Apple Inc.
AAPLTechnology · Market cap $4.46T
Risk score
- At 35.1× trailing EPS of $8.72, the multiple carries most of the expected return rather than earnings growth.
- ROE of 148.8% and P/B of 41.5 are buyback artifacts. Years of repurchases have shrunk book equity, so neither ratio describes the return on operating capital.
- Gross margin has widened three years running (44.1% → 46.2% → 46.9%), consistent with mix shifting toward services rather than hardware pricing power.
- Balance-sheet strength and cash generation remain the cushion: operating margin of 32.6% on FY25 revenue of $416.2B.
Illustrative fair value
$244 – $296Illustrative band only: 28–34× trailing EPS of $8.72. Not a price target, not a recommendation.
Technical & money-flow
SidewaysPrice-action context, not a buy/sell signal. As of 2026-08-14 · source Twelve Data.
Analyst rationale
Apple compounded revenue to $416.2B in FY25 from $383.3B in FY23 (+8.6% over two years) while gross margin widened from 44.1% to 46.9% — margin expansion on a hardware base almost always means mix, not pricing. The more interesting line is R&D: $29.9B → $34.5B over the same two years, a 15.4% rise against 8.6% revenue growth, lifting intensity from 7.8% to 8.3%. Spend is being pulled forward ahead of a revenue line that has not appeared in the statements yet. At $305.93 the shares sit above the top of the illustrative 28–34× band, so the burden rests on that spend converting. Technically the setup is the opposite of the valuation: RSI of 26.0 with price 8.2% below where it stood a month ago and under the 50-day ($309.19) while holding above the 200-day ($280.48).
Research coverage
Finish the research before decidingThree years of audited income statements support the margin and R&D trend read.
Operating margin 32.6%, profit margin 27.6%. Book-value ratios are distorted by buybacks and are treated as such.
Installed base and unit share are the anchor metrics for the hardware branch, and neither is in the provided data. Research task, not a conclusion.
Where the elevated R&D is going is not disclosed at segment level. Treat any specific attribution as unverified.
Business overview
Consumer electronics with an attached services business. The hardware installed base is the distribution channel for services, so the two segments are not independent: services growth is a lagging function of devices sold in prior years, which is why installed base rather than quarterly unit sales is the metric that matters for the hardware branch.
Financial statements
| FY | Revenue | Gross profit | Operating income | Net income |
|---|---|---|---|---|
| FY2025 | $416.2B | $195.2B | $133.1B | $112.0B |
| FY2024 | $391.0B | $180.7B | $123.2B | $93.7B |
| FY2023 | $383.3B | $169.1B | $114.3B | $97.0B |
Peers
- MSFTMicrosoft — The cleaner comparison for the services-mix argument, since its margin structure is already software-weighted.
- GOOGLAlphabet — Carries the same app-store regulatory exposure from the other side of the same duopoly.
- DELLDell Technologies — Hardware without the services attach — the contrast that shows how much of the margin is mix.
Risk breakdown
- Valuation: 35.1× trailing EPS against 8.6% two-year revenue growth. The multiple assumes the R&D spend converts.
- Concentration: Results stay sensitive to a single product cycle, so a delayed cycle is a revenue event rather than a mix event.
- Regulatory: App-store economics sit inside the services mix that is driving margin expansion.
- Accounting quality: No unusual accruals visible in the provided statements. Book-value ratios are buyback-distorted but disclosed, not obscured.
- Balance sheet: Operating margin of 32.6% and profit margin of 27.6% leave substantial absorption capacity.
Bear case
- 1R&D is outgrowing revenue by roughly two to one (15.4% vs 8.6% over two years) and intensity has climbed every year. Sustained spend that has not yet produced a disclosed revenue line is the pattern that precedes a margin reset, not the one that follows a successful launch.
- 2The services mix credited with the margin expansion is also the part most exposed to regulatory action on app-store economics. The single explanation for the good news is the single concentration of regulatory risk.
- 3At $305.93 the shares trade above the top of the illustrative band. Compression to the low end is a 20% move with no change in earnings at all — the multiple alone does the damage.
Filings summary
Most recent filings are the 10-Q of 2026-07-31 covering the quarter ended 2026-06-30, and an 8-K dated 2026-07-30. The prior 10-Q was filed 2026-05-01. Segment detail in the July 10-Q is the primary source for testing whether the gross-margin gain is mix or pricing.
- Read the segment mix in the 10-Q filed 2026-07-31 and confirm where the gross-margin gain came from.
- Confirm FY25 revenue of $416.2B and R&D of $34.5B against the annual filing rather than the data feed.
- Compare R&D intensity of 8.3% against peers on the same basis; rising intensity is only a warning if it is out of line.
- Work through a downside case at 28× trailing EPS and decide whether that outcome is survivable for your position size.
- Flag if gross margin falls back below 46%, which would undo the three-year mix gain.
- Flag if R&D intensity passes 9% without a new revenue line appearing in the segment table.
- Flag if price closes below the 200-day average of $280.48.
HawkEye is an analysis tool, not personalised investment advice. It compiles public data and AI-generated analysis for informational purposes only. It does not issue buy, sell, or hold recommendations. You are solely responsible for your own decisions. Verify figures against the cited sources before acting.