Apple (AAPL 4.24%) just reported third-quarter 2025 (ended June 28) financial results that pleased investors. Revenue soared 9.6% year over year to $94 billion, while diluted earnings per share climbed 12.1%. These headline figures beat Wall Street estimates.
Despite the upbeat results, Apple shares have disappointed. They're down 15% in 2025 (as of Aug. 6). And in the last 12 months, they are essentially flat. The S&P 500 index is up 22% during the same time. This trend doesn't inspire confidence among the investment community.
But maybe the future will bring optimism. Where will this consumer discretionary stock be one year from now?
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Leaning into the AI opportunity
The general view is that Apple has so far fallen behind in the ongoing artificial intelligence (AI) race. Apple Intelligence, its AI system that's integrated with its devices and software, has launched 20 different features for users. But it hasn't exactly had that wow factor that people are accustomed to seeing from Apple.
There was also supposed to be an AI-powered Siri launching in late 2024. However, this more personalized voice assistant won't be introduced until sometime in 2026. Big tech peers have gone full steam ahead in the meantime, while it appears that Apple is playing catch-up.
On the latest earnings call, though, CEO Tim Cook gave investors a reason to be bullish. "We see AI as one of the most profound technologies of our lifetime," he said on the Q3 2025 earnings call. Maybe he's finally starting to regard AI as a serious paradigm shift that can have huge implications for his business.
Apple is raising the amount of money it's spending on AI-related capital expenditures (capex). CFO Kevan Parekh said capex spending "is going to grow substantially." In Q3, the company's capex totaled $3.5 billion. Mergers and acquisitions could be part of the plan.
Therefore, investors shouldn't be surprised for Apple to push more aggressively into AI initiatives. This seems to be the right move from a strategic perspective. At the end of the day, it's all about Apple being able to bolster its competitive position. It's hard to say what new products or services will come next from this.
It's also difficult to see any meaningful effect on the company's financials. For Apple, this means being able to sell more devices and simultaneously grow the services segment. According to Wall Street consensus analyst estimates, Apple's revenue will rise 6.3% in fiscal 2025 and 4.8% in fiscal 2026.
Making accurate predictions is hard
It can be a valuable exercise for investors to understand the current situation that a business is in, as well as what the near future might hold. However, making correct predictions about the direction of a stock is almost impossible to do. There are so many variables at play.
For what it's worth, the consensus price target for Apple shares is $233.61, which implies 10.9% upside from today's price. That would certainly be an improvement from the last 12 months' performance. It's a gain that I wouldn't be surprised by.
But investors looking at Apple shouldn't make a decision based on what could happen over the next 12 months. Instead, it's worth assessing whether or not this is a business that you'd want to own for the next five years. That's the proper way to invest, with a long-term mindset.
Right now, Apple stock trades at a price-to-earnings ratio of 31.9. That's a high valuation to pay for a company whose growth is harder to come by these days. To be fair, Apple possesses one of the world's strongest brands, its products and services are hugely in demand, and its profitability is incredible. However, I don't believe investors who own this stock will achieve market-beating returns between now and 2030, regardless of what happens in the next year.
