Apple(NASDAQ: AAPL) has spent quite some time as the most valuable company in the world, although its run in the top spot has been periodically interrupted by Nvidia and Microsoft. Apple's market cap peaked at nearly $3.6 trillion, but it has since fallen back to around $3.4 trillion.
When a company becomes that large and successful, it's natural that predictions about its future performance are going to be hotly debated. It hasn't helped the bull case for Apple that famed investor Warren Buffett has slashed his stake in the company, although it's still the largest position in the Berkshire Hathaway portfolio.
Let's consider if, and when, Apple might reach $4 trillion.
Why investors love Apple
Apple has developed a differentiated ecosystem of popular products that its fans love. Its products work in an interconnected, integrated system that breeds loyalty and exclusivity.
So, for example, even though all of the top tech companies, and some new ones, are bragging about their investments in artificial intelligence (AI), Apple has an edge over other hardware players because its customers are already invested in and loyal to its platform. It may also have an edge because of the reason these customers are so loyal to begin with: Apple usually integrates the technology smoothly. It recently debuted powerful generative AI features on its iPhones that are fully integrated and easy to install and use, including a Siri reboot. New features include AI-powered image searching and photo editing, and they're the kind of services a non-Apple user would have to find in multiple places or pay for.
Right now, Apple Intelligence is available to users with new enough devices through a free software update, but they'll come installed on future iPhone models. Apple is well-positioned to benefit from a full AI program as well as the organic growth of AI.
Apple is also seeing tremendous success in its services business. Apple Pay and Apple TV are growing faster than the total and are adding an extra driver to what's already a huge and powerful business.
Branching out into new revenue streams is a key lever to push for many large companies, and it's one of the features Buffett has said he loves in a great business. Subscription services also provide reliable revenue streams and draw users further into the Apple ecosystem. Apple will continue to get the largest fraction of its revenue from iPhone sales, but its varied products and services make it a well-rounded business with greater opportunities.
Heading for new milestones
For Apple to reach a $4 trillion market cap, the stock would need to gain about 18% from where it is today. How fast could that happen? It's already up 17% this year, and there's still about six weeks left to go.
Revenue increased 6% year over year in the company's fiscal 2024 fourth quarter (which ended Sept. 28) to $95 billion, and Wall Street expects it to keep growing at mid-single-digit percentage rates. It's a similar story with earnings per share, which are expected to increase at a slow and steady pace. Those expectations may be conservative, though, because it's still unclear how much of an impact Apple Intelligence will have.
At current growth rates, Apple's market cap may hit the $4 trillion mark as early as next year, presuming that its valuations don't slip. However, Apple stock is fairly expensive right now. It trades at 37 times trailing 12-month earnings, well above its five-year average of 29. Is that premium justified? It might be, because companies that are this dominant and reliable are worth paying a premium for. But Apple stock has dipped a bit over the past month, and its still-lofty valuation could mean that it's at risk of further pullbacks in the near term.
You may not want to make Apple the largest position in your portfolio if you're opening a new stake, but it's a reliable candidate for growth and stability, and offers a steady (but below-average) dividend. If you're already a shareholder, hold on and wait for it to hit further milestones.
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Jennifer Saibil has positions in Apple. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
