Apple earned 171.4% on its shareholders' equity in its latest fiscal year, which ended on 27 September 2025. Tesla earned 4.9% in its year to 31 December 2025. Both figures follow US accounting rules (GAAP) and come from each company's annual report.
Return on equity (ROE) divides a year's profit by the shareholders' stake that the accounts record. Seven large US companies, the Magnificent 7, span a range of ROE from 4.9% to 171.4%. The median is 34.0%. Three things explain the gap: how much profit each dollar of sales earns, how hard the assets work, plus how small the equity base is.
What is return on equity? Return on equity (ROE) is a company's net income for a year divided by its average shareholders' equity. It shows how many dollars of profit the business earned for each dollar of equity on its balance sheet.
Apple's ROE was 171.4% and Nvidia's was 101.5%. Microsoft's, the median of the seven, was 34.0%, while Tesla's was 4.9%.
Nvidia's 101.5% rests on a 55.6% net margin, which is net income as a share of revenue. Apple's 171.4% rests on a small equity base.
Apple paid out more than its net income over five fiscal years, so its equity grew only 12.8%. Microsoft keeps more, so its equity grew 211.6%.
What does return on equity measure?
Net income is the profit left after all costs, interest and tax, as our post on how to read an income statement shows. We use the part that belongs to each parent company's shareholders.
Shareholders' equity is total assets minus total liabilities on the balance sheet. It records the owners' stake at accounting value. The market price of the shares is a different figure. Apple's was $73.7 billion on 27 September 2025, which is $359.2 billion of assets less $285.5 billion of liabilities.
We divide net income by the average of equity at the start and the end of the year. Profit builds up across the year, while equity changes during it. The average of the two ends matches the profit period better than either end alone.
Microsoft earned $133.7 billion in the year to 30 June 2026, on average equity of $392.9 billion. Its ROE was 34.0%.
How did we calculate ROE for the Magnificent 7?
The Magnificent 7 are Apple, Microsoft, Alphabet (Google's parent), Amazon, Meta, Nvidia and Tesla. Every figure comes from the companies' annual reports, called Form 10-K, filed with the US Securities and Exchange Commission. The latest years use the 10-K each company had filed by 28 October 2026. The twelve-month check also uses quarterly reports (Form 10-Q).
A fiscal year is a company's own accounting year, so the year-ends differ. Apple's ended on 27 September 2025, Microsoft's on 30 June 2026 and Nvidia's on 25 January 2026. The other four ended on 31 December 2025.
Which Magnificent 7 company has the highest ROE?
Apple does, at 171.4%. Nvidia comes second at 101.5%. They are the only two above 100%. The other five sit between 4.9% and 35.7%.
Source: Company Form 10-K filings
The chart shows Alphabet at 35.7%, Microsoft at 34.0%, Meta at 30.2%, Amazon at 22.3% and Tesla at 4.9%.
The mean of the seven is 57.2%, while the median is 34.0%. Apple and Nvidia pull the mean up, so the median describes a typical member of the group better.
How has ROE changed over five years?
The next chart shows each company's ROE for its five latest fiscal years, with the oldest on the left. Each bar is net income divided by average equity for that year.
The years on the chart are the calendar years in which each fiscal year ended.
Source: Company Form 10-K filings
Apple stayed between 147.4% and 175.5% in all five years.
Nvidia's ROE rose from 17.9% in 2023 to 119.2% in 2025, then eased to 101.5% in 2026. Amazon's was minus 1.9% in 2022, when it reported a net loss of $2.7 billion. It reached 22.3% in 2025.
Tesla's fell from 33.5% in 2022 to 4.9% in 2025. Its net income dropped from $12.6 billion to $3.8 billion while its equity rose from $44.7 billion to $82.1 billion.
Microsoft's fell from 47.2% in 2022 to 34.0% in 2026. Its net income rose 83.9% over that time, but its average equity rose 154.7%.
What drives return on equity?
ROE is the product of three ratios. Net margin is net income divided by revenue. Asset turnover is revenue divided by average total assets, which shows how much sales each dollar of assets produces.
The equity multiplier is average total assets divided by average equity. A higher number means shareholders fund less of the balance sheet. Multiply the three. The revenue and asset terms cancel, which leaves net income over average equity.
Net margin | Asset turnover | Equity multiplier | ROE | |
|---|---|---|---|---|
Apple | 26.9% | 1.15 | 5.54 | 171.4% |
Nvidia | 55.6% | 1.36 | 1.35 | 101.5% |
Alphabet | 32.8% | 0.77 | 1.41 | 35.7% |
Microsoft | 40.3% | 0.48 | 1.75 | 34.0% |
Meta | 30.1% | 0.63 | 1.61 | 30.2% |
Amazon | 10.8% | 0.99 | 2.07 | 22.3% |
Tesla | 4.0% | 0.73 | 1.68 | 4.9% |
Latest fiscal year, GAAP. Net margin = net income / revenue. Asset turnover = revenue / average total assets. Equity multiplier = average total assets / average equity. Source: company Form 10-K filings
The table lists the three ratios for each company, with ROE as their product.
Nvidia's net margin of 55.6% is the highest of the seven, while its equity multiplier of 1.35 is the lowest. Its high ROE comes from profit on each dollar of sales.
Apple's net margin of 26.9% is fifth of seven. Its multiplier of 5.54 is the highest. The next highest is Amazon's at 2.07.
Amazon's net margin of 10.8% is second lowest. Its asset turnover of 0.99 is third highest, which helps lift its ROE to 22.3%.
Why is Apple's ROE so high?
Apple's equity is small next to its profit. Apple's statement of shareholders' equity deducts repurchased shares and dividends, so the cash Apple pays out lowers equity.
In fiscal 2025, Apple paid $90.7 billion to repurchase its shares and $15.4 billion in dividends. Together that is 94.8% of its $112.0 billion net income.
Source: Apple Form 10-K filings
The chart shows Apple's net income, its payouts and its year-end equity for five fiscal years. Payouts exceeded net income in three of the five years. Net income ranged from $93.7 billion to $112.0 billion, while equity stayed between $50.7 billion and $73.7 billion.
Over the five fiscal years to 27 September 2025, Apple earned $497.2 billion and paid out $513.6 billion. Its equity rose from $65.3 billion to $73.7 billion, a gain of 12.8%.
Microsoft earned $468.8 billion over the five fiscal years to 30 June 2026 and paid out $223.1 billion, or 47.6%. Its equity rose from $142.0 billion to $442.4 billion, a gain of 211.6%.
What are the limits of ROE?
Equity is an accounting figure. A company that pays out most of its profit has less equity, which lifts ROE without any change in profit. Apple shows this.
Net income includes items that are not operating profit. Alphabet's 2025 net income of $132.2 billion includes $24.1 billion of net gains on equity securities. Most are unrealised gains on non-marketable equity securities, which are holdings with no public market price. ROE counts those gains.
ROE ignores the price paid for a share. Our post on the P/E ratio covers that. Return on invested capital (ROIC) compares operating profit with the debt and equity together. Our post on ROIC explains it.
The year-ends also differ. Microsoft's year ended six months after Alphabet's, so the seven figures cover different twelve-month periods. The order holds if we divide by closing equity instead of the average. It also holds on the latest twelve months to mid-2026 (to July for Nvidia), except that Amazon (30.6%) moves ahead of Meta (29.8%).
Our post on the Magnificent 7 covers the group more broadly.
Apple's 171.4% comes from a small equity base. Nvidia's 101.5% comes from a 55.6% net margin. Tesla's 4.9% comes from profit that fell while equity rose.
Get the next explainer
The Academy is free to read, here on the web. The Long Trend, our free weekly letter, comes by email.
Learn more with YX Insights
This explainer is part of the YX Insights Academy. Each one takes a single idea and checks it against real data.
The same approach runs through everything else we publish:
Systematic Portfolio: ready-made portfolios for Macro & Megacaps and for Commodities. We publish the holdings and every change.
Multi-model Signals: a daily long-or-flat call on every name we cover. Each call shows how strongly our four models agree.
Research: company deep dives, macro commentary and essays on how we test.
Good places to start on the website:
Academy: more explainers like this one.
Start here: get our free weekly letter by email.
Macro & Megacaps Systematic Portfolio and Commodities: the two portfolios in detail.
Track record: live results since 3 August 2026, plus the ten-year backtest.
Upgrade: get the Systematic Portfolio, Multi-model Signals and research in full.
Common questions about return on equity
How do you calculate return on equity?
Divide a company's net income for the year by its average shareholders' equity, which is the mean of equity at the start and the end of the year. Microsoft earned $133.7 billion in the year to 30 June 2026 on average equity of $392.9 billion, so its ROE was 34.0%.
What is a good return on equity?
No single level counts as good. ROE depends on margin, asset turnover and borrowing, which differ by industry. Among the Magnificent 7, the median ROE was 34.0% in the latest fiscal year, with a range of 4.9% to 171.4%.
Can return on equity be negative?
Yes. ROE is negative when net income is a loss. Amazon reported a net loss of $2.7 billion in 2022, against average equity of $142.1 billion, which gave an ROE of minus 1.9%. Equity itself can also turn negative. The ratio then has no clear meaning.
What is the difference between ROE and ROIC?
ROE compares net income with shareholders' equity only. Return on invested capital (ROIC) compares operating profit after tax with all the capital invested, meaning debt as well as equity. Debt raises ROE but not ROIC, so the gap shows how much borrowing lifts ROE. Our post on ROIC explains it.
DISCLAIMER: This article is intended for educational purposes only. Any information or analysis in this note does not constitute an offer to sell or a solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice, 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.
