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Apple is seeing a boost in performance, largely driven by its services revenue enhancing overall profit margins.
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The company is aggressively repurchasing its stock, which has helped stabilize its stock price.
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Investing a high price in a company with modest growth can lead to unfavorable outcomes.
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10 stocks we prefer over Apple ›
The “Magnificent Seven,” which includes Nvidia, Apple (NASDAQ:AAPL), Alphabet, Microsoft, Amazon, Meta Platforms, and Tesla, have outperformed the S&P 500 over the past three years. However, this might not necessarily continue in the coming years.
This is the second part of our series evaluating stocks in the Magnificent Seven. I mentioned before that Tesla is my least favorite choice. Now, let’s explore why Apple is a solid option in 2026.
Just five months ago, Apple had seen a more than 20% decline in its year-to-date performance. Investors have voiced concerns about Apple’s handling of artificial intelligence (AI), particularly after the disappointing reactions to announcements at the Worldwide Developers Conference in June. It seemed like a great time to buy, with the stock priced reasonably and just needing acceptable results to win back investors—and it seems that is exactly what happened.
Sales and profits at Apple are on the rise, with operating margins hitting 32%, the highest in a decade. That said, growth is still somewhat sluggish compared to its peers in the Magnificent Seven.
For the year ending September 27, 2025, Apple’s product sales increased only 4.1%, while services—including Apple TV, Apple Music, Apple Pay, and Apple Card—grew by 13.5%.
A positive aspect for Apple is that its higher-margin services are becoming a larger portion of total sales, which is crucial for the steady rise in profit margins. In fiscal 2025, services are expected to represent 26.2% of sales, while products like Mac, iPad, wearables, and accessories account for 23.4%. This means services are currently the second largest source of revenue after the iPhone.
As usual, Apple managed to boost earnings growth through stock buybacks, even if its overall growth wasn’t particularly striking. The company invested an astonishing $90.7 billion into repurchasing shares in fiscal year 2025.
Apple remains a reliable, profitable company, albeit with slow growth, that could find ways to monetize AI in its devices. Additionally, if trade tensions with China, its second-largest market, begin to ease, profits might improve.
