The Revenue LinesWide moat

Apple (AAPL) — moat facet

Half of Apple is one phone, a quarter is Services earning 42% of the gross profit, and the other three lines exist mostly to keep the phone's owners inside.

Apple reports five revenue lines, and the first thing to know is that they are not five businesses of similar weight. In fiscal 2025 the iPhone brought in $209.6 billion, half of the company's $416.2 billion; Services $109.2 billion; Wearables, Home and Accessories $35.7 billion; the Mac $33.7 billion; and the iPad $28.0 billion1. Apple does not report a profit for any of them. It reports one gross margin for products and another for Services, and the gap between the two is the most important number on the page: 36.8% against 75.4% in fiscal 20252.

Compound annual growth, FY2019 to FY2025 (%)Services15.4%iPhone6.7%Wearables6.5%iPad4.7%Mac4.6%Calc from Apple Forms 10-K, net sales by category (recast basis)
The line with the highest margin also grew fastest; the iPhone, half of sales, grew under half as quickly.

Put those together and profit is far more concentrated than revenue. Services was 26% of net sales and 42% of gross profit, $82.3 billion of $195.2 billion3. The four product lines, 74% of sales, shared the other $112.9 billion, 58% of gross profit, and Apple never says how. The iPhone almost certainly carries most of it, since it is 68% of product revenue4, but that is an inference, and the filings leave it one.

Growth runs in a different order. On the basis Apple has used since fiscal 2019, Services compounded at about 15% a year to fiscal 2025, the iPhone at about 7%, Wearables at about 6.5%, and the iPad and the Mac at under 5%5. So the line that earns the most per dollar has also grown fastest, which is most of the case for the multiple the market pays. The line that makes the most dollars then surprised everyone: in the first nine months of fiscal 2026 the iPhone rose 22% while Services rose 14%6. The June 2026 quarter showed the same spread in miniature: the iPhone up 22%, the Mac 29%, Services 12% and Wearables 6%, with the iPad the one line down, by 6%7.

Each line also has a different job. The iPhone opens the account: nearly every Apple relationship starts with one, and every other line depends on the base it anchors. Services is the meter on that base. The Mac, the iPad and the wearables are the devices a customer adds after the phone, and their value is partly what they sell and partly how hard they make it to leave, which is the argument of The Ecosystem Lock-In under The Moat. None of that is visible in a revenue table, which reports the lines as if they were separate shops.

The weak years say something about each. The iPhone fell in fiscal 2016 on a lower rate of upgrades and again in fiscal 2019 on lower unit sales89. The Mac lost 27%, or $10.8 billion, in fiscal 2023, after the surge of Apple-silicon laptops10. Wearables has shrunk for three years since its fiscal 2022 peak11. Services has not had a down year in the series, and its slowest was 9% in fiscal 202312.

Two warnings about the chart beside these pages. The bands before fiscal 2019 are as originally reported; Apple recast the categories that year under the new revenue standard, moving about $2.6 billion of fiscal 2018 sales into Services13, and renamed "Other Products" as Wearables, Home and Accessories. And all five lines are product categories, while Apple's reportable segments are geographic: the Americas, Europe, Greater China, Japan and the rest of Asia Pacific14. The product view is the useful one for thinking about the moat; the geographic one is where Apple reports operating income.

The pages below take the lines in the chart's order. One number would change the verdict across all five: the Services share of gross profit, 42% in fiscal 2025. If it keeps climbing while the iPhone grows, Apple is becoming the annuity the market already pays for; if it stalls while regulators trim the App Store, the company falls back on the phone.

Moat trajectory: Widening

The mix keeps shifting toward the line that earns most: Services was 20.4% of Apple's gross profit in fiscal 2017 and 42.2% in fiscal 2025, while the iPhone, the account every other line depends on, grew 22% in the first nine months of fiscal 2026.

The number that tests this moat
Moat Explorer calc
Services share of Apple's gross profit
42.2% in FY2025, from 35.7% in FY2023

Five lines, one gross-margin split: the quarter of sales that is Services earns two-fifths of the gross profit, and the share has risen every year the split is shown. A year in which it fell while the iPhone grew would mean Apple was drifting back toward being a hardware company.

How it's calculated: Services gross margin $82,314M / total $195,201M = 42.2% (FY2025); $60,345M / $169,148M = 35.7% (FY2023).
Source: Moat Explorer calc from Apple Form 10-K, FY2025 ↗
Dig deeper
DIG DEEPER 01
iPhone
The account every other line sells into: $209.6 billion in fiscal 2025, flat for years, then up 22% in fiscal 2026 and now $100 dearer on every model.
DIG DEEPER 02
Services
The meter on 2.5 billion devices: margins above 75%, never a down year, and a list of growth drivers that has shrunk to advertising and cloud.
DIG DEEPER 03
Wearables, Home & Accessories
The fastest-growing line of the decade shrank for three years, and each new iPhone owner now buys less of it than the owners before.
DIG DEEPER 04
Mac
Flat on Intel chips, up 56% on Apple's own, down 27% the year after, and now winning schools with the cheapest Mac yet.
DIG DEEPER 05
iPad
The only Apple line smaller than it was in 2013: a second screen that its owners rarely replace.
References
  1. ReportedIn fiscal 2025 the iPhone brought in $209.6 billion, half of the company's $416.2 billion; Services $109.2 billion; Wearables, Home and Accessories $35.7 billion; the Mac $33.7 billion; and the iPad $28.0 billion.
    Apple Form 10-K, FY2025, Item 7 - net sales by category 2023-2025 (iPhone $209,586M / $201,183M / $200,583M; Mac $33,708M / $29,984M / $29,357M; iPad $28,023M / $26,694M / $28,300M; Wearables, Home and Accessories $35,686M / $37,005M / $39,845M; Services $109,158M / $96,169M / $85,200M) and the drivers of each change; products and services gross margin 36.8% and 75.4%; services cost of sales $26,844M — FY2023-FY2025 · publ. 31 October 2025 · source ↗
  2. ReportedIt reports one gross margin for products and another for Services, and the gap between the two is the most important number on the page: 36.8% against 75.4% in fiscal 2025.
    Apple Form 10-K, FY2025, Item 7 - net sales by category 2023-2025 (iPhone $209,586M / $201,183M / $200,583M; Mac $33,708M / $29,984M / $29,357M; iPad $28,023M / $26,694M / $28,300M; Wearables, Home and Accessories $35,686M / $37,005M / $39,845M; Services $109,158M / $96,169M / $85,200M) and the drivers of each change; products and services gross margin 36.8% and 75.4%; services cost of sales $26,844M — FY2023-FY2025 · publ. 31 October 2025 · source ↗
  3. Moat Explorer calcServices was 26% of net sales and 42% of gross profit, $82.3 billion of $195.2 billion.
    Moat Explorer calc from Apple Forms 10-K (FY2015-FY2025) and 10-Q (FY2026): category net sales, units to FY2018, products and services gross margin, installed base reported each January — FY2013 to June 2026 · publ. 2026-09-19 · source ↗
    Method: Services gross margin $82,314M ($109,158M - $26,844M) / total gross margin $195,201M = 42.2%; Services $109,158M / net sales $416,161M = 26.2%; products gross margin $195,201M - $82,314M = $112,887M (FY2025 10-K).
  4. Moat Explorer calcThe iPhone almost certainly carries most of it, since it is 68% of product revenue, but that is an inference, and the filings leave it one.
    Moat Explorer calc from Apple Forms 10-K (FY2015-FY2025) and 10-Q (FY2026): category net sales, units to FY2018, products and services gross margin, installed base reported each January — FY2013 to June 2026 · publ. 2026-09-19 · source ↗
    Method: iPhone $209,586M / products net sales ($416,161M - $109,158M = $307,003M) = 68.3% (FY2025 10-K).
  5. Moat Explorer calcOn the basis Apple has used since fiscal 2019, Services compounded at about 15% a year to fiscal 2025, the iPhone at about 7%, Wearables at about 6.5%, and the iPad and the Mac at under 5%.
    Moat Explorer calc from Apple Forms 10-K (FY2015-FY2025) and 10-Q (FY2026): category net sales, units to FY2018, products and services gross margin, installed base reported each January — FY2013 to June 2026 · publ. 2026-09-19 · source ↗
    Method: Compound annual growth FY2019-FY2025 on the recast basis: Services $46,291M to $109,158M = 15.4%; iPhone $142,381M to $209,586M = 6.7%; Wearables $24,482M to $35,686M = 6.5%; iPad $21,280M to $28,023M = 4.7%; Mac $25,740M to $33,708M = 4.6%.
  6. ReportedThe line that makes the most dollars then surprised everyone: in the first nine months of fiscal 2026 the iPhone rose 22% while Services rose 14%.
    Apple Form 10-Q, quarter ended 27 June 2026 - iPhone $54,252M (+22%); Mac $10,352M (+29%); iPad $6,191M (-6%) on iPad mini and Air; Wearables $7,883M (+6%); Services $30,739M (+12%) on advertising and cloud services; nine months: iPhone $196,515M, Mac $27,137M, iPad $21,700M, Wearables $27,277M, Services $91,728M; services gross margin 75.6%; deferred revenue $14.9B, 64% within a year — Q3 FY2026 · publ. 31 July 2026 · source ↗
  7. ReportedThe June 2026 quarter showed the same spread in miniature: the iPhone up 22%, the Mac 29%, Services 12% and Wearables 6%, with the iPad the one line down, by 6%.
    Apple Form 10-Q, quarter ended 27 June 2026 - iPhone $54,252M (+22%); Mac $10,352M (+29%); iPad $6,191M (-6%) on iPad mini and Air; Wearables $7,883M (+6%); Services $30,739M (+12%) on advertising and cloud services; nine months: iPhone $196,515M, Mac $27,137M, iPad $21,700M, Wearables $27,277M, Services $91,728M; services gross margin 75.6%; deferred revenue $14.9B, 64% within a year — Q3 FY2026 · publ. 31 July 2026 · source ↗
  8. ReportedThe iPhone fell in fiscal 2016 on a lower rate of upgrades and again in fiscal 2019 on lower unit sales.
    Apple Form 10-K, FY2016 - iPhone net sales and unit sales decreased on a lower rate of iPhone upgrades; iPad decreased on lower unit sales and weaker foreign currencies — FY2016 · publ. 26 October 2016 · source ↗
  9. ReportedThe iPhone fell in fiscal 2016 on a lower rate of upgrades and again in fiscal 2019 on lower unit sales.
    Apple Form 10-K, FY2019 - the recast category table (Wearables, Home and Accessories +41% and +36% on AirPods and Apple Watch; iPhone -14% on lower unit sales; Services +16%); gross margin by products and services, services 55.0% (2017) and 63.7% (2019) — FY2017-FY2019 · publ. 31 October 2019 · source ↗
  10. ReportedThe Mac lost 27%, or $10.8 billion, in fiscal 2023, after the surge of Apple-silicon laptops.
    Apple Form 10-K, FY2023 - iPhone -2% ($4.9B) on non-Pro models; Mac -27% ($10.8B) on laptops; iPad -3% on iPad mini and Air; Wearables, Home and Accessories -3% ($1.4B); Services +9% ($7.1B) across all lines of business — FY2023 · publ. 3 November 2023 · source ↗
  11. ReportedWearables has shrunk for three years since its fiscal 2022 peak.
    Apple Form 10-K, FY2025, Item 7 - net sales by category 2023-2025 (iPhone $209,586M / $201,183M / $200,583M; Mac $33,708M / $29,984M / $29,357M; iPad $28,023M / $26,694M / $28,300M; Wearables, Home and Accessories $35,686M / $37,005M / $39,845M; Services $109,158M / $96,169M / $85,200M) and the drivers of each change; products and services gross margin 36.8% and 75.4%; services cost of sales $26,844M — FY2023-FY2025 · publ. 31 October 2025 · source ↗
  12. ReportedServices has not had a down year in the series, and its slowest was 9% in fiscal 2023.
    Apple Form 10-K, FY2023 - iPhone -2% ($4.9B) on non-Pro models; Mac -27% ($10.8B) on laptops; iPad -3% on iPad mini and Air; Wearables, Home and Accessories -3% ($1.4B); Services +9% ($7.1B) across all lines of business — FY2023 · publ. 3 November 2023 · source ↗
  13. Moat Explorer calcThe bands before fiscal 2019 are as originally reported; Apple recast the categories that year under the new revenue standard, moving about $2.6 billion of fiscal 2018 sales into Services, and renamed "Other Products" as Wearables, Home and Accessories.
    Moat Explorer calc from Apple Forms 10-K (FY2015-FY2025) and 10-Q (FY2026): category net sales, units to FY2018, products and services gross margin, installed base reported each January — FY2013 to June 2026 · publ. 2026-09-19 · source ↗
    Method: FY2018 Services $39,748M in the FY2019 10-K (recast) against $37,190M as originally reported in the FY2018 10-K = $2,558M.
  14. ReportedAnd all five lines are product categories, while Apple's reportable segments are geographic: the Americas, Europe, Greater China, Japan and the rest of Asia Pacific.
    Apple Form 10-K, FY2025, Item 1 - the iPhone, Mac, iPad and Wearables, Home and Accessories lines (wearables include smartwatches, wireless headphones and spatial computers); Services: advertising incl. third-party licensing arrangements, AppleCare, cloud services, digital content incl. the App Store and subscription services, payment services; reportable segments are geographic; direct and indirect channels 40% and 60% of net sales — FY2025 · publ. 31 October 2025 · source ↗
Sources
Generated September 19, 2026