Key Points
iPhone sales grew by more than 20% in Apple's latest fiscal quarter.
The stock still trades at a premium.
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Apple (NASDAQ: AAPL) is the odd man out in the list of the world's largest companies. It is the only major tech company not actively investing hundreds of billions of dollars into artificial intelligence technologies. Instead, it's choosing to outsource most of the AI work to other businesses, then deploy their solutions into its products. For example, it will be using Google's Gemini to improve its Siri virtual assistant. Whether this is a smart strategy or not remains to be seen, but there's no doubt that it's very Apple-like. Time and time again, Apple has chosen the path of not trying to be first to market, but rather of getting its solution right on its first try.
This strategy, combined with Apple's spending restraint, has given its stock an OK year, as it's up about 6% -- slightly behind the S&P 500 (SNPINDEX: ^GSPC). But with Apple's laid-back AI approach, does this make it a candidate that could come back into style?
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Apple's business is starting to show signs of life, too
Another drag on Apple's stock over the past few years was its lackluster growth. It struggled to grow sales meaningfully, and by some measures, its revenues actually shrank if you factor in inflation. However, Apple has now posted two quarters in a row of double-digit percentage growth. If it can keep this trend up, it could show investors that Apple is back to being the company it once was.
AAPL Revenue (Quarterly YoY Growth) data by YCharts.
While Apple has several business units, its two most important, by far, are iPhone and services. Combined, they accounted for $88 billion of Apple's $111 billion in fiscal 2026 second-quarter revenue. If these units are doing poorly, then Apple's results as a whole will be disappointing.
Fortunately for shareholders, iPhone sales were up 22% in its latest period, which ended March 28, while services revenue was up 17%. That's a great mark for each business unit, and if Apple can maintain such growth rates, it could vault back into the conversation about top tech stocks.
However, there's a persistent issue with Apple's stock: its valuation. But even throughout its poorer-performing periods, Apple still maintained a premium valuation. It trades today at an expensive 35 times trailing earnings and 33 times forward earnings.
AAPL PE Ratio (Forward) data by YCharts
There are stocks trading at much lower valuations that are growing far faster than Apple, and I still think they may be better investment opportunities. The iPhone maker is still a solid company, but I don't think Apple's stock returns from here will be nearly as explosive as those of many of its peers due to the premium it already carries.
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Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
