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 of $2.01 rising 22% and services revenue hitting a record nearly $31 billion. The article argues Apple Intelligence could drive a multi-year iPhone upgrade cycle, while India and other emerging markets provide a long growth runway. Despite a ~35x P/E and shares near $300, the piece remains constructive on the stock's long-term fundamentals.

Analysis

Apple’s setup is less about a single product cycle and more about a compounding mix shift: hardware is becoming the loss leader for a larger annuity stream. The market is still underappreciating how a bigger installed base plus higher device engagement can expand monetization per user even if unit growth slows; that matters because services-like revenue tends to re-rate the whole franchise, not just lift absolute EPS.

The key second-order effect is that AI compatibility creates a forced replacement filter across the installed base. That should pull forward replacement demand from older devices over the next 12-24 months, but the more durable benefit is that each upgraded device is likely to increase attachment to paid services and lower churn versus the broader smartphone ecosystem. If Apple Intelligence becomes a habit-forming interface layer, the moat shifts from hardware aspiration to workflow dependency.

India is the least understood leg of the bull case because it is not just a sales geography; it is a mix-engineering opportunity. As penetration rises, Apple can trade up the customer base while broadening financing, retail, and ecosystem monetization, which should support margins even if average selling prices stay premium. The contrarian point is that China strength reduces the market’s willingness to pay for the “China risk discount,” but it also delays any valuation reset if growth decelerates elsewhere.

The main risk is that the current multiple already prices in a long runway, so any evidence of slower upgrade pull-through or weaker services growth would likely compress the stock faster than fundamentals deteriorate. In the near term, the stock can keep grinding higher on guide clarity and iPhone mix, but over 6-12 months the more important watch item is whether Apple Intelligence becomes incremental enough to justify a premium multiple versus a mature consumer hardware platform.

Key Decisions for Investors

• Stay long AAPL into the next 1-2 quarters, but size it as a quality compounder rather than a momentum chase; upside remains from mix and services, while downside is valuation compression if AI uptake is disappointing.
• Buy AAPL Jan-2027 call spreads on any post-earnings pullback of 5-8%; the setup is a multi-quarter adoption story, so defined-risk upside is better than outright stock here.
• Pair trade: long AAPL / short a basket of lower-quality handset OEMs and consumer-electronics names over 6-12 months; Apple is best positioned to convert AI-driven replacement demand into recurring monetization.
• If you want a hedge, use short-dated AAPL puts around product/earnings events rather than a structural short; the fundamental trend is positive, but the multiple is vulnerable to any guide miss.
• Monitor GOOGL as a strategic loser-winner: the collaboration reduces near-term competitive threat but increases dependence on external model quality; if Apple’s AI experience underwhelms, Alphabet is the first beneficiary on search and assistant time-share.