This section and other parts of this Quarterly Report on Form 10-Q ("Form 10-Q")
contain forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995, that involve risks and uncertainties.
Forward-looking statements provide current expectations of future events based
on certain assumptions and include any statement that does not directly relate
to any historical or current fact. For example, statements in this Form 10-Q
regarding the potential future impact of the COVID-19 pandemic on the Company's
business and results of operations are forward-looking statements.
Forward-looking statements can also be identified by words such as "future,"
"anticipates," "believes," "estimates," "expects," "intends," "plans,"
"predicts," "will," "would," "could," "can," "may," and similar terms.
Forward-looking statements are not guarantees of future performance and the
Company's actual results may differ significantly from the results discussed in
the forward-looking statements. Factors that might cause such differences
include, but are not limited to, those discussed in Part I, Item 1A of the
Company's Annual Report on Form 10-K for the fiscal year ended September 25,
2021 (the "2021 Form 10-K") under the heading "Risk Factors." The Company
assumes no obligation to revise or update any forward-looking statements for any
reason, except as required by law.

Unless otherwise stated, all information presented herein is based on the
Company's fiscal calendar, and references to particular years, quarters, months
or periods refer to the Company's fiscal years ended in September and the
associated quarters, months and periods of those fiscal years. Each of the terms
the "Company" and "Apple" as used herein refers collectively to Apple Inc. and
its wholly owned subsidiaries, unless otherwise stated.

The following discussion should be read in conjunction with the 2021 Form 10-K
filed with the U.S. Securities and Exchange Commission (the "SEC") and the
condensed consolidated financial statements and accompanying notes included in
Part I, Item 1 of this Form 10-Q.

Available Information



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-Q is not incorporated by reference into this filing. Further, the Company's
references to website URLs are intended to be inactive textual references only.

Business Seasonality and Product Introductions



The Company has historically experienced higher net sales in its first quarter
compared to other quarters in its fiscal year due in part to seasonal holiday
demand. Additionally, new product and service introductions can significantly
impact net sales, cost of sales and operating expenses. The timing of product
introductions can also impact the Company's net sales to its indirect
distribution channels as these channels are filled with new inventory following
a product launch, and channel inventory of an older product often declines as
the launch of a newer product approaches. Net sales can also be affected when
consumers and distributors anticipate a product introduction.

Quarterly Highlights



Total net sales increased 9% or $7.7 billion during the second quarter of 2022
compared to the same quarter in 2021, driven primarily by growth in Services,
iPhone and Mac.

During the second quarter of 2022, the Company released the following products:



•iPhone SE® with 5G technology;
•iPad Air®, powered by the Apple M1 chip;
•All-new Mac Studio™, powered by the Apple M1 Max or the new Apple M1 Ultra
chip; and
•All-new Apple Studio Display™.

The Company repurchased $22.9 billion of its common stock and paid dividends and dividend equivalents of $3.6 billion during the second quarter of 2022.

Apple Inc. | Q2 2022 Form 10-Q | 14
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COVID-19 Update



The COVID-19 pandemic has had, and continues to have, a significant impact
around the world, prompting governments and businesses to take unprecedented
measures, such as restrictions on travel and business operations, temporary
closures of businesses, and quarantine and shelter-in-place orders. The COVID-19
pandemic has at times significantly curtailed global economic activity and
caused significant volatility and disruption in global financial markets. The
COVID-19 pandemic and the measures taken by many countries in response have
affected and could in the future materially impact the Company's business,
results of operations and financial condition, as well as the price of the
Company's stock.

During the second quarter of 2022, aspects of the Company's business continued
to be affected by the COVID-19 pandemic, with a significant number of the
Company's employees working remotely and many of the Company's retail stores
operating at limited capacity or temporarily closing at various times.
Substantially all of the Company's other facilities are open, subject to
operating restrictions to protect public health and the health and safety of
employees. The Company continues to work on safely reopening the remainder of
its facilities, subject to local rules and regulations.

At times, certain of the Company's outsourcing partners, component suppliers and
logistical service providers have experienced disruptions, resulting in supply
shortages that could affect sales worldwide. Similar disruptions could occur in
the future.

The extent of the continuing impact of the COVID-19 pandemic on the Company's
operational and financial performance is uncertain and will depend on many
factors outside the Company's control, including the timing, extent, trajectory
and duration of the pandemic, the emergence of new variants, the development,
availability, distribution and effectiveness of vaccines and treatments, the
imposition of protective public safety measures, and the impact of the pandemic
on the global economy and demand for consumer products. Refer to Part I, Item 1A
of the 2021 Form 10-K under the heading "Risk Factors" for more information.

Products and Services Performance

The following table shows net sales by category for the three- and six-month periods ended March 26, 2022 and March 27, 2021 (dollars in millions):



                                                   Three Months Ended                                        Six Months Ended
                                    March 26,          March 27,                             March 26,          March 27,
                                       2022               2021              Change              2022               2021              Change
Net sales by category:
iPhone (1)                         $  50,570          $  47,938                  5  %       $ 122,198          $ 113,535                  8  %
Mac (1)                               10,435              9,102                 15  %          21,287             17,777                 20  %
iPad (1)                               7,646              7,807                 (2) %          14,894             16,242                 (8) %
Wearables, Home and Accessories
(1)(2)                                 8,806              7,836                 12  %          23,507             20,807                 13  %
Services (3)                          19,821             16,901                 17  %          39,337             32,662                 20  %
Total net sales                    $  97,278          $  89,584                  9  %       $ 221,223          $ 201,023                 10  %


(1)Products net sales include amortization of the deferred value of unspecified
software upgrade rights, which are bundled in the sales price of the respective
product.

(2)Wearables, Home and Accessories net sales include sales of AirPods, Apple TV, Apple Watch, Beats products, HomePod mini, iPod touch and accessories.

(3)Services net sales include sales from the Company's advertising, AppleCare, cloud, digital content, payment and other services. Services net sales also include amortization of the deferred value of services bundled in the sales price of certain products.

iPhone



iPhone net sales increased during the second quarter and first six months of
2022 compared to the same periods in 2021 due primarily to higher net sales from
the Company's new iPhone models.

Mac

Mac net sales increased during the second quarter and first six months of 2022 compared to the same periods in 2021 due primarily to higher net sales of MacBook Pro®, partially offset by lower net sales of MacBook Air®.

Apple Inc. | Q2 2022 Form 10-Q | 15
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iPad



iPad net sales decreased during the second quarter of 2022 compared to the
second quarter of 2021 due primarily to lower net sales of the 10-inch version
of iPad, offset by higher net sales of iPad Pro® and iPad mini®. Year-over-year
iPad net sales decreased during the first six months of 2022 due primarily to
lower net sales of the 10-inch version of iPad, partially offset by higher net
sales of iPad mini.

Wearables, Home and Accessories



Wearables, Home and Accessories net sales increased during the second quarter
and first six months of 2022 compared to the same periods in 2021 due primarily
to higher net sales of Apple Watch, AirPods and accessories.

Services



Services net sales increased during the second quarter and first six months of
2022 compared to the same periods in 2021 due primarily to higher net sales from
advertising, the App Store® and cloud services.

Segment Operating Performance



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 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.
Further information regarding the Company's reportable segments can be found in
Part I, Item 1 of this Form 10-Q in the Notes to Condensed Consolidated
Financial Statements in Note 9, "Segment Information and Geographic Data."

The following table shows net sales by reportable segment for the three- and
six-month periods ended March 26, 2022 and March 27, 2021 (dollars in millions):

                                                    Three Months Ended                                        Six Months Ended
                                     March 26,          March 27,                             March 26,          March 27,
                                        2022               2021              Change              2022               2021              Change
Net sales by reportable segment:
Americas                            $  40,882          $  34,306                 19  %       $  92,378          $  80,616                 15  %
Europe                                 23,287             22,264                  5  %          53,036             49,570                  7  %
Greater China                          18,343             17,728                  3  %          44,126             39,041                 13  %
Japan                                   7,724              7,742                  -  %          14,831             16,027                 (7) %
Rest of Asia Pacific                    7,042              7,544                 (7) %          16,852             15,769                  7  %
Total net sales                     $  97,278          $  89,584                  9  %       $ 221,223          $ 201,023                 10  %


Americas

Americas net sales increased during the second quarter of 2022 compared to the
second quarter of 2021 due primarily to higher net sales of iPhone, Services and
Mac. Year-over-year Americas net sales increased during the first six months of
2022 due primarily to higher net sales of iPhone, Services and Wearables, Home
and Accessories.

Europe

Europe net sales increased during the second quarter and first six months of
2022 compared to the same periods in 2021 due primarily to higher net sales of
Services and Mac. The movement of foreign currencies in Europe relative to the
U.S. dollar had a net unfavorable impact on Europe net sales during the second
quarter and first six months of 2022.

Greater China

Greater China net sales increased during the second quarter and first six months
of 2022 compared to the same periods in 2021 due primarily to higher net sales
of iPhone and Services. The strength of the Chinese renminbi relative to the
U.S. dollar had a favorable impact on Greater China net sales during the second
quarter and first six months of 2022.
                      Apple Inc. | Q2 2022 Form 10-Q | 16
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Japan

Japan net sales were flat during the second quarter of 2022 compared to the
second quarter of 2021 due primarily to the weakness of the Japanese yen
relative to the U.S. dollar, offset by higher net sales of iPhone and Services.
Year-over-year Japan net sales decreased during the first six months of 2022 due
primarily to the weakness of the Japanese yen relative to the U.S. dollar.

Rest of Asia Pacific



Rest of Asia Pacific net sales decreased during the second quarter of 2022
compared to the second quarter of 2021 due primarily to lower net sales of
iPhone, partially offset by higher net sales of Services and Mac. Year-over-year
Rest of Asia Pacific net sales increased during the first six months of 2022 due
primarily to higher net sales of Services, Mac and Wearables, Home and
Accessories. The movement of foreign currencies in Rest of Asia Pacific relative
to the U.S. dollar had a net unfavorable impact on Rest of Asia Pacific net
sales during the second quarter and first six months of 2022.

Gross Margin



Products and Services gross margin and gross margin percentage for the three-
and six-month periods ended March 26, 2022 and March 27, 2021 were as follows
(dollars in millions):

                         Three Months Ended              Six Months Ended
                      March 26,       March 27,      March 26,      March 27,
                         2022           2021           2022           2021
Gross margin:
Products             $   28,167      $  26,236      $  68,287      $  59,784
Services                 14,392         11,843         28,515         22,623
Total gross margin   $   42,559      $  38,079      $  96,802      $  82,407


Gross margin percentage:
Products                           36.4  %      36.1  %      37.5  %      35.5  %
Services                           72.6  %      70.1  %      72.5  %      69.3  %
Total gross margin percentage      43.7  %      42.5  %      43.8  %      41.0  %


Products Gross Margin

Products gross margin increased during the second quarter of 2022 compared to
the second quarter of 2021 due primarily to higher Products volume.
Year-over-year Products gross margin increased during the first six months of
2022 due primarily to a different Products mix and higher Products volume.

Products gross margin percentage increased during the second quarter of 2022
compared to the second quarter of 2021 due primarily to improved leverage.
Year-over-year Products gross margin percentage increased during the first six
months of 2022 due primarily to a different Products mix.

Services Gross Margin



Services gross margin increased during the second quarter and first six months
of 2022 compared to the same periods in 2021 due primarily to higher Services
net sales and a different Services mix, partially offset by the weakness in
foreign currencies relative to the U.S. dollar.

Services gross margin percentage increased during the second quarter and first
six months of 2022 compared to the same periods in 2021 due primarily to a
different Services mix and improved leverage, partially offset by the weakness
in foreign currencies relative to the U.S. dollar.

The Company's future gross margins can be impacted by a variety of factors, as
discussed in Part I, Item 1A of the 2021 Form 10-K under the heading "Risk
Factors." As a result, the Company believes, in general, gross margins will be
subject to volatility and downward pressure.
                      Apple Inc. | Q2 2022 Form 10-Q | 17
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Operating Expenses

Operating expenses for the three- and six-month periods ended March 26, 2022 and March 27, 2021 were as follows (dollars in millions):



                                           Three Months Ended             Six Months Ended
                                        March 26,      March 27,      March 26,      March 27,
                                          2022           2021           2022           2021
Research and development               $  6,387       $  5,262       $ 12,693       $ 10,425
Percentage of total net sales                 7  %           6  %           6  %           5  %
Selling, general and administrative    $  6,193       $  5,314       $ 12,642       $ 10,945
Percentage of total net sales                 6  %           6  %           6  %           5  %
Total operating expenses               $ 12,580       $ 10,576       $ 25,335       $ 21,370
Percentage of total net sales                13  %          12  %          11  %          11  %


Research and Development

The growth in research and development ("R&D") expense during the second quarter
and first six months of 2022 compared to the same periods in 2021 was driven
primarily by increases in headcount-related expenses, engineering program costs
and professional services. The Company continues to believe that focused
investments in R&D are critical to its future growth and competitive position in
the marketplace, and to the development of new and updated products and services
that are central to the Company's core business strategy.

Selling, General and Administrative



The growth in selling, general and administrative expense during the second
quarter of 2022 compared to the second quarter of 2021 was driven primarily by
increases in advertising, headcount-related expenses and professional services.
Year-over-year selling, general and administrative expense increased during the
first six months of 2022 due primarily to increases in headcount-related
expenses, advertising and variable selling expenses.

Other Income/(Expense), Net

Other income/(expense), net ("OI&E") for the three- and six-month periods ended March 26, 2022 and March 27, 2021 was as follows (dollars in millions):



                                                                  Three Months Ended                                         Six Months Ended
                                                   March 26,           March 27,                             March 26,           March 27,
                                                      2022               2021               Change              2022               2021               Change
Interest and dividend income                      $     700          $      718                             $   1,350          $    1,465
Interest expense                                       (691)               (670)                               (1,385)             (1,308)
Other income/(expense), net                             151                 460                                   (52)                396
Total other income/(expense), net                 $     160          $      508                (69) %       $     (87)         $      553

(116) %

OI&E decreased during the second quarter and first six months of 2022 compared to the same periods in 2021 due primarily to fair value adjustments on marketable securities, partially offset by foreign exchange gains.

Apple Inc. | Q2 2022 Form 10-Q | 18
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Provision for Income Taxes



Provision for income taxes, effective tax rate and statutory federal income tax
rate for the three- and six-month periods ended March 26, 2022 and March 27,
2021 were as follows (dollars in millions):

                                        Three Months Ended              Six Months Ended
                                     March 26,       March 27,      March 26,      March 27,
                                        2022           2021           2022           2021
Provision for income taxes          $   5,129       $  4,381       $ 11,740       $  9,205
Effective tax rate                       17.0  %        15.6  %        16.4  %        14.9  %
Statutory federal income tax rate          21  %          21  %          21

% 21 %




The Company's effective tax rate for the second quarter of 2022 was lower than
the statutory federal income tax rate due primarily to a lower effective tax
rate on foreign earnings, including the favorable impact of changes in
unrecognized tax benefits, partially offset by the impact to U.S. foreign tax
credits as a result of regulations issued by the U.S. Department of the Treasury
in January 2022 (the "Regulations"). The Company's effective tax rate for the
first six months of 2022 was lower than the statutory federal income tax rate
due primarily to a lower effective tax rate on foreign earnings, including the
favorable impact of changes in unrecognized tax benefits.

The Company's effective tax rate for the second quarter of 2022 was higher
compared to the second quarter of 2021 due primarily to the impact to U.S.
foreign tax credits as a result of the Regulations, partially offset by a lower
effective tax rate on foreign earnings, including the favorable impact of
changes in unrecognized tax benefits. The Company's effective tax rate for the
first six months of 2022 was higher compared to the same period in 2021 due
primarily to the impact to U.S. foreign tax credits as a result of the
Regulations and lower tax benefits from share-based compensation.

Liquidity and Capital Resources

The Company believes its balances of cash, cash equivalents and unrestricted marketable securities, 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's contractual cash requirements have not changed materially since the 2021 Form 10-K, except for manufacturing purchase obligations.

Manufacturing Purchase Obligations



The Company utilizes several outsourcing partners to manufacture subassemblies
for the Company's products and to perform final assembly and testing of finished
products. The Company also obtains individual components for its products from a
wide variety of individual suppliers. Outsourcing partners acquire components
and build product based on demand information supplied by the Company, which
typically covers periods up to 150 days. As of March 26, 2022, the Company had
manufacturing purchase obligations of $40.6 billion, with $40.5 billion payable
within 12 months. The Company's manufacturing purchase obligations are primarily
noncancelable.

In addition to its contractual cash requirements, the Company has a share
repurchase program authorized by the Board of Directors (the "Program"). As of
March 26, 2022, the remaining availability under the Program was $17.6 billion.
On April 28, 2022, the Company announced the Board of Directors increased the
Program authorization by $90 billion. The Program does not obligate the Company
to acquire a minimum amount of shares.

On April 28, 2022, the Company also announced the Board of Directors raised the
Company's quarterly cash dividend from $0.22 to $0.23 per share, beginning with
the dividend to be paid during the third quarter of 2022. The Company intends to
increase its dividend on an annual basis, subject to declaration by the Board of
Directors.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity
with U.S. generally accepted accounting principles and the Company's discussion
and analysis of its financial condition and operating results require the
Company's management to make judgments, assumptions and estimates that affect
the amounts reported. Note 1, "Summary of Significant Accounting Policies" of
the Notes to condensed consolidated Financial Statements in Part I, Item 1 of
this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II,
Item 8 of the 2021 Form 10-K describe the significant accounting policies and
methods used in the preparation of the Company's condensed consolidated
financial statements. There have been no material changes to the Company's
critical accounting estimates since the 2021 Form 10-K.
                      Apple Inc. | Q2 2022 Form 10-Q | 19

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