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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