3 Reasons This Warren Buffett Favorite AI Stock Could Soar Over the Next 10 Years

Apple reported fiscal Q2 2026 revenue of $111.2 billion, up 17% year over year, with EPS rising 22% to $2.01. Services revenue hit a record nearly $31 billion, iPhone revenue rose 22% to $57 billion, and management highlighted Apple Intelligence, a broader upgrade cycle, and India as key long-term growth drivers. The stock has already rerated to about $300 with a roughly 35x P/E, but the article argues the fundamentals still support further upside.

Analysis

AAPL’s setup is less about a one-quarter beat and more about a structural mix shift: every incremental dollar of services and attached software revenue raises the quality of earnings and reduces dependence on hardware unit volatility. The installed-base expansion creates a compounding loop, but the more interesting second-order effect is that AI-enabled device refreshes can also re-accelerate the monetization of the base through higher engagement, higher transaction frequency, and longer customer lifetime value — a better outcome than a pure unit cycle.

The market is likely underappreciating how broad-based this demand strength is across geographies because it lowers the probability that the current cycle is just a China re-stocking story. India matters less as an immediate revenue contributor than as an option on a multi-year premiumization curve; if penetration inflects, it expands the TAM for both hardware and the services bundle. That said, the stock’s multiple now prices in a very long runway, so the key risk is not a bad quarter but a slowing of upgrade velocity once the initial AI feature novelty fades over the next 2-4 quarters.

From a competitive standpoint, GOOGL is the cleaner infrastructure beneficiary from model development and cloud demand, while AAPL is the consumer-facing monetization layer; investors mixing the two risk conflating platform control with model leadership. The biggest loser may be legacy Android OEMs and carrier subsidy economics if Apple’s AI narrative extends replacement cycles and pulls premium buyers back into the ecosystem. Near term, the market likely treats any Siri/product milestone as a catalyst, but the real test will be whether services growth sustains mid-teens growth after the upgrade wave normalizes.

Key Decisions for Investors

• Maintain a core long AAPL but hedge with short-dated upside collars into the next product/Siri milestone; the stock is high quality, but implied expectations are already rich and a 10-15% post-event drawdown would not be surprising if guidance disappoints.
• Pair long AAPL vs short a basket of legacy Android OEMs / hardware-reliant consumer tech on a 3-6 month horizon; the thesis is that AI upgrades and ecosystem stickiness translate into superior gross margin and cash generation, while weaker brands face commoditization pressure.
• Add GOOGL as a complementary long rather than a substitute for AAPL exposure; if Apple deepens model partnerships, Alphabet captures more upstream AI monetization even if Apple wins the device-side refresh cycle.
• Use call spreads rather than outright calls on AAPL for 6-12 months; upside still exists if the upgrade cycle extends, but the stock’s multiple limits convexity, so defined-risk exposure is preferable.
• Watch India and Greater China revenue mix over the next 2-3 quarters; if growth broadens without margin dilution, add on pullbacks, but if services growth decelerates below low-teens, trim because the re-rating thesis weakens materially.