Apple (AAPL +0.73%) has been one of the most successful companies in the world over the last 20 years, and it doesn't show any signs of stopping. iPhones continue improving, Macs are better than ever, and new accessories like AirPods and the Apple Watch have taken the market by storm.
But what do smart investors know about Apple? Let's dig into why this company is so successful.
NASDAQ: AAPL
Key Data Points
The iPhone is the key to Apple's success
Everything Apple does today stems from the iPhone. Not only did the iPhone generate $65.8 billion of the company's $117.2 billion in revenue in the fiscal first quarter of 2023 (which ended December 31, 2022), it drove a lot of the $20.8 billion in services revenue from the App Store, iCloud, and advertising.
The iPhone has also been both the gateway to products like Macs, iPads, and accessories and the testing ground for new innovations that integrate the company's products more completely. And this level of integration is what sets Apple apart from the competition.
Image source: Apple.
Integration is the point
Apple has always been a unique company in that it integrates hardware with software. But over the last decade, it's taken the strategy to a new level.
Apple now manufactures its own chips for the iPhone, the Mac, and even designs their smaller devices like AirPods and the Apple Watch in house. The software and hardware are integrated, but so are chips and other components.
This allows Apple to make more efficient products for its specific use cases. Computers can last longer on a charge and be built to efficiently operate for most use cases and future functionality like incorporating AI models on the chip (something Apple is working on).
The disparate PC and Android model of pulling together components from multiple suppliers and then tying them together with Android or Windows has advantages like cost and flexibility, but Apple is more concerned with a better user experience, and integration allows that to happen.
Apple is returning cash to shareholders at an unprecedented level
Not only is Apple upgrading and introducing new products, it's also returning cash to shareholders at an incredible pace. Over the past year, it has returned over $100 billion to shareholders through buybacks and dividends.
AAPL Stock Buybacks (TTM) data by YCharts
This may be a sign of a maturing business that doesn't have major new projects to invest in, but Apple is also generating cash at a scale few companies have ever come close to. So returning cash is likely the best use of company funds, rather than chasing new markets that may never materialize (ahem, Meta).
Still one of the best
Apple isn't growing as quickly as it was a decade ago, but it's still a giant in technology. The company has an incredibly sticky business that starts with the iPhone and extends to the Mac and other products. I don't see its dominant position ending anytime soon, and that's why it's still one of the best stocks on the market today.
