Apple Inc. (NASDAQ: AAPL) is an American multinational technology company headquartered in Cupertino, California. Founded in 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne, Apple has evolved from a computer maker into a global leader in consumer electronics, software, and digital services. Its product portfolio spans the iPhone, iPad, Mac, Apple Watch, and App Store, supported by in-house operating systems including iOS and macOS. Apple also operates a broad services ecosystem featuring Apple Pay, iCloud, Apple Music, and Apple TV. The company’s business model emphasizes premium product positioning, tight vertical integration, and strong brand loyalty, enabling strong margins and substantial cash generation. With about 166,000 employees, Apple emphasizes innovation, scale, and a mission that positions business as a force for public good.
Our business health scorecard shows that Apple impresses with great margins, strong earnings and efficient management of capital and expenses. The flipside are large amounts of debt and clear signs of extensive financial engineering. The competitive strength assessment finds Apple at or near the top on all four key metrics. As a result the company achieves very strong scores for both: 84% for business health and 86% for competitive strength.
Read on to learn more about how its financial performance can position Apple as a wonderful investment opportunity in our detailed analysis.
Financial analysis
Business health score card
Using our custom scoring model for business health, Apple achieves 16 out of 19 total points, giving it a score of 84%. From the 225 companies that we are currently monitoring, only 15 achieve a higher score. This puts Apple’s financial performance in the 93rd percentile. It achieves full scores on margins, earnings and expenses. Negative and declining retained earnings and high liabilities keep it from reaching a perfect score. The full table with performance metrics and scores is shown below.
| Performance indicator | Metric | Value | Score |
| Gross margin | Median | 45.2% | 2/2 |
| Gross margin | Coeff. of variation | 3.8% | 1/1 |
| SG&A expense rate | Median | 14.6% | 2/2 |
| Net income | Growth | 3.3% | 1/1 |
| Net income | Consistency | yes | 1/1 |
| Net margin | Median | 25.3% | 2/2 |
| Long term debt to earnings ratio | Median | 0.95 | 2/2 |
| Total liabilities to equity ratio | Median | 5.04 | 0/2 |
| Retained earnings | Growth | -57.3% | 0/1 |
| Share buybacks | Existence | yes | 1/1 |
| Return on equity | Median | 160.3% | 2/2 |
| CAPEX to earnings | Median | -11.0% | 2/2 |
| Total | 16/19 |
Margins: 5 of 5 possible points
Apple shows a solid median gross margin of 45% over the past four years. What’s more, the margin has been growing steadily from 43% in 2022 to 47% in the last year. The median net margin over the same period has been 25% and has been very stable, varying only between 24% and 27%. When we put the margins in context by comparing them with those of close competitors, we see that the proportion of hardware and software products in the portfolio exerts a great influence on the margins:
- Microsoft: 69% gross margin and 36% net margin
- Alphabet : 57% gross margin and 26% net margin
- Samsung: 38% gross margin and 13% net margin
- Dell : 22% gross margin and 4% net margin
So when we compare Apple’s margins to those companies that also generate the majority of their sales from physical products and devices, we can clearly see the pricing power the company possesses due to the premium perception of its products and its brand.
Earnings: 4 of 4 possible points
A net income of $112bn last year was by far the highest value in the last four years and marks a turnaround. In the three years prior, earnings had been slowly declining from $100bn in 2022 to $94bn in 2024. Return on equity also declined, albeit on an extremely high level: The median of the last four years was 160% with a peak of 197% in 2022. The explanation for that decline can be found in an increase in equity over the same period: Growing assets (especially cash and receivables) as well as reduced liabilities, in particular long term debt and other non-current liabilities, drove up equity from $51bn in 2022 to $74bn last year. Taken together, these are positive trajectories and justify a full score on earnings.
Expenses: 4 of 4 possible points
To assess expenses we are going to look at two ratios: SG&A expenses as a percentage of gross profit and capital expenditures as a percentage of earnings. While absolute SG&A expenses are high ($28bn last year), the SG&A expense rate of Apple is delightfully low: The median percentage of gross profit spent on SG&A expenses was a mere 15% over the last 4 years. For the purpose of assessing the financial health of companies, we consider a rate below 30% as a great result. It is a testament to the strength of the Apple brand that can remain present and valuable without having to spend excessive amounts on advertising. In addition, this ratio has been remarkably stable and decreasing slightly: From 14.7% in 2022 to 14.1% last year.
The capital expenditures are also at an investor friendly low rate of 11% of earnings and show the same consistency year over year. It is apparent that Apple is not engaging in the same AI infrastructure spending spree as some of its American peers where capital expenditures have risen sharply over the past years:
- Microsoft: From $24bn in 2022 to $69bn in the trailing twelve months (+188%)
- Alphabet: From $31bn to $78bn (+152%)
- Meta: From $32bn in 2022 to $63bn (+97%)
- Amazon: From $64bn in 2022 to $120bn (+88%)
Debt and Equity: 3 of 6 possible points
Looking at retained earnings we are primarily interested in a positive growth trend. Unfortunately, the trajectory of Apple’s retained earnings points in the opposite direction and on top of that they have been negative throughout the last four years. In 2025 the retained earnings reported on the balance sheet were -$14bn: an improvement to the -$19bn the year before, but a decline from the -$3bn in 2022. Why are they negative? A company can do three things with its earnings:
- Pay out dividends
- Buy back shares
- Accumulate them to fund future growth
Apple is paying a dividend and is known for extensive share buybacks. They have reduced their number of shares from 15.9bn in 2022 to 14.8bn in 2025 – an average annual reduction of 2.5%. For most companies, negative retained earnings are a clear warning sign about their financial health. But in the case of Apple, which scores well on all other dimensions, it can be seen as an intentional choice: The company’s financials are so strong that it doesn’t need to accumulate large amounts of profits to fund further growth.
Now turning to debt, we first look at the ratio of total liabilities to equity. Here the median over the last four years is just above 5. That is too high for our liking: We would prefer a ratio lower than 1.5 and ideally lower than 0.8. On the positive side, we observe a clear declining trend: From a high watermark of almost 6 in 2022, the value has slowly declined to 3.9 last year.
When we look at the ratio between long term debt and earnings, we find the opposite picture: Apple has an outstandingly low median ratio of 0.95 over the last four years and last year’s value was even lower at 0.7, driven by the sudden earnings spike. For context: We are looking for a value below 4 because that means a company could pay back its debt with less than four years of earnings.
Competitive strength assessment
To determine Apple’s competitive strength, we compare the company’s performance to a selection of publicly traded competitors and close peers using four key financial performance indicators:
- Gross margin: Shows pricing power, brand strength and competitive advantage
- Net margin: Reveals operational efficiency and sustained profitability of the business
- Return on equity: Indicates efficient use of capital and self-financing growth
- Capital expenditures: Enables free cash flow growth and financial flexibility
To gauge overall competitive strength, we look at the performance across all four metrics combined. Here we find that Apple surpasses the competition in 31 out of 36 comparisons. The company performs better than its peers in 86% of the cases – a very strong result. It also ranks far above the median rival on all four metrics:
- 17% higher gross margin
- 19% higher net margin
- 146% higher return on equity
- 48% lower capital expenditures to earnings ratio
Moreover, Apple ranks first on return on equity and capital expenditure to earnings ratio, is a close 3rd to Alphabet on net margin and only has to give way to the software heavy behemoths Microsoft and Alphabet on gross margin.
| Metric | Apple | Average of top 3 competitors | Median of competitors |
| Gross margin ↑ | 45.2% | 57.0% | 27.7% |
| Net margin ↑ | 25.3% | 25.0% | 6.2% |
| Return on equity ↑ | 160.3% | 29.3% | 14.6% |
| CAPEX to earnings ↓ | 11.0% | 33.6% | 58.9% |
Apple’s competitors and peers
- Microsoft (NASDAQ:MSFT): Competes with Apple through Windows PCs, Surface devices, cloud services, and productivity software
- Amazon (NASDAQ:AMZN): Competes with Apple via its digital content, smart home devices, and services like Amazon Music and Prime Video
- Alphabet (NASDAQ:GOOGL): Competes with Apple through Android, Google Pixel devices, and services like Search, Maps, and YouTube that rival Apple’s native apps and iPhone platform
- Samsung Electronics (KSE:005930.KS): Competes directly with Apple in smartphones, tablets, wearables, and consumer electronics, serving as Apple’s strongest global hardware rival
- Xiaomi (HKSE:1810.HK): Competes with Apple by offering high-spec smartphones, wearables, and smart home devices at lower prices, targeting value-focused consumers
- Sony (Tokyo:6758.T): Competes with Apple in premium audio, gaming, entertainment content, and camera technology for smartphones
- Dell (NYSE:DELL): Competes with Apple primarily in personal computing, offering Windows-based laptops and desktops that rival the Mac lineup in enterprise and consumer markets
- HP (NYSE:HPQ): Competes with Apple in personal computing and peripheral hardware, positioning its laptops and desktops as affordable and versatile alternatives to Macs
- Lenovo (HKSE:0992.HK): Competes with Apple by dominating global PC shipments and offering a broad range of laptops and tablets that challenge MacBooks and iPads
Gross margin analysis: Apple ranks 4th out of 10
The average gross margin for the top three competitors is 57%. The median of all nine is 28%. With a gross margin of 45% Apple compares quite well to that benchmark. The determining factor here is the product portfolio mix between physical products (hardware) and digital products (software and services). Therefore, Microsoft and Alphabet, which derive the majority of their revenue from digital products clearly lead the ranking. On the other end of the spectrum companies like Samsung, Xiaomi, Dell or Lenovo that derive the majority of their revenue from physical products exhibit substantially lower gross margins. Considering that Apple generates the lion’s share of its revenue with physical products it compares quite favorably.
Net profit margin performance:
Apple ranks 3rd out of 10
Overall, we see a very similar picture. The only exception is Amazon: The large retail business has expectedly low net margins, which pushes the company down in the ranking even though it was ranked 3rd by gross margin. The average net margin for the top three competitors is 25%. The median of all nine is a mere 6%. With a net margin of 25% Apple positions itself as a strong 3rd behind the sole leader Microsoft (36% net margin) and almost on par with Alphabet (26% net margin). Particularly eye-catching is the direct comparison between Apple and Samsung: Samsung was lagging Apple’s gross margin by 8 percentage points (45.2% vs 37.6%). That gap increased to 13 percentage points when comparing the net margins of the two companies.
Return on equity comparison:
Apple ranks 1st out of 10
The median return on equity of the competitors is 15% and the average value of the top 3 competitors is 29%. With its 160% return on equity Apple is the leader by a large margin. To some extent that is caused by high profit margins derived from premium pricing and strong customer loyalty. But it is also the result of financial engineering to reduce equity (debt financing, share buybacks and tax optimization). As such, the actual lead is less expressive, but it is clearly visible that Apple is among the top players for generating profits from its investments.
For the competitors, return on equity is by and large declining with market capitalization: Very large companies like Microsoft and Alphabet post substantially higher values compared to smaller ones like Sony or Xiaomi. HP and Dell actually have negative equity, which makes this metric less expressive for these companies.
Capital expenditure efficiency:
Apple ranks 1st out of 10
With just 11% of earnings spent on capital expenditures Apple truly leads the ranking. The only company that gets into its vicinity is HP with 20%. The median of the competitors is a much more sober 59% and even the average of the top 3 competitors clocks in at 34%. And since we look at four year median spending, this doesn’t even fully factor in the current surge for AI infrastructure spending.
Comprehensive ranking of Apple and its peers
To get a holistic picture that includes each company’s performance on all four metrics, we rank them individually on each metric and compute the average rank per company. The table below summarizes how Apple compares to its peers on all four key performance indicators in 2025. Here we find that Apple ranks second overall, just behind Microsoft and slightly ahead of Alphabet. Microsoft leads with first ranks on margins and a solid 2nd rank for return on equity. Apple in turn ranks first on return on equity and capital expenditures.
| Company | Gross margin | Net margin | Return on equity | CAPEX to earnings | Average rank |
| Microsoft | 1 | 1 | 2 | 4 | 2.0 |
| Apple | 4 | 3 | 1 | 1 | 2.3 |
| Alphabet | 2 | 2 | 3 | 5 | 3.0 |
| Sony | 6 | 5 | 6 | 6 | 5.8 |
| Amazon | 3 | 6 | 5 | 10 | 6.0 |
| Samsung Electronics | 5 | 4 | 8 | 9 | 6.5 |
| Xiaomi | 9 | 7 | 7 | 3 | 6.5 |
| HP Inc. | 8 | 8 | 10 | 2 | 7.0 |
| Dell | 7 | 9 | 9 | 7 | 8.0 |
| Lenovo | 10 | 10 | 4 | 8 | 8.0 |
Disclaimer: The content on this page is for informational and educational purposes only and does not constitute financial, investment, or trading advice. All opinions expressed are solely those of the author. There are risks associated with investing in securities, including the loss of invested capital. Past performance is not a guarantee or predictor of future results. The author is not responsible for any losses incurred as a result of the information provided.