Between the end of fiscal 2022 and fiscal 2024, Apple's (AAPL 1.93%) annual sales volume essentially went nowhere. In fact, it even declined slightly over that two-year stretch. But the company's latest results, combined with its upbeat outlook for its important holiday quarter, suggest this era of suppressed sales may be ending.
In its fourth-quarter 2025, Apple reported $102.5 billion in revenue, up 8% year over year, helped by robust iPhone revenue growth and double-digit growth in services. Even more, Apple guided for its revenue growth rate to accelerate in fiscal Q1 -- a critical period that includes the holiday season.
I believe this acceleration in Apple's business is a sign of an enduring pick-up in its business that ultimately makes the stock attractive today.
Apple's MacBook Pro. Image source: Apple.
A holiday-quarter outlook that sets the tone
Setting the stage for what is likely to be a strong fiscal 2026 for the iPhone maker, Apple chief financial officer Kevan Parekh said during its fiscal fourth-quarter earnings call that it expects revenue in the first quarter of the fiscal year to rise 10% to 12% year over year, with iPhone revenue growing at a double-digit rate.
Not only is Apple's holiday quarter typically its biggest, but it also marks the first full quarter of sales of the company's latest iPhone lineup, so it arguably sets the stage for how the latest iPhone line can drive sales during the entire fiscal year. And with management specifically calling out an expectation for iPhone sales to grow at a double-digit rate during the period, this provides even more reason to be confident in Apple's momentum headed into fiscal 2026.
2 more key catalysts
While Apple's iPhone gets the most headline attention, the company's services segment is arguably just as important to the tech company's growth story. The segment, which boasts high-margin revenue from Apple's share of third-party app sales and subscriptions, the company's native services like Apple Pay, Apple Music, Apple TV, and Apple Care, and more, posted 15% year-over-year growth in fiscal Q4. And, looking to fiscal Q1, management said it expects its services revenue to continue growing at a double-digit rate.
Just how lucrative is Apple's services segment? Its gross margin came in at 75.3% in fiscal Q3 -- more than double the 36.2% gross profit margin that Apple's product segment boasted during the quarter.
Further, there's a recurring nature to Apple's services business that investors love. As the company's installed base of active devices expands and as those users become more active over time, Apple can benefit from monetizing its users via recurring payments tied to Apple's ecosystem -- even during periods when hardware demand isn't robust.
And then there's another major tailwind that could help Apple's business in the coming years: AI (artificial intelligence). Unlike tech peers like Microsoft and Alphabet, Apple isn't spending wild sums on capital expenditures to fund expansions in AI-capable data center infrastructure. But that doesn't mean it won't benefit from AI. The company could benefit from it in several ways, including increased demand for high-performing technology devices providing users with access to cloud-based AI features, and potentially even from entirely new product categories that emerge in the coming years, ultimately enabled by AI.
NASDAQ: AAPL
Key Data Points
With all of this said, investors do seem to already be pricing an anticipated reacceleration in Apple's business. The stock's valuation is not cheap. Shares currently command a price-to-earnings ratio of about 37 and a forward price-to-earnings of 33.
But given the powerful brand that Apple boasts, the intense loyalty of its customer base, and the potential of AI leading to an unusually large wave of device upgrades over the coming years, I believe the tech giant deserves this valuation.
Of course, no investment is without risk. Apple's heavy reliance on iPhone is a tailwind during good times for the flagship device, but it can weigh on its business when iPhone sales weaken. Further, there's always competition aiming to capture a slice of Apple's lucrative hardware markets. For these reasons, investors should be careful about how they size any position in the stock. Ultimately, however, I do think the tech stock looks attractive today -- even when considering the risks.
