Apple Inc (NASDAQ: AAPL) may have been a laggard in artificial intelligence (AI) roll outs, but its Q1 earnings confirm it continues to lead in consumer technology and loyalty.
On Thursday, the multinational posted a record $143.76 billion in revenue on $2.84 per share of earnings – both handily beating Street estimates.
The quarterly strength was driven largely by a massive surge in smartphone revenue, which jumped 23% year-over-year as the iPhone 17 cycle kicked into high gear.
Investors cheered the release, sending Apple stock up some 5% in after-hours as the results silenced critics who doubted the titan’s near-term growth potential during its transition into an AI-first era.
Apple stock remains inexpensive despite post-earnings surge
While AAPL is already up a remarkable 55% versus its 52-week high at the time of writing, JPM’s senior analyst Samik Chatterjee continues to see a positive setup for the tech stock ahead.
Even after the post-earnings rally, Apple is trading at about 30x forward earnings – a meaningful discount compared to previous “super cycle” peaks, Chatterjee argued in his latest research note.
For example, during the 5G upgrade cycle, AAPL stock’s multiple surpassed 32x.
With the current valuation sitting below those historical highs, Apple has significant “room to run” as the market begins to price in a multi-year AI upgrade cycle, he added.
Chatterjee’s “buy” rating on the iPhone maker comes with a price objective of “$315”, indicating potential upside of another 20% from here.
Why services weakness doesn’t matter much for AAPL shares
While services sales came in slightly shy of Street estimates ($30.01 billion versus $30.07 billion expected), JPMorgan is urging Apple shares’ investors not to overreact.
In his research note, Samik Chatterjee noted Apple possesses “multiple levers” for growth beyond the App Store, ranging from iCloud expansions to its burgeoning advertising business.
More importantly, the bull case for services is shifting toward AI integration.
The upcoming multi-year partnership to integrate Google’s Gemini into the Apple ecosystem, and a total Siri revamp, is expected to create new high-margin revenue streams.
These AI-driven “intelligent services” could notably boost per-user monetization, far outweighing any temporary softness in traditional App Store gaming revenue, the analyst told clients.
How to play Apple Inc in 2026
While Apple’s iPhone revenue topped Street estimates by more than $6.5 billion in the first quarter, the road for AAPL shares moving forward appears even brighter.
Despite industry-wide concerns regarding soaring RAM and NAND prices, JPMorgan expects margin pressures from higher memory costs to remain “limited” due to Apple’s favourable long-term supply contracts.
Furthermore, Apple’s gross margin came in about 70 basis points higher than expected in Q1, and the investment firm expects its operating expenses to track lower in the current quarter, exhibiting discipline management in a high-spend environment.
As these lower-than-expected costs combine with robust iPhone demand and AI roll outs, Apple is poised for significant earnings-per-share (EPS) leverage.
This combination of top-line growth and bottom-line efficiency is expected to drive Apple shares toward new record territory in the coming months.
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