AppleWide moat

Apple's income statement is easy to misread. The company collected about $416 billion in fiscal 2025, and the lines read like a hardware catalog¹: iPhone $209.6 billion — half the company by itself — then Services at $109.2 billion, Wearables, Home and Accessories at $35.7 billion, Mac at $33.7 billion, iPad at $28 billion. Read it that way and Apple is the world's most successful gadget maker. Read the margins instead and a second business appears: hardware carries a gross margin around 37%, while Services runs near 75%² — the profitability of a software company, stapled to a device maker.

The machine works in two strokes. First, sell the device — at premium prices, on an upgrade cycle smoothed by trade-ins and installment plans, through carriers and Apple's own stores. Second, monetize the ownership: once an iPhone is in a pocket it collects App Store commissions, iCloud storage fees, AppleCare premiums, Music and TV+ subscriptions, advertising placements, and — the quietest line of all — billions a year from Google for the privilege of being the default search engine. None of that requires selling anyone anything new. It accrues on the more than 2.5 billion devices already in use³.

That installed base is the company's real balance sheet. Hardware revenue is cyclical — iPhone units barely grow in a good year — but the base grows every year regardless, because devices outlive their owners' upgrade appetites, and every active device is a meter running. The footprint is global with a heavy American and Chinese accent, and nearly everything is designed in California, assembled in Asia, and sold at margins the electronics industry otherwise never sees.

So: a device maker on top, an annuity underneath — and the annuity is why Apple is valued like a consumer staple rather than an electronics firm. Whether the meter keeps running — the lock-in, the brand, the silicon, and the App Store toll the regulators now contest — is the moat question, taken up wall by wall in The Moat below; how each of the five lines earns and grows is set out line by line in The Revenue Lines. The forces that could stop it live in the threats; the market's blind spots in the insights; and the next acts — Siri's rented brain, the glasses, the Watch-as-medicine, the fold — under Future Bets.