The Apple story

What drives the business

• Apple designs the hardware, operating systems and related services across iPhone, Mac, iPad and wearables, with the App Store, iCloud, AppleCare and subscriptions extending the relationship beyond a device purchase.
• iPhone contributed $54.3 billion, or 50%, of revenue in the quarter to June 2026, keeping the phone at the center of the business.
• Services generated $30.7 billion in the quarter to June 2026, with a gross margin of 76% against 40% for hardware, while the active device base reached a record across all major product categories and geographic segments.
• Apple manages its reportable segments geographically, with the Americas generating $45.8 billion and Greater China $18.8 billion in the quarter to June 2026.
• Distribution depends on both Apple’s own stores and platforms and outside carriers and resellers, with direct channels accounting for 40% of net sales and indirect channels 60% in fiscal 2025.

What the price assumes

At $338.40, the reverse DCF implies that free cash flow after stock pay grows 17.4% a year for ten years, using a 10.2% discount rate.

Apple delivered 5.6% annual growth on that measure over the last 10 years, while the TenQ check sets a 4.8% bar by slowing the historical record halfway toward 4%.

Apple passes 0 of 6 Value checks, with a free cash flow yield of 2.8% against its historical 5.4%, despite generating $136.7 billion of free cash flow over the last twelve months.

Value AAPL on your own assumptions

What could change the story

• Apple expects constraints and rising costs for advanced semiconductors, NAND and DRAM to intensify, potentially limiting revenue and pressuring margins.
• Scarce computing resources, longer lead times and higher infrastructure costs could constrain the functionality or availability of Apple’s artificial intelligence offerings.
• Developers discontinuing platform support and requirements under the EU’s Digital Markets Act could weaken the product experience while increasing security, privacy and compliance risks.
• Revenue growth of 14.2% over the last twelve months exceeds Apple’s 1.8% annual pace over the last three years, but that longer record trails the sector comparison of 9.6% and leaves sustained growth unproven.
• Near-term liquidity fails the TenQ check at 1.00 against a 1.50 bar, with cash and short-term investments of $62.4 billion compared with total debt of $82.3 billion.

What to watch next

• Apple’s release for the quarter to June 2026 included no numerical guidance, leaving the next results to establish whether broad product and geographic growth persists.
• Services revenue, its margin relative to hardware and further growth in active devices will show whether the expanding device base continues to support service revenue.
• Gross margin and disclosures about tariff refunds and component costs will help distinguish operating progress from the refund benefit in the quarter to June 2026.
• Following the introduction of Siri AI, disclosures about computing capacity, availability and operating costs will help show how infrastructure constraints affect the offering.

Sources

• Apple's earnings release, filed with the SEC
• Its latest 10-Q or 10-K, for the risk factors
• The AAPL stock report, for every figure and check