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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 2026 the iPhone brought in $254.1 billion, more than half of the company's $478.8 billion; Services $123.3 billion; Wearables, Home and Accessories $35.6 billion; the Mac $37.9 billion; and the iPad $27.9 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: 39.3% against 76.2% in fiscal 20262.

Compound annual growth, FY2019 to FY2026 (%)Services15.0%iPhone8.6%Mac5.7%Wearables5.5%iPad3.9%Calc from Apple results exhibits, net sales by category, FY2019 recast basis
Services still compounds fastest, but FY2026 lifted the iPhone into second place and left the iPad last — the order this page was written to explain has changed.

Put those together and profit is far more concentrated than revenue. Services was 26% of net sales and 40% of gross profit, $93.9 billion of $233.6 billion3. The four product lines, 74% of sales, shared the other $139.7 billion, 60% of gross profit, and Apple never says how. The iPhone almost certainly carries most of it, since it is 71% 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 2026, the iPhone at about 8.6%, the Mac at about 5.7%, Wearables at about 5.5%, and the iPad at about 3.9%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: across fiscal 2026 the iPhone rose 21.2% while Services rose 13.0%6, the first year in a decade in which the phone outgrew the meter attached to it. The September quarter put the spread in sharper relief: the iPhone up 17.5%, the Mac 23.7% and Services 9.8%, while the iPad fell 10.4% and Wearables 7.9%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 now shrunk four years running from 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 tests the verdict across all five: the Services share of gross profit. It had risen every year to 42% in fiscal 2025 — and in fiscal 2026 it fell to 40%15. Read the cause before the conclusion: Services did not falter, it grew 13% at a record margin. The hardware margin simply improved faster. That is a good problem, and it is still a reversal: the company is being carried by the phone again, and the phone is the part of Apple that has to be sold afresh every single year.

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
40.2% in FY2026, down from 42.2%

A quarter of sales earns two-fifths of the gross profit, which is the whole case for Apple's multiple. The share had risen every year until FY2026, when it fell — not because Services weakened but because the products margin improved faster. Another fall would still be the number that matters: it would mean the annuity is no longer taking over the profit.

How it's calculated: Services gross profit of $93,943M ($123,301M less $29,358M) over total gross margin of $233,602M for FY2026; $82,314M over $195,201M for FY2025.
Source: Moat Explorer calculation from Apple's Q4 FY2026 results exhibit ↗
Dig deeper
DIG DEEPER 01
iPhone
The account every other line sells into: $254 billion in fiscal 2026, up 21% after years of going nowhere, 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 has now shrunk four years running, and each new iPhone owner 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. ReportedFY2026 net sales by category: iPhone $254,098M of $478,834M, Services $123,301M, Wearables $35,577M, Mac $37,929M, iPad $27,929M.
    Apple Inc., Form 8-K Exhibit 99.1 — Q4 FY2026 results: revenue $114,477M (+12%), net income $30,711M, diluted EPS $2.10; twelve months revenue $478,834M, net income $132,175M, diluted EPS $8.98; net sales by category iPhone $254,098M, Services $123,301M, Wearables/Home/Accessories $35,577M, Mac $37,929M, iPad $27,929M; by segment Americas $198,083M, Europe $127,604M, Greater China $82,378M, Japan $30,908M, Rest of Asia Pacific $39,861M; R&D $45,765M; inventories $14,541M vs $5,718M; intangibles $20,278M vs $11,093M; repurchases $86,390M; capex $9,041M; D&A $13,423M — Q4 and FY2026 (quarter and year ended 26 September 2026) · publ. 2 November 2026 · source ↗
  2. Moat Explorer calcA products gross margin of 39.3% against 76.2% for Services in FY2026.
    Moat Explorer calculation from Apple's Q4 FY2026 results exhibit (growth rates, category and segment shares, products and Services gross margins, gross-profit shares and compound growth rates are all derived from the reported dollar figures) — FY2026 · publ. 3 November 2026 · source ↗
    Method: Shares and margins are the reported dollar lines divided into one another.
  3. Moat Explorer calcServices was 26% of net sales and 40% of gross profit, $93.9 billion of $233.6 billion; the four product lines shared $139.7 billion, 60% of gross profit.
    Moat Explorer calculation from Apple's Q4 FY2026 results exhibit (growth rates, category and segment shares, products and Services gross margins, gross-profit shares and compound growth rates are all derived from the reported dollar figures) — FY2026 · publ. 3 November 2026 · source ↗
    Method: Shares and margins are the reported dollar lines divided into one another.
  4. Moat Explorer calcThe iPhone is 71% of product revenue in FY2026.
    Moat Explorer calculation from Apple's Q4 FY2026 results exhibit (growth rates, category and segment shares, products and Services gross margins, gross-profit shares and compound growth rates are all derived from the reported dollar figures) — FY2026 · publ. 3 November 2026 · source ↗
    Method: Shares and margins are the reported dollar lines divided into one another.
  5. Moat Explorer calcFY2019-FY2026 compound growth: Services about 15%, the iPhone 8.6%, the Mac 5.7%, Wearables 5.5%, the iPad 3.9%.
    Moat Explorer calculation from Apple's Q4 FY2026 results exhibit (growth rates, category and segment shares, products and Services gross margins, gross-profit shares and compound growth rates are all derived from the reported dollar figures) — FY2026 · publ. 3 November 2026 · source ↗
    Method: Compound annual growth from the FY2019 recast base to FY2026, i.e. (end/start)^(1/7)-1.
  6. Moat Explorer calcAcross FY2026 the iPhone rose 21.2% and Services 13.0%.
    Moat Explorer calculation from Apple's Q4 FY2026 results exhibit (growth rates, category and segment shares, products and Services gross margins, gross-profit shares and compound growth rates are all derived from the reported dollar figures) — FY2026 · publ. 3 November 2026 · source ↗
    Method: Shares and margins are the reported dollar lines divided into one another.
  7. Moat Explorer calcSeptember-quarter growth: iPhone 17.5%, Mac 23.7%, Services 9.8%, iPad -10.4%, Wearables -7.9%.
    Moat Explorer calculation from Apple's Q4 FY2026 results exhibit (growth rates, category and segment shares, products and Services gross margins, gross-profit shares and compound growth rates are all derived from the reported dollar figures) — FY2026 · publ. 3 November 2026 · source ↗
    Method: Shares and margins are the reported dollar lines divided into one another.
  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, Home and Accessories fell again in FY2026, to $35,577M from $35,686M — a fourth consecutive decline.
    Apple Inc., Form 8-K Exhibit 99.1 — Q4 FY2026 results: revenue $114,477M (+12%), net income $30,711M, diluted EPS $2.10; twelve months revenue $478,834M, net income $132,175M, diluted EPS $8.98; net sales by category iPhone $254,098M, Services $123,301M, Wearables/Home/Accessories $35,577M, Mac $37,929M, iPad $27,929M; by segment Americas $198,083M, Europe $127,604M, Greater China $82,378M, Japan $30,908M, Rest of Asia Pacific $39,861M; R&D $45,765M; inventories $14,541M vs $5,718M; intangibles $20,278M vs $11,093M; repurchases $86,390M; capex $9,041M; D&A $13,423M — Q4 and FY2026 (quarter and year ended 26 September 2026) · publ. 2 November 2026 · 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 ↗
  15. Moat Explorer calcThe Services share of Apple's gross profit fell from 42% in FY2025 to 40% in FY2026, while Services revenue grew 13% at a record margin.
    Moat Explorer calculation from Apple's Q4 FY2026 results exhibit (growth rates, category and segment shares, products and Services gross margins, gross-profit shares and compound growth rates are all derived from the reported dollar figures) — FY2026 · publ. 3 November 2026 · source ↗
    Method: Shares and margins are the reported dollar lines divided into one another.
Sources
Generated November 3, 2026