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Revenue Growth

Apple (with its installed base of 2 billion+ devices) shows that growth and massive scale can coexist despite the conventional wisdom about the law of large numbers. The company’s revenue base of $267.7 billion five years ago has increased to $395.8 billion in the last year, translating into a decent 8.1% annualized growth rate.

In light of its big tech peers, however, Apple’s growth trailed Amazon (18.5%), Alphabet (17%), and Microsoft (14.3%) over the same period. Comparing the four is relevant because investors often pit them against each other to derive their valuations. When adjusting for these benchmarks, we think Apple is expensive.

We at StockStory emphasize long-term growth, but for big tech companies, a half-decade historical view may miss emerging trends in AI. Apple’s recent history shows its demand slowed as its annualized revenue growth of 1.1% over the last two years is below its five-year trend.

This quarter, Apple grew its revenue by 4% year on year, and its $124.3 billion of revenue was in line with Wall Street’s estimates. Looking ahead, sell-side analysts expect revenue to grow 6.3% over the next 12 months. This projection illustrates the market thinks that AI, in the form of Apple Intelligence, could catalyze better top-line performance. However, its anticipated growth is still a far cry from its heyday in the 2010s.

Today’s young investors likely haven’t read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.

Products: Steve Jobs’s Legacy

Apple’s Products segment includes everything from its flagship iPhone, iPad, and MacBook computers to AirPods and Apple Watch. We are closely monitoring whether the GenAI-powered Apple Intelligence, which was released in September 2024 but has limited interoperability with older devices, can spur an upgrade cycle for the company.

Products sales are by far the biggest chunk of Apple’s revenue at 74.9%, and they grew by 6.2% annually over the last five years, slower than total revenue. Recently, demand went south as its sales dropped at an annual clip of 1.9% over the last two years. Apple could really use that upgrade cycle right about now.

This quarter, Products sales were up 1.6% year on year, in line with Wall Street’s estimates. Holding aside expectations, the recently improved rate of change shows that more customers are upgrading their devices than before. We’ll be watching to see if Apple Intelligence and iOS 18 can accelerate this trend. Wall Street is pricing the stock like it will.

Key Takeaways from Apple’s Q4 Results

Apple’s total revenue met analysts’ expectations this quarter, but looking under the hood, we can see its Services segment outperformed. This business line helped the company beat Wall Street's operating income and EPS estimates because it has higher margins than its hardware-oriented Products segment. Zooming out, we think this was a decent quarter featuring some areas of strength. The stock remained flat at $235.52 immediately following the results.

Should you buy the stock or not? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.