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Back of Napkin

Apple Inc. AAPL

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Apple's revenue growth went from 5.1% to 16.4% across five quarters, which is the fastest this company has grown in years.

Product gross margin went from 34.5% to 40.1% over the same stretch, and that is the more interesting number.

AAPL · price with moving averages

Daily · 6MWeekly · 3Y
$152$200$249$298$347 Sep '23Apr '24Nov '24Jun '25Jan '26Aug '26 BID
EMAs82140

Source: market data.

The business

Apple sells iPhones, and then sells software and services to the people who own them. The iPhone was $54.3B of the $109.4B quarter. Services, meaning the App Store, advertising, iCloud, payments and subscriptions, was $30.7B at a 75.6% gross margin against 40.1% on hardware.

Every strategic question about Apple is really about whether the installed base keeps growing, because Services revenue is a function of how many devices exist and how much each owner spends. The company no longer discloses that base, so the question cannot be answered directly from the filings.

Inside the complete Back of Napkin

  1. 01The business
  2. 02The numbers
  3. 03Management
  4. 04How it fails or surprises you
  5. 05The shape of the payoff
  6. 06Closing thoughts
  7. 07Methodology

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