Apple (AAPL 1.75%) spent much of 2025 out of favor as investors worried about stalled growth and a late pivot into AI (artificial intelligence). But after being down more than 20% for the year by mid-June, the stock has roared higher. Investors have cheered as the company's top-line growth rate accelerated and management guided for double-digit iPhone revenue growth during the holiday quarter.
Is it too late to buy the stock? I don't think so. In fact, it's my second-biggest holding. A well-received iPhone cycle, a powerful services business, and emerging AI features build a strong bull case for the stock.
Here's a closer look at the reasons I'm betting on Apple stock going into 2026.
iPhone 17 Pro Max. Image source: Apple.
Growth tailwinds are returning
Fiscal 2025 marked a clear turn in Apple's fundamentals.
Revenue for the fiscal year rose about 6% year over year to about $416 billion, up from $391 billion in fiscal 2024. Not only was the second half of the year's growth greater than the first half, but this came after several years of poor top-line performance. Indeed, between the end of fiscal 2022 and the end of fiscal 2024, Apple's sales actually declined.
Importantly, the growth in Apple's bottom line recently has been even better. Fiscal 2025 earnings per share (EPS) rose 23% year over year.
Looking to fiscal 2026, Apple's top-line performance is likely to accelerate further.
Apple's guidance for the first quarter of fiscal 2026 (the period that aligns closely with the fourth quarter of 2025) points to management's confidence in both its latest iPhone 17 cycle and its services business. On the earnings call, executives said they expect total revenue for the period to grow roughly 10% to 12%. Management said this will be supported by double-digit growth in iPhone revenue and services revenue similar to the 13.5% growth the business saw in fiscal 2025.
AI could morph into a major catalyst
Then there's the possibility that Apple's investments in AI and the resulting features the company deploys across its product line, like Apple's planned overhaul of Siri next year, help catalyze even more device upgrades.
In fact, I'd argue that Apple's biggest opportunity in 2026 arguably goes beyond the iPhone 17 cycle and rests on how Apple Intelligence and services deepen engagement across an enormous installed base of active devices. The company confirmed this summer that it has more than 2.35 billion active devices in use worldwide, and it has said since then that the number has continued to grow.
All of this to say, AI could not only strengthen Apple's already strong services business by providing more ways to monetize the company's installed base and by offering features to improve engagement, but it could also accelerate device sales.
NASDAQ: AAPL
Key Data Points
Disciplined spending
Another key reason to bet on Apple stock as one of my top picks for 2026 is the company's disciplined approach to spending. The iPhone maker's capital expenditures in fiscal 2025 were just $12.7 billion. Many other big tech companies are investing heavily in AI infrastructure. Meta, for instance, expects capital expenditures in 2025 to total between $70 billion and $72 billion, and Alphabet expects to spend between $91 billion and $93 billion.
Apple's choice to avoid such unprecedented levels of spending on cloud computing makes it a nice counter to the companies that are spending heavily on AI-related infrastructure.
Of course, one risk is Apple stock's valuation. With a forward price-to-earnings ratio of about 34 as of this writing, investors clearly have big expectations for the iPhone maker. If growth doesn't materialize as much as investors hope, shares could take a hit. But I personally believe the company's tailwinds are both strong and diverse, making the stock worth its current valuation. More importantly, I think AI will drive a substantial wave of device upgrades in the coming years and potentially lead to entirely new product categories.
