When investors think of artificial intelligence (AI), companies like Nvidia (NVDA), Microsoft (MSFT), and Google (GOOG) (GOOGL) often steal the spotlight. While the market is fixated on these obvious names, Apple (AAPL) may be the most underappreciated AI play today – but this could change quickly.
Apple’s June quarter showcased global demand and brand power. However, behind the headline numbers is Apple’s rapidly expanding AI strategy.
Apple’s stock has dipped 18.6% year-to-date, lagging the tech-heavy Nasdaq Composite’s ($NASX) gain of 9%. Is Apple stock a good buy now on the dip? Let’s dive into the third quarter results to find out.
www.barchart.com
In Apple’s June quarter, which ended June 28, iPhone revenue surged 13% year-over-year to $44.6 billion, thanks to the A18 Pro-powered iPhone 16 family, which is optimized for on-device AI workloads. Mac sales increased by 15% to $8 billion, boosted by the success of the M4 MacBook Air.
While Apple’s AI growth is more hardware-driven, its long-term monetization will be heavily reliant on Services, which generated record-breaking revenue of $27.4 billion (up 13%) in the quarter. Total revenue increased by 10% to $94 billion, while diluted earnings rose 12% to $1.57 per share.
AI is enhancing its services, such as smarter suggestions in Apple Music, improved recommendations in Apple TV+, and developer tools for AI apps. Apple unveiled over 20 Apple Intelligence features at the 2025 Worldwide Developers Conference, which are now being rolled out to iPhones, iPads, Macs, and even AirPods.
Apple CEO Tim Cook described AI as “one of the most profound technologies of our lifetime,” and the company is investing heavily in it. Unlike most of its competitors, who rely heavily on the cloud for AI, Apple is developing a unique and potentially disruptive approach. Apple Intelligence is a deeply integrated on-device AI that prioritizes privacy, personalization, and a seamless user experience. With iOS 26, macOS 26, and iPadOS 26 all optimized for Apple Intelligence, the company is now integrating AI throughout its platforms.
Recently, Apple announced a $500 billion investment in the U.S. over the next four years, with a focus on AI, advanced manufacturing, and silicon engineering. Apple has stepped into the AI race with full force, but it is doing so with financial strength. At the end of Q3, it had $133 billion in cash and marketable securities and $102 billion in debt. It returned $27 billion to shareholders via dividends and share repurchases.
In short, Apple has the resources to fund large-scale AI research and development, make strategic acquisitions, and integrate AI into its ecosystem. However, Tim Cook did not hesitate to highlight tariffs as a real risk factor. In the June quarter, the company incurred tariff-related costs totaling $800 million. If current tariff rates remain unchanged, Apple estimates that $1.1 billion in tariff costs will have an impact on gross margin in the next quarter.
Apple is vulnerable to geopolitical tensions, particularly with China, which could disrupt component supply chains and pricing. Cook emphasized that Apple is already reducing risk through geographic diversification of its supply chain. It is expanding its presence in India, both in terms of market penetration and manufacturing, to reduce its reliance on China.
For the full fiscal year 2025, analysts forecast modest revenue growth of 6.1%, followed by an additional 4.8% increase in fiscal 2026. Earnings are expected to increase by 9.3% in fiscal 2025 and 7.8% in fiscal 2026, respectively. Trading at 25x forward 2026 earnings, Apple stock appears to be a reasonable buy now given its brand strength, robust financials, and growing presence in AI.
On Wall Street, Apple stock is rated a “Moderate Buy.” Of the 37 analysts covering AAPL, 18 recommend a “Strong Buy,” three rate it a “Moderate Buy,” 14 suggest a “Hold,” and two say it is a “Strong Sell.” With an average price target of $233.83, analysts project a potential upside of around 15% from current levels. The highest price target of $300 suggests the stock could rise as much as 47.5% from current levels.
www.barchart.com
Apple isn’t the loudest voice in the AI race. However, its AI features are poised to significantly increase user engagement, app ecosystem monetization, hardware upgrades, and subscription growth. Importantly, the company is doing all this while maintaining its brand moat and privacy-first promise, which reflects a significant long-term growth opportunity.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
