.S . federal R & D credit, and tax benefits from share-based compensation.

• MacBook Pro 14-in.;

• iPad Pro;

Services gross margin percentage increased during 2024 2025 compared to 2023 2024 primarily due to a different Services mix of services, partially offset by higher costs .

iPad Greater China net sales decreased during 2024 2025 compared to 2023 2024 primarily due primarily to lower net sales of iPad Pro and the entry-level iPad models iPhone , partially offset by higher net sales of iPad Air Mac .

• iPhone 16 17 , iPhone 16 Plus Air , iPhone 16 17 Pro and iPhone 16 17 Pro Max ;

Services gross margin increased during 2024 2025 compared to 2023 2024 primarily due primarily to higher Services net sales and a different mix of services .

Americas iPhone net sales increased during 2024 2025 compared to 2023 2024 due primarily to higher net sales of Services Pro models .

• MacBook Air 15-in.

Europe net sales increased during 2024 2025 compared to 2023 2024 primarily due primarily to higher net sales of Services , iPhone and iPhone Mac .

Japan Americas net sales increased during 2024 2025 compared to 2023 2024 primarily due primarily to higher net sales of iPhone and Services . The weakness in the yen foreign currencies relative to the U.S. dollar had an unfavorable year-over-year impact on Japan Americas net sales during 2024 2025 .

Mac net sales increased during 2024 2025 compared to 2023 2024 primarily due primarily to higher net sales of laptops and desktops .

Wearables, Home and Accessories net sales decreased during 2024 2025 compared to 2023 2024 primarily due primarily to lower net sales of Accessories and Wearables and Accessories .

• iMac .

The growth in R & D expense during 2024 2025 compared to 2023 2024 was primarily driven primarily by increases in headcount-related expenses and infrastructure-related costs .

As of September 28 27 , 2024 2025 , the balance of the deemed repatriation tax payable imposed by the U.S. Tax Cuts and Jobs Act of 2017 ( the " TCJA ") was $ 16.5 8.8 billion, with $7.2 billion expected to be paid which was payable within 12 months.

• iPad Air ;

Services net sales increased during 2024 2025 compared to 2023 2024 primarily due primarily to higher net sales from advertising, the App Store ® and cloud services.

The Company also issues unsecured short-term promissory notes pursuant to a commercial paper program. As of September 28 27 , 2024 2025 , the Company had $ 10.0 8.0 billion of commercial paper outstanding, all of which was payable within 12 months.

In December 2023, the Financial Accounting Standards Board (the " FASB ") issued Accounting Standards Update (" ASU ") No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (" ASU 2023-09 "), which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. The Company will adopt ASU 2023-09 in its fourth quarter of 2026 using a prospective transition method.

The Company believes its balances of unrestricted cash, cash equivalents and marketable securities, which totaled $ 140.8 132.4 billion as of September 28 27 , 2024 2025 , along with cash generated by ongoing operations and continued access to debt markets, will be sufficient to satisfy its cash requirements and capital return program over the next 12 months and beyond.

The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, the outcomes of which are inherently uncertain. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable, the determination of which requires significant judgment. Resolution of legal matters in a manner inconsistent with management's expectations could have a material impact on the Company's financial condition and operating results.