Warren Buffett's Favorite Stock That's Up 107,400% Since 1990 Is Still a Buy. Here's Why.

Apple reported Q2 fiscal 2026 revenue of $111.2 billion, up almost 17% year over year, with EPS rising 22% to $2.01. iPhone sales reached about $57 billion, up nearly 22%, while services revenue hit an all-time high of roughly $31 billion, up 16%. The article argues Apple still has upside from AI-driven product upgrades, a larger installed base of more than 2.5 billion active devices, and new hardware initiatives, despite a valuation of 32.8x forward earnings.

Analysis

The key second-order setup is not simply that Apple is still growing, but that it is converting hardware momentum into a larger, stickier monetization flywheel. If AI improves the assistant layer and device utility, the incremental value accrues less through one-off unit upside and more through a higher attach rate across services, accessories, financing, and upgrade cadence. That matters because the stock can justify a premium multiple only if the market believes services mix and installed-base monetization can offset any normalization in unit growth.

The more interesting competitive implication is that Apple’s AI rollout raises the bar for “good enough” consumer AI at the edge. That is a headwind for smaller premium hardware competitors and a nuance for NVIDIA/INTC: Apple’s in-device AI strategy does not remove compute demand, but it shifts some workload to on-device silicon and could lengthen replacement cycles for parts of the PC/phone ecosystem that are not differentiated. In other words, the AI trade broadens beyond cloud capex into consumer upgrade cycles, where the winners are the platforms that can turn feature launches into ecosystem lock-in.

The main risk is timeline mismatch. Investors are paying for multiple years of optionality today, but the monetization of AI features is usually delayed by 2-4 quarters after launch as consumers validate utility and developers adapt. If the personalized assistant underwhelms, or if regulatory pressure forces Apple to loosen platform control, the multiple compresses quickly because the bull case is built on premium durability more than near-term EPS. The contrarian read is that consensus may be underestimating how much the stock already prices in perfect execution: good results are not enough if they are merely good, rather than re-accelerating.

From a trading standpoint, Apple looks more like a quality compounder than a tactical catalyst, so the better expression is relative value rather than outright aggression. Short-dated upside is already partially embedded; the cleaner risk/reward is to own it against a weaker premium hardware basket or to use options around product-cycle milestones where implied volatility is typically mispriced. Berkshire remains a lower-beta way to express the same franchise quality if the goal is to harvest Apple exposure with less single-name multiple risk.

Key Decisions for Investors

• Hold AAPL only as a core quality position; avoid chasing here. Best entry is on a 5-8% pullback or post-product-launch selloff if fundamentals stay intact, with a 6-12 month horizon.
• Pair trade: long AAPL / short a basket of premium consumer hardware laggards over 3-6 months. The thesis is ecosystem monetization and AI-driven retention versus peers that lack pricing power and installed-base leverage.
• For options accounts, consider a call spread on AAPL into the next major Siri/AI catalyst rather than stock. Risk/reward is better defined if implied vol stays elevated and execution risk is binary.
• If seeking lower volatility exposure, favor BRK.B as a proxy for Apple franchise quality with less single-name multiple compression risk; use it as a defensive long if tech valuation de-rates broadly.
• Monitor AI feature adoption and services growth over the next 2 quarters; if services decelerate while the multiple stays above the sector by a wide margin, trim or hedge AAPL aggressively.