After sales dipped 2.8% in its fiscal 2023 (ended Sept. 30), Apple (AAPL -0.35%) was finally able to return to growth in the latest quarter as revenue increased 2.1%. The tech titan also reported a 13% jump in net income, showing once again how profitable of an enterprise this is.

Through the ups and downs, investors by and large have remained positive. The top FAANG stock has soared over 40% since the start of 2023 as investors have sought to ride the momentum of strong returns.

One notably positive number stood out -- 2.2 billion -- providing good reason to buy Apple shares. However, one critical metric should give investors pause. Here's what you need to know about the iPhone maker.

All across the globe

Shareholders and analysts undoubtedly focus on key figures like revenue, margins, free cash flow (FCF), and how well different products, such as the iPhone, MacBooks, and iPads, sold in any given period. These are certainly important numbers that can help one understand Apple's success.

But there's one data point that truly demonstrates the sheer dominance of this business. "I'm pleased to announce today that we have set a new record for our installed base, which has now surpassed 2.2 billion active devices," CEO Tim Cook said on the first-quarter 2024 earnings call. This figure was up from about 2 billion just six months ago. And it continues to rise with each passing quarter.

Not only does this represent how successful and ubiquitous Apple has become, but it also indicates how powerful of an ecosystem the company has built. There are 2.2 billion devices out there all using Apple's various software and subscription solutions, which produce a very profitable (73% gross margin) revenue stream. And this division was able to grow sales at a faster clip than hardware in the latest fiscal quarter, which is an ongoing trend.

Investors looking to own stocks for the long haul should want the businesses to have durability. With its massive installed base that keeps getting larger, Apple fits the bill here. These are loyal customers who understand how great the products and services are.

This stickiness helps support Apple's powerful brand presence, which is likely a key reason why Warren Buffett, through his conglomerate Berkshire Hathaway, is such a big shareholder and fan of the company.

High expectations

Thanks to Apple shares soaring 331% in the last five years and 867% in the last decade, this has become one of the most valuable businesses on the face of the planet. Additionally, the market fully understands Apple's favorable qualities and dominance.

Consequently, the stock isn't cheap. It trades at a price-to-earnings (P/E) ratio of about 29 today. Compared to the stock's trailing 10-year average P/E multiple of 20.9, this represents a sizable 38% premium.

Apple's loudest bulls might believe this valuation is justified. The huge and growing installed base I mentioned above is impressive. Moreover, Apple is incredibly profitable, reporting an average operating margin of 27.8% in the last 20 fiscal quarters. This business generated insane amounts of free cash flow in fiscal 2023, and currently has a net cash balance of $65 billion.

However, I believe Apple's growth prospects going forward will be more limited. Consumers have less of a reason to upgrade their iPhones as frequently, mainly because innovations are becoming marginal at best. And unless Apple can introduce another truly revolutionary product, one big enough to move the needle financially, double-digit top-line gains are out of the question, in my opinion.

The elevated valuation implies high expectations from investors. And this could pressure potential returns over the next several years.