Not even a blowout quarter—beating estimates and posting strong results across nearly every segment—has been enough to reverse the drag on Apple (AAPL) stock this year. The tech giant has paid a steep price for falling behind other mega-techs on the AI front—roughly $670 billion in market value wiped out in 2025 so far. That’s especially disappointing for a company whose core moat has long been unmatched innovation.
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Instead, Apple appears to be coasting on modest growth and relying heavily on buybacks to deliver shareholder value. But what investors really want is for Apple to take a bold swing at AI—something transformational, like many of its peers are already doing.
So while the fundamentals still scream quality and long-term value, the stock thesis feels stuck in second gear. As long as the market keeps seeing Apple as a laggard in the AI race, I remain firmly Neutral on AAPL stock.
Apple Posts Huge Beat, So Why the Cold Shoulder?
Last week, Apple’s latest quarterly results were outstanding on all fronts, beating Wall Street expectations by a wide margin, posting EPS of $1.57 vs. $1.43 expected, and revenue of $94.04 billion vs. $89.53 billion—marking 9.6% year-over-year growth, the best since Q4 2021.
iPhone sales were the standout, jumping 13% to $44.6 billion—about 47% of total revenue—well ahead of the $40.2 billion consensus. Services also impressed, bringing in $27.4 billion vs. $26.8 billion expected. A significant contributor to the consolidated figures was Greater China, which returned to growth with a 4% year-over-year increase to $15.4 billion.
These results were a pleasant surprise, especially given concerns around Apple’s performance in China and ongoing trade tensions. Some of the strength may be explained by a pull-forward in demand, as fears of tariffs and price hikes encouraged earlier purchases—particularly outside of China. It also helps that the iPhone 16 marks Apple’s biggest upgrade cycle since the iPhone 12 launch in late 2020, giving product innovation a much-needed boost.
And yet, this wasn’t enough to spark a lasting rally. Despite all these substantial numbers, Apple’s stock dropped nearly 4% in the days that followed. In my view, that reaction comes down to one key issue: AI.
The AI Race Is On, and Apple Is the Laggard
Truth be told, while the market was a bit more skeptical heading into Apple’s Q2, it’s really no surprise to see the company deliver a blowout quarter, beating estimates across the board. Deep down, though, it feels like what investors really wanted was a meaningful update on AI.
In a way, Apple’s strong results mask its ongoing struggle to deliver true innovation—the very thing that built its legacy. These days, Apple seems more focused on driving shareholder value through massive buybacks than by positioning itself as a transformational tech leader.
Meanwhile, other mega-cap names are ramping up capital expenditures (CapEx) like never before to meet soaring AI demand and stay ahead in the race. Microsoft (MSFT) is on track to spend $120 billion annually, Amazon (AMZN) $118 billion, Alphabet (GOOGL) $85 billion, and Meta (META) $72 billion.
Apple is the clear outlier with no notable announcements related to AI research and development. Tim Cook did say the tech giant is “significantly increasing” AI spending—but didn’t provide any figures or specifics. So naturally, the assumption is that Apple’s AI investment is still much smaller than its peers’.
One thing did stand out: Apple’s leadership avoided commenting on the commoditization of foundational AI models. That kind of dodge usually signals there’s something to hide—or in this case, a strategy still being formed. Based on that vagueness, and earlier media reports, it seems likely that Apple plans to partner with players like OpenAI to power its Apple Intelligence features. If Apple were developing its own large language models (LLMs) in-house, that’s probably something they would be eager to showcase.
Sometimes, silence speaks volumes. Avoiding topics like commoditization suggests Apple isn’t trying to own the foundation of AI, but rather to integrate it into its ecosystem in a way that feels uniquely “Apple.” And for a company known for setting the pace in innovation, that muted AI approach clearly isn’t thrilling the market. However, if and when Apple does come to the party, the final product may well be above and beyond the rest.
Apple Gets Cheaper, but Not Everyone’s Biting
Unsurprisingly, Apple’s valuation has compressed—especially relative to its recent averages and peaks. Its forward P/E sits at 27.6x, about 20% above the sector average, but still below its 12-month average of 30x and well under the 35x it traded at earlier in 2025.
The silver lining for value investors is that this compression comes mainly from a drop in price, not earnings. That signals a more cautious tone from analysts—likely due to Apple being the clear outlier among Big Tech when it comes to AI spending and positioning.
From a fundamentals standpoint, it’s hard to argue against buying the dip if you’re thinking long term. But in the short to medium term, unless Apple surprises the market with something big enough to place it in the same AI CapEx league as its peers, the stock might keep getting left behind—just as we’ve seen throughout this year.
What is Apple’s Target Price?
Wall Street is clearly divided on Apple stock. Of the 27 analysts covering it in the past three months, 14 are bullish, 12 are neutral, and just one is bearish. AAPL’s average stock price target stands at $233.33, implying about 14% upside from the current share price.
Revenues are Not Enough During an AI Boom
Posting solid quarterly results with little room for debate is important, but clearly not enough to spark bullishness in Apple shares—at least for now. While tariff concerns seem largely priced into AAPL’s corrections this year, the upside remains capped by the company’s lukewarm approach to AI compared to its main competitors.
Given that this narrative continues after Q2, and considering another quarter heavy on buybacks—not inherently bad, but not inspiring when investors expect innovation—I’m sticking with a Hold rating on AAPL.