Thoughts on Apple’s Gross Margins, Gross Profit, Capex, Capital Management, and 10-Q Filing
Hello everyone.
Please bear with me as there are a number of housekeeping items.
Crazy Week. What a week. A power surge caused by thunderstorms led to a series of repairs at Above Avalon HQ and a subsequent change in the daily updates release schedule. Everything is now back to normal. On the flip side, we get a rare weekend edition of the Above Avalon Daily.
Today’s Update. Going through possible discussion topics for today’s update, there were a handful of remaining financial subjects that deserved a deeper look. Apple’s 3Q25 10-Q filing was also an outstanding discussion topic. Accordingly, today’s update will be a sort of financial catch basin covering various topics. After today, Apple earnings will be firmly in the rearview mirror.
Schedule. One news item that may come at any point is the prescribed remedies regarding Google’s antitrust trial. We will see how things go and if an emergency update is needed. For a recap of where my thoughts are on the topic, check out the updates from August 12th, 2024, August 13th, 2024, and November 25th. Questions surrounding the Google Search contract may constitute the biggest unknown currently facing Apple. (Consensus is always unsure of Apple’s future product strategy, so that doesn’t count.)
Above Avalon Week-in-Review. A recap of analysis and perspective published elsewhere in the Above Avalon ecosystem. You can use the blue links to get more information on the podcast episodes or essay.
AVALON Podcast (my unscripted weekly podcast about Apple)
Episode 9: Liquid Glass: Half Empty of Half Full? My impressions using Liquid Glass and other iOS 26 features.
Episode 10: It’s Tough Making Money From Hardware. An inside look at how companies try to influence analyst expectations ahead of earnings.
Inside Orchard (Above Avalon’s sibling site covering my broader thoughts on tech via essays and a podcast)
Elon Musk Should Step Down as Tesla CEO. I lay out the case for why it’s time for Musk to officially handoff the Tesla reigns to someone else.
We will now turn to today’s update.
Thoughts on Apple’s Gross Margins Percentages, Gross Profit, Capex, Capital Management, and 10-Q Filing
Gross Margin Percentages
Based on Apple’s 3Q25 earnings and 4Q25 guidance, Apple’s gross margin will likely finish FY25 close to 46.8%. This would be up from 46.2% in FY24, continuing what has been a remarkable streak of gross margin improvement. Gross margins are now trending at a 13-year high for Apple despite some tariff impact and slight FX headwind in the beginning of the year. Five years ago, gross margin was way back at 38%.
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Apple Year in Review 2023 (Financial Strategy)
Today's Above Avalon daily update includes the following stories:
Apple Year in Review 2023 (Financial Strategy)
As we close out 2023, there is value in taking time to recap the past 12 months. For Apple, one way of recapping the past 12 months is to look at the company from two perspectives: products and financials. In yesterday’s update, we recapped Apple's product strategy. Today, we will analyze Apple’s financial trends in FY2023.
Above Avalon membership is required to read this daily update. Members can read the update here.
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
Above Avalon members receive the full Above Avalon experience throughout the week.
The cornerstone of Above Avalon membership is access to Neil’s exclusive daily updates about Apple. Daily updates are 2,000 words and sent via email Monday through Thursday. Updates revolve around the following topics:
Apple business and strategy analysis.
Neil’s perspective and observations on current news and Apple competitors.
Neil’s Apple financial estimates.
Full coverage of Apple earnings, product events, and keynotes.
If it is of interest to Apple, it is something I pay attention to.
Member Privileges and Benefits
Receive Exclusive Daily Updates. The cornerstone of Above Avalon membership is access to Neil Cybart’s exclusive daily updates about Apple. Updates are sent via email and go over current news and developments impacting Apple, its competitors, and the industries Apple plays in (or will play in). Approximately 200 daily updates are published throughout the year. Sample daily updates can be viewed here, here, and here.
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Archive Access. Read 1,500+ daily updates and reports that have been previously sent to members. The Above Avalon member archive is unmatched in the marketplace in terms of the sheer amount of Apple analysis found in one location. The daily updates archive can be viewed here while the reports archive is available here.
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Apple’s Paid Subscriptions Growth Reaccelerates, The Case for Higher Apple Gross Margins
Today's Above Avalon daily update includes the following stories:
Apple’s Paid Subscriptions Growth Reaccelerates
The Case for Higher Apple Gross Margins
We will conclude our Apple earnings review by looking at Apple’s paid subscriptions growth and gross margins. There are a few follow-ups that we have not covered yet. The discussion includes Neil’s thoughts on why Apple’s gross margins still have room to move higher.
Above Avalon membership is required to read this daily update. Members can read the update here.
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
Above Avalon members receive the full Above Avalon experience throughout the week.
The cornerstone of Above Avalon membership is access to Neil’s exclusive daily updates about Apple. Daily updates are 2,000 words and sent via email Monday through Thursday. Updates revolve around the following topics:
Apple business and strategy analysis.
Neil’s perspective and observations on current news and Apple competitors.
Neil’s Apple financial estimates.
Full coverage of Apple earnings, product events, and keynotes.
If it is of interest to Apple, it is something I pay attention to.
Member Privileges and Benefits
Receive Exclusive Daily Updates. The cornerstone of Above Avalon membership is access to Neil’s exclusive daily updates about Apple. Updates are sent via email and go over current news and developments impacting Apple, its competitors, and the industries Apple plays in (or will play in). Approximately 200 daily updates are published throughout the year. Sample daily updates can be viewed here, here, and here.
Receive Exclusive Reports. Members have access to Neil’s reports, which are in-depth examinations of Apple's business, product, and financial strategy.
Access Private Podcasts. Members have the option of attaching the podcast add-on to their membership in order to receive the daily updates and reports in audio form.
Access Neil’s Earnings Model. Members have access to Neil’s working Apple earnings model (an Excel file that also works in Numbers). The model is fully functional and adjustable and provides the ability to alter earnings drivers.
Email Priority. Receive priority when it comes to having email questions and inquiries answered. Neil personally answers all inquiries, including customer service matters related to your membership.
Archive Access. Read 1,400+ daily updates and reports that have been previously sent to members. The Above Avalon member archive is unmatched in the marketplace in terms of the sheer amount of Apple analysis found in one location. The daily updates archive can be viewed here while the reports archive is available here.
Member Forum Access. Join other Above Avalon members in an active forum containing in-depth discussion and debate. Neil moderates and participates in the forum. The forum is run through Slack and can be accessed here.
Virtual Meet-ups. Talk with Neil about Apple and other related items in virtual meet-ups held via Slack throughout the year.
Above Avalon Support. Play an active role in supporting Above Avalon as an independent source of Apple analysis. Above Avalon is fully sustained by its members.
Apple’s Paid Subscriptions Growth, Apple Gross Margin Hits Decade High, Apple’s Next Marginal Customer
Today's Above Avalon daily update includes the following stories:
Apple’s Paid Subscriptions Growth
Apple Gross Margin Hits Decade High
Apple’s Next Marginal Customer
In today's update, we will address a few topics carried over from Apple's 1Q23 earnings release: paid subscriptions growth trends and gross margin improvement. We begin with Neil’s estimates for new paid subscriptions added across Apple’s ecosystem on a quarterly basis. The discussion then turns to Apple’s gross margin improvement. We go over the most likely driver of the stronger performance. The update concludes with an underlying story to be told about Apple’s gross margin hitting a 10-year high.
Above Avalon membership is required to read this daily update. Members can read the update here.
Above Avalon Membership
Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.
Above Avalon members receive the full Above Avalon experience throughout the week.
The cornerstone of Above Avalon membership is access to Neil’s exclusive daily updates about Apple. Daily updates are 2,000 words and sent via email Monday through Thursday. Updates revolve around the following topics:
Apple business and strategy analysis.
Neil’s perspective and observations on current news and Apple competitors.
Neil’s Apple financial estimates.
Full coverage of Apple earnings, product events, and keynotes.
If it is of interest to Apple, it is something I pay attention to.
Member Privileges and Benefits
Receive Exclusive Daily Updates. The cornerstone of Above Avalon membership is access to Neil’s exclusive daily updates about Apple. Updates are sent via email and go over current news and developments impacting Apple, its competitors, and the industries Apple plays in (or will play in). Approximately 200 daily updates are published throughout the year. Sample daily updates can be viewed here, here, and here.
Receive Exclusive Reports. Members have access to Neil’s reports, which are in-depth examinations of Apple's business, product, and financial strategy.
Access Private Podcasts. Members have the option of attaching the podcast add-on to their membership in order to receive the daily updates and reports in audio form.
Access Neil’s Earnings Model. Members have access to Neil’s working Apple earnings model (an Excel file that also works in Numbers). The model is fully functional and adjustable and provides the ability to alter earnings drivers.
Email Priority. Receive priority when it comes to having email questions and inquiries answered. Neil personally answers all inquiries, including customer service matters related to your membership.
Archive Access. Read 1,200+ daily updates and reports that have been previously sent to members. The Above Avalon member archive is unmatched in the marketplace in terms of the sheer amount of Apple analysis found in one location. The daily updates archive can be viewed here while the reports archive is available here.
Member Forum Access. Join other Above Avalon members in an active forum containing in-depth discussion and debate. Neil moderates and participates in the forum. The forum is run through Slack and can be accessed here.
Virtual Meet-ups. Talk with Neil about Apple and other related items in virtual meet-ups held via Slack throughout the year.
Above Avalon Support. Play an active role in supporting Above Avalon as an independent source of Apple analysis. Above Avalon is fully sustained by its members.