Apple generated $136.7 billion of free cash flow in the twelve months to 27 June 2026. Free cash flow is the cash left after capital spending, which is spending on buildings and equipment. It is a non-GAAP measure because Generally Accepted Accounting Principles (GAAP), the US accounting rules, do not define it.
This post asks how far a Discounted Cash Flow (DCF) of Apple moves when its assumptions change. Illustrative inputs give $273 a share on perpetual growth (steady growth after year 10) and $333 on an exit multiple (a sale at a set multiple of year-10 cash flow).
What is an Apple DCF? An Apple DCF adds up the free cash flow Apple is assumed to produce, discounted to today's money.
Changing one assumption at a time changes the answer: about $160 a share at 5% growth in years 1 to 5 and about $592 at 30%, on perpetual growth.
Most of the value comes after year 10: 58% of enterprise value, the value of the business before its cash and debt.
The discount rate is a Weighted Average Cost of Capital. One percentage point more gives $236 a share and one point less $322.
Apple's starting point: free cash flow
What Is Free Cash Flow? has the detail.
Apple's fiscal year ends in late September. Fiscal 2026 ended on 26 September 2026, but its annual report is unfiled as of 15 October 2026.
The model therefore starts from the twelve months to 27 June 2026: fiscal 2025, plus the first nine months of fiscal 2026, minus the first nine months of fiscal 2025.
Source: Apple Form 10-K for fiscal 2025 and quarterly report (Form 10-Q) for the quarter to 27 June 2026; YX Insights
Free cash flow ran from $53.5 billion in fiscal 2016 to $111.4 billion in fiscal 2022. It was then $99.6 billion, $108.8 billion and $98.8 billion in fiscal 2023, 2024 and 2025.
The last bar overlaps fiscal 2025 by three months, so the 38% rise to it compares overlapping periods. The base year is a choice. The sensitivity section shows what it does to the answer.
How the model forecasts ten years of Apple's cash flow
The forecast has two stages, as in the Microsoft model in What Is a DCF?.
Stage 1, years 1 to 5: free cash flow grows 15% a year, from $136.7 billion to $274.9 billion.
Stage 2, years 6 to 10: growth fades evenly, from 12.5% in year 6 to 2.5% in year 10, reaching $393.6 billion. In the sensitivity table the fade starts from the changed stage 1 rate.
The Alphabet DCF post uses the same 15% path so the two compare.
Cash is discounted as if it arrived at each year's end, with year 1 the twelve months after 27 June 2026. Values are as at that date.
Source: Apple filings; YX Insights calculations
Chart 2 shows the assumed path before discounting.
Apple's discount rate: the Weighted Average Cost of Capital
We discount at Apple's Weighted Average Cost of Capital (WACC), worked out from market data on 13 October 2026 as What Is WACC? explains.
Beta, how far Apple's shares move for each 1% move in SPY (the Standard & Poor's 500 ETF, an exchange-traded fund), was 1.07 over the 60 months to September 2026.
Aswath Damodaran's page for 1 October 2026 lists equity risk premium estimates, the extra yearly return assumed for shares over Treasuries, from 3.30% to 5.67%. We use 4.20%.
The cost of equity, the return shareholders require, is the risk-free rate (the 10-year US Treasury yield) plus beta times the premium: 5.21% + 1.07 × 4.20% = 9.70%.
The cost of debt is the yield on an index of US corporate bonds with a high credit grade (rated AA), 5.77%.
After the 17.3% GAAP effective tax rate for the twelve months to 27 June 2026, the cost of debt is 5.77% × (1 − 17.3%) = 4.77%.
Debt was $84.3 billion on 27 June 2026, excluding leases. Equity is 98.3% of capital and debt 1.7%. 98.3% × 9.70% + 1.7% × 4.77% = 9.62%, rounded to 9.6% in the model.
Terminal value: two ways to price the years after year 10
The terminal value prices every year after year 10 in one number.
Perpetual growth. We assume cash flow grows 2.5% a year for ever. That is below the 4.5% a year at which US Gross Domestic Product (GDP) grew from 2000 to 2025 before inflation.
The first year after year 10 is one year of growth on year 10, hence the 1 + 2.5%. Dividing by the discount rate less the growth rate adds up the endless stream.
The terminal value is year-10 cash flow × (1 + 2.5%) ÷ (9.6% − 2.5%) = $5,682 billion. Dividing by 1 + 9.6% compounded over ten years, a factor of 2.501, gives $2,272 billion today.
Years 1 to 5 are worth $791 billion today and years 6 to 10 $859 billion, so years 1 to 10 are worth $1,650 billion. The enterprise value is $1,650 billion + $2,272 billion = $3,922 billion, of which 58% is terminal value.
Exit multiple. The business is assumed sold at the end of year 10 for 20 times that year's free cash flow, as in the Microsoft model. The terminal value is $7,872 billion, or $3,148 billion today. The enterprise value is $4,798 billion.
At 9.6%, 20 times equals perpetual growth of (20 × 9.6% − 1) ÷ (20 + 1) = 4.4%. That is above the 2.5% assumed above, so this method gives $60 a share more.
On 27 June 2026 Apple held $146.5 billion of cash and marketable securities (investments that can be sold quickly) against $84.3 billion of debt, excluding leases. Net cash, meaning cash less debt, is $62.2 billion.
$ million | Perpetual growth | Exit multiple |
|---|---|---|
Enterprise value | 3,922,298 | 4,797,894 |
Cash and marketable securities | 146,517 | 146,517 |
Debt | −84,344 | −84,344 |
Equity value | 3,984,471 | 4,860,067 |
Per share (14.594 billion shares) | $273 | $333 |
How the answer changes with the assumptions
The table changes one assumption at a time and shows value per share. In the rows for growth in years 1 to 5, stage 2 fades from the changed rate to 2.5%.
Input changed | Perpetual growth | Exit multiple |
|---|---|---|
Illustrative inputs | $273 | $333 |
Years 1 to 5 growth 5% | $160 | $191 |
Years 1 to 5 growth 30% | $592 | $736 |
No fade: 2.5% from year 6 | $230 | $278 |
Later fade: 15% to year 7, then 10%, 5%, 2.5% | $292 | $358 |
Terminal growth 1.5% | $252 | Not applicable |
Terminal growth 4.5% | $338 | Not applicable |
Exit multiple 10 times (implies −0.4% growth) | Not applicable | $225 |
Exit multiple 25 times (implies 5.4% growth) | Not applicable | $387 |
Discount rate 8.6% (one point lower) | $322 | $360 |
Discount rate 10.6% (one point higher) | $236 | $309 |
Debt weight 0% (base 1.7%; discount rate 9.7%) | $269 | $330 |
Debt weight 30% (base 1.7%; discount rate 8.2%) | $346 | $371 |
Stock-based compensation (pay in shares) also deducted from free cash flow | $246 | $300 |
Last fiscal year's free cash flow as the start | $198 | $242 |
Source: Apple filings; FRED series DGS10, BAMLC0A2CAAEY, GDP; Aswath Damodaran; YX Insights calculations.
Source: Apple filings; FRED; Aswath Damodaran; YX Insights calculations
Chart 3 plots the perpetual-growth column. The width of each change is our choice, so the bars do not rank the drivers.
A reader who changes these assumptions gets a different answer. No case is the right one.
This post starts from free cash flow, as the worked model in What Is a DCF? does, so operating margin and capital spending are not separate inputs. A fuller build forecasts revenue, then margins and capital spending.
A DCF is one method among several
Multiples such as the price-to-earnings ratio, the forward price-to-earnings ratio and enterprise value multiples compare a company with its peers, which is quick but depends on the peers chosen. A DCF states every assumption, but the answer moves with each.
How to Value a Stock covers the approaches. The reverse DCF post covers a related method.
What the model leaves out
Free cash flow (non-GAAP) does not deduct stock-based compensation, which is pay in shares. It was $13.7 billion in the twelve months to 27 June 2026, or 10.0% of free cash flow (non-GAAP). The sensitivity section shows the effect.
The exercise produced about $160 a share at 5% growth in years 1 to 5 and about $592 at 30%, on perpetual growth. The method is what this post illustrates: each input is a choice that moves the answer.
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Common questions about an Apple DCF
How much does an Apple DCF change when the assumptions change?
The illustrative inputs give $273 a share on perpetual growth and $333 on a 20 times exit multiple. Changing one assumption at a time gives about $160 at 5% growth in years 1 to 5 and about $592 at 30%. The sensitivity section lists every case.
What is Apple's WACC?
Apple's Weighted Average Cost of Capital was 9.62% on 13 October 2026, rounded to 9.6% in the model. It blends a 9.70% cost of equity with a 4.77% cost of debt after tax. What Is WACC? explains each step.
How are the cash flows timed in this DCF?
Each year's cash is discounted as if it arrived at the year's end. The valuation date is 27 June 2026, while the market inputs to the discount rate are dated 13 October 2026. Discounting mid-year would raise the enterprise value by 4.7%. Moving the valuation date to the date of those inputs would add about 3%.
Which free cash flow does an Apple DCF start from?
This model starts from $136.7 billion, Apple's free cash flow (non-GAAP) in the twelve months to 27 June 2026. Fiscal 2025's figure was $98.8 billion, which gives $198 a share on perpetual growth. The starting year is an assumption the reader can change.
DISCLAIMER: This article is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.