Evolve Financial · Risk Report
AAPL — Apple Inc.
BUY · 68 / 100
+3.24% (post-earnings, May 1 close)
Q2 FY26 beat — revenue $111.2B (+17% YoY) and EPS $2.01 topped consensus; board added $100B buyback + 4% dividend hike; John Ternus named next CEO (transition Sept 1, 2026).
Updated May 2, 2026 · 06:15 UTC
Forward P/E
31.8
vs peer median ~22.5
P/S (TTM)
9.3
vs peer median ~7
Gross margin
49.3%
Q2 FY26 record
EBITDA mgn est
~33%
TTM
Net cash est
~$48B
securities − debt
Revenue YoY
+16.6%
Q2 FY26
From May 2025 to today, with annotated catalysts
AAPL pricepositive catalystcompany eventheadwind / shockillustrative; monthly anchors only
Rich relative to peers and to its own history
Caution
Forward P/E
31.8
Above peer median (~22.5). Premium reflects services growth and buyback floor.
Peers · MSFT 32 · GOOGL 23 · META 17 · AMZN 22
Caution
Price / Sales
9.3×
Among the richest in mega-cap; justified only if Services keeps compounding ≥15%.
Peer median ~7×
Miss
Historical premium
+40%
P/E is ~40% above 10-year average — multiple expansion has done much of the work.
10-yr avg P/E ~24
Miss
PEG (5-yr)
2.4
PEG >2 typically signals the price is leaning on optimistic out-year growth.
PEG ≤1.5 = value
Caution
EV / EBITDA
25.4×
Premium tier. Apple has earned it via margin and capital returns, but offers little cushion on a multiple compression.
Peer median ~17×
Beat
Capital returns yield
~3.0%
$100B buyback + 0.4% dividend = ~3% effective shareholder yield, top-decile mega-cap.
FY26 yield run-rate
Among the strongest balance sheets and cash machines in equity markets
Beat
Gross margin
49.3%
Q2 FY26 record; +110 bps QoQ; mix shift toward Services driving structural lift.
Peer median ~46%
Beat
Net income margin
~26.6%
$29.6B net on $111.2B revenue. Rare durability at this scale.
Q2 FY26
Beat
Cash + securities est
~$140B
Net cash ~$48B after debt. Net-cash-zero target unchanged; buyback funded from FCF.
Per FY25 10-K
Beat
Dividend track record
14 yrs
Consecutive years of dividend growth; latest +4% to $0.27/qtr.
Yield ~0.4%
Beat
Buyback authorization
$100B
New tranche atop existing program. ~2.5% of float retired annually at recent pace.
Apr 30, 2026 board
Beat
FCF conversion est
~95%
FCF tracks net income closely; Services adds high-margin recurring cash flows.
TTM modeled
Reaccelerating short-term; long-run still hinges on AI parity
Beat
Revenue YoY
+16.6%
Two consecutive double-digit quarters after years of single-digit growth.
Q2 FY26
Beat
EPS YoY
+22%
Operating leverage + buyback math; ahead of revenue growth.
Q2 FY26
Beat
Services growth
+16%
Services hit $31B, the highest-margin segment; recurring and sticky.
All-time high
Beat
Q3 guidance
+14% to +17%
June quarter outlook well above consensus; tariff-pull-forward likely a factor.
Co. guidance
Caution
China premium share
~14–15%
Down from ~20% in 2021. Huawei resurgence + nationalist sentiment are real demand pressures.
Industry est
Miss
AI roadmap
Lagging
On-device AI behind MSFT/GOOGL/META by 12–18 months. iPhone 18 cycle is the make-or-break.
Independent benchmarks
Pillar contributions and the 0–100 gauge
Valuation · 35% weight50 / 100
Contribution: 50 × 0.35 = 17.5
Financial health · 35% weight85 / 100
Contribution: 85 × 0.35 = 29.75
Growth · 30% weight70 / 100
Contribution: 70 × 0.30 = 21.0
Composite68 / 100
Bands · 80+ Strong Buy · 60–79 Buy · 40–59 Hold · 20–39 Reduce · <20 Avoid
68
BUYBest-in-class quality and accelerating top-line, partially offset by a stretched valuation.
Five-quarter trend
| Quarter | Revenue | YoY | Gross margin | Diluted EPS |
|---|---|---|---|---|
| Q2 FY25 (Mar '25) | $95.4B | +5% | ~46.5% est | $1.65 |
| Q3 FY25 (Jun '25) | $94.0B | +10% | ~46.5% est | $1.57 |
| Q4 FY25 (Sep '25) | $102.5B | +8% est | ~47% est | ~$1.97 est |
| Q1 FY26 (Dec '25) | $143.8B | +16% | ~48% est | $2.84 |
| Q2 FY26 (Mar '26) | $111.2B | +17% | 49.3% | $2.01 |
Beat on top and bottom; guidance ahead of consensus
Revenue
$111.2B
vs $109.66B est · BEAT +1.4%
Diluted EPS
$2.01
vs $1.94 est · BEAT +3.6%
“This was a March-quarter record on every key metric — revenue, EPS, and Services. iPhone 17 demand is broad-based, and Services hit a new all-time high.” — paraphrased from Apple Q2 FY26 release / earnings call, April 30, 2026
Q3 FY26 guidance: revenue growth +14% to +17% YoY, ahead of consensus. Gross margin expected to remain near the 47–49% range. Tariff cost expected to be in the low single-digit billions for the quarter.
Catalysts vs. risks
Catalysts
- iPhone 17 momentum continues through summer + iPhone 18 cycle in Sept '26 — first cycle with full on-device Apple Intelligence.
- Services run-rate reaches $130B+ on $31B Q2 print; high-margin and recurring — biggest multiple driver.
- $100B buyback begins drawing down float through FY27, supporting EPS even with flat revenue.
- India expansion — manufacturing ramp + premium share gains; partial China-risk hedge.
- Apple Intelligence v3 expected at WWDC '26; closing the AI gap would be the largest single re-rating event.
- Ternus CEO transition (Sept '26) — analyst-positive; Cook stays as exec chairman, continuity preserved.
Risks
- Section 122 tariff — 15% on imported electronics; est $3–10B annual hit if not passed through.
- China premium share — fell from ~20% (2021) to ~14–15%; Huawei resurgence and nationalist demand pressure.
- EU + US antitrust — DOJ suit + DMA-driven app store openings threaten Services take-rate.
- AI lag — 12–18 months behind hyperscalers on on-device + cloud AI; risk of structural perception shift.
- Premium valuation — ~40% above 10-yr P/E avg; multiple compression risk if growth normalizes.
- CEO transition execution — first non-Cook era since 2011; supply-chain expertise still resides with Cook.
The strongest 3-sentence case for the long
(1) Apple is monetizing the world's most valuable installed base — ~2.4B+ active devices — at accelerating rates: Services hit $31B (+16% YoY) and gross margin reached 49.3%, both March-quarter records. (2) The $100B buyback + 4% dividend hike signal management's confidence that FY26–27 free cash flow will comfortably exceed today's ~$110B run-rate, even after the Section 122 tariff drag. (3) If iPhone 18 launches in Sept '26 with on-device AI parity to GPT-5/Gemini, the discount Apple trades at versus other Magnificent-7 names disappears and the multiple re-rates toward MSFT (~32× forward).
Two weakest assumptions
1. That Section 122 tariff impact stays at $3–10B annually and isn't escalated as a political tool — a single Executive Order can change the run-rate by an order of magnitude.
2. That on-device AI on iPhone 18 reaches feature parity with hyperscaler frontier models within 12 months — Apple is currently 18+ months behind on independent benchmarks and Apple Intelligence v2 has had several public missteps.
Rating triggers
↑ Strong Buy
Services run-rate >$140B with stable GM, AI parity confirmed by independent benchmarks.
Services run-rate >$140B with stable GM, AI parity confirmed by independent benchmarks.
= Hold
China revenue declines >10% YoY for two quarters running, OR tariff cost exceeds $15B annual.
China revenue declines >10% YoY for two quarters running, OR tariff cost exceeds $15B annual.
↓ Reduce / Avoid
DOJ wins antitrust case; default-search payments from Google end (~$20B annual at risk to Services).
DOJ wins antitrust case; default-search payments from Google end (~$20B annual at risk to Services).
Bottom line · BUY · 12-month horizon
0 Avoid20 Reduce40 Hold60 Buy80 Strong Buy100
Apple deserves a Buy at $280 with 12-month upside toward the $310–$330 zone (Morgan Stanley sits at $330). The Q2 FY26 print confirms iPhone 17 is reaccelerating, Services are reaching escape velocity at industry-leading margin, and the $100B buyback puts a floor under per-share economics. Tariff and antitrust drag is real but bounded; the larger open question is whether on-device AI catches up before the iPhone 18 cycle locks in customer expectations. Risk-adjusted, the position warrants long exposure — but pair-trading with a growth-AI peer (MSFT or GOOGL) is sensible to hedge the AI-lag risk. Composite 68/100 → Buy.
Sources
- Apple Newsroom · Q4 FY25 results (Oct 30, 2025)
- Apple FY25 10-K · SEC EDGAR (filed Oct 2025)
- CNBC · Apple Q2 FY26 earnings report (Apr 30, 2026)
- MacRumors · Apple Q2 FY26 results $29.6B profit (Apr 30, 2026)
- Motley Fool · Apple +$100B buyback coverage (May 1, 2026)
- 24/7 Wall St. · Wall Street splits on AAPL post-print (May 1, 2026)
- GuruFocus · AAPL forward P/E and valuation multiples
- Stock Analysis · AAPL valuation metrics
- FinancialContent · Section 122 tariff ruling deep-dive (Feb 2026)
- Longyield · Apple's China premium-share dynamics
- CNBC · Major analyst notes incl. Morgan Stanley $330 PT (May 1, 2026)
Uncertainties & missing data
- est Exact net cash position at March 28, 2026 — modeled at ~$48B from FY25 10-K trend; full Q2 10-Q reconciliation pending in detail.
- est EBITDA margin (~33%) modeled from disclosed gross margin and historic opex ratios — Apple does not report EBITDA directly.
- est Free cash flow conversion (~95%) is a TTM model; quarter-specific FCF requires the cash flow statement in the Q2 10-Q.
- iPhone 17 unit sales — Apple stopped disclosing unit volumes in 2018; growth attribution between price/mix/units is not directly observable.
- est Region-by-region Q2 FY26 breakdown (Greater China, Americas, Europe, Japan, Rest of Asia-Pac) not yet pulled — full 10-Q segment table needed.
- Services attach rates and the share of Services revenue from Google's TAC payments are not separately disclosed and represent the single largest antitrust-sensitive line.
- Vision Pro line-item — still aggregated within “Wearables, Home and Accessories”; cannot model attach rate or contribution margin independently.
- est Tariff cost run-rate ($3–10B) is third-party analyst modeling; Apple has not disclosed a specific number.
- stale 12-month price chart uses monthly anchor points with linear interpolation — illustrative only; full daily series requires market-data feed.
- FY27 consensus revenue/EPS estimates not in current search results — long-horizon valuation work would benefit from a TIKR / Bloomberg / FactSet pull.
- Apple Intelligence rollout schedule beyond WWDC '26 is management-discussed but not formally guided; the AI-parity milestone is qualitative judgement.
- Peer median multiples (P/E ~22.5, P/S ~7, EV/EBITDA ~17) are simple averages of MSFT/GOOGL/META/AMZN rounded — not weighted.
Evolve Financial · Long-only PM perspective · 12-month horizon. Not investment advice. Equities involve risk including loss of principal. All figures in USD.
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