Apple Inc. (AAPL): what the price assumes

In the published model solve dated 2026-Q2, anchored at $320.13, Apple Inc. (AAPL) is priced for +30.1% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-08-07.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/AAPL

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 9.9% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.2%); the inversion above states its own rate.

Per-Model Detail (n=17)

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Apple sells hardware and earns like a software business: fiscal 2025 Services produced 82,314 million dollars of gross profit on a 75.4% gross margin, roughly 42% of the company's entire gross profit from about a quarter of its revenue.
• Today's price embeds operating-profit growth of roughly 29.6% a year sustained about five years, and among comparable fast growers only about 27% have held a pace like that for that long.
• The near-term event to watch is the handover: Tim Cook moves to Executive Chair effective September 1, 2026 and John Ternus, the hardware engineering chief, becomes chief executive.

Bull Case

The trajectory is the argument. Operating income for the June 2026 quarter came in near 35,695 million dollars against 28,202 million a year earlier, and for the first nine months of the fiscal year at 122,432 million against 100,623 million. Set that against the full-year figures the company has already filed: 123,216 million in fiscal 2024 and 133,050 million in fiscal 2025. The operating margin has moved from 31.5% to 32.0% to 33.6% across those three windows. A business this size is not supposed to be widening its margin while growing revenue at a mid-teens rate. This one currently is.

The reason sits in the mix. Services carried a 75.4% gross margin in fiscal 2025 against 36.8% on Products, and the 10-K names the drivers without ambiguity: Services net sales increased during 2025 compared to 2024 primarily due to higher net sales from advertising, the App Store and cloud services. Those three lines have almost no unit cost. Every incremental dollar of App Store commission or search placement revenue arrives with roughly three quarters of itself intact, which is why a quarter of the revenue produces something close to two fifths of the gross profit. Hardware buys the installed base. Software monetizes it.

Geography is where the consensus story has quietly broken. Greater China, the region every bear has treated as structurally lost, delivered 18,816 million dollars of net sales in the June quarter and 64,839 million over nine months, up 22% and 30% respectively, and the 10-Q attributes it directly: Greater China net sales increased during the third quarter and first nine months of 2026 compared to the same periods in 2025 primarily due to higher net sales of iPhone. That segment threw off 7,406 million dollars of operating income in a single quarter before central research and administrative costs. A region generating that much profit is not in retreat.

Capital allocation is doing exactly what it should at this valuation, which is to say it is relentless. The company retired 215 million shares for 61.8 billion dollars across the first nine months of fiscal 2026, and the diluted share count fell to 14.71 billion for the June quarter from 14.95 billion a year earlier. That is a shareholder taking a bigger slice of the same pie every quarter without doing anything. Pair it with a quarterly dividend of 27 cents and the return of capital runs well past what most of the rest of the market can fund.

The bear will say the requirement embedded in the price is unreasonable, and it is high. But the near-term rate is not the imaginary part. Operating profit grew 26.6% in the most recent quarter. The bull case is simply that the run continues a while longer than the base rate suggests, and that an installed base management describes as an all-time high across every product category and every geography is the mechanism by which it might.

Bear Case

The clearest sign that an advantage is eroding is what it now costs to hold it. Research and development ran 34,035 million dollars over the first nine months of fiscal 2026 against 25,684 million in the same period last year, a 32% increase. For scale, the entire fiscal 2025 R&D line was 34,550 million and grew 10% that year. Apple spent roughly a decade as the company that did not need to outspend anyone, and it has now tripled its rate of spending growth. At WWDC26 it introduced what it called the all-new Siri AI. Rebuilding a product that shipped in 2011 is not the behavior of a business comfortably ahead.

The competitive filing language has sharpened along with the spending. The 10-K describes rivals in terms that would have read as implausible a few years ago: Some of the Company's competitors have broad product lines, low-priced products, large installed bases of active devices, and large customer bases. Installed base was the thing Apple had and others did not. On the profitability side the company is equally direct, stating that the Company believes, in general, gross margins will be subject to volatility and downward pressure.

Then there is the quality of the June quarter itself. Gross margin reached 50.1%, but roughly 2 percentage points of that came from tariff refunds, and diluted earnings per share of 2.02 dollars included 11 cents from the same source. Strip that out and the record is a good quarter rather than an extraordinary one. iPad net sales fell to 6,191 million dollars from 6,581 million. Refunds do not repeat on a schedule.

The single largest identified threat is not competitive at all. Apple's own risk factors disclose that the Company earns revenue from licensing arrangements with Google LLC ("Google") and other companies to offer their search services on the Company's platforms and applications, and certain of these arrangements are currently subject to government investigations and legal proceedings, following the August 5, 2024 finding that Google violated U.S. antitrust laws and the remedies ordered on September 2, 2025. This is high-margin revenue that costs Apple essentially nothing to produce, sitting inside the very Services line the bull case rests on, and it is subject to a court rather than to a market.

Connect that back to what the price asks. It asks for operating profit to compound near 29.6% a year for about five years, which from a base near 154,859 million dollars would require the figure to more than triple. Among comparable fast growers, only about 27% managed that persistence. If the pace instead reverts toward something ordinary, the multiple the market is paying compresses first and hardest, because that multiple is the part of the price that the static approaches never supported. The bull is right that the recent quarters have delivered. The question the price forces is not whether Apple can grow. It is whether a company already earning more operating profit than any other can keep accelerating while paying more each year to defend the ground it holds.

Valuation

Start with what the market is actually underwriting. Today's price embeds company-wide operating-profit growth near 29.6% a year over roughly a five-year stage, computed against a 9.9% cost of capital. That rate is not fantasy against recent results: the June quarter grew operating income 26.6% year over year. The stretch is persistence rather than pace. Of comparable fast growers, only about 27% sustained that kind of run for that long, and that base rate is doing most of the work in the assessment.

The methods disagree in a specific and informative pattern. Asset-based approaches, earnings-power approaches and peer-multiple approaches all land materially under the current quote. The price sits more than three times above where the earnings-power methods land and roughly two and a half times above the asset-based ones. Only the forward-growth approaches reach it, and the one that gets closest does so by taking free cash flow of about 150 billion dollars, compounding it at 14% a year, and holding the discount rate at 9.1% throughout. That is not a fair value hiding in the data. That is a statement about what has to stay true.

Sensitivity is worth stating plainly because it is unusually sharp here. Each additional percentage point of required return moves the embedded growth assumption by roughly 6 percentage points. Rates do not need to move much to make the bet materially harder, and nothing in the operating business changes when they do.

Cohort comparison places the profitability rather than the price. Against its whole-company comparable set, Apple's roughly 33% operating margin has no near neighbour: CSCO converts 23.4% of revenue into operating profit and HPQ converts 5.3%. Apple's gross margin, though, is the lower one. IBM runs 58.1% and CSCO 64.3% at the gross line against Apple's 46.9% in fiscal 2025. The advantage is not that Apple's products are cheaper to build. It is that it spends far less of each revenue dollar reaching the customer, because the customer comes back on their own.

Solvency does not constrain anything here, and it is worth saying why that matters for the downside rather than the upside. Net borrowings on the funded-debt measure sit near 23,175 million dollars against operating profit of 154,859 million for the twelve months ended June 27, 2026, so the obligations are trivial relative to the earnings that service them. What that buys is the freedom to keep retiring 60 billion dollars of stock a year through a bad stretch rather than in spite of one. The risk in this name has never been the balance sheet. It is entirely the rate of compounding the price has already booked.

Catalysts

The June quarter, reported July 30, 2026, was a record on the company's own framing: revenue of 109.4 billion dollars, up 16% year over year, with diluted earnings per share of 2.02 dollars, up 29%. Management flagged that gross margin of 50.1% included roughly 2 percentage points of benefit from tariff refunds and that earnings per share included 11 cents from the same source, so the underlying run rate is somewhat below the headline. The CFO noted that the installed base of active devices reached an all-time high across all major product categories and geographic segments.

The leadership change is the largest scheduled event. The company disclosed that Tim Cook will transition to Executive Chair of the Board effective September 1, 2026, with John Ternus, previously Senior Vice President of Hardware Engineering, appointed Chief Executive Officer and a board member on the same date, and Art Levinson becoming Lead Independent Director. A hardware engineer taking the top job at a company that just raised research spending by nearly a third is a legible signal about where the next few years of investment go.

Two legal and product threads run through the second half. The remedies ordered on September 2, 2025 against Google remain subject to further proceedings and to appeal by both the Department of Justice and Google, and the search licensing arrangements they touch are a Services revenue line. On the product side, the all-new Siri introduced at WWDC26 is the first real test of whether the R&D increase converts into something customers pay for. The board also declared a quarterly dividend of 27 cents per share payable August 13, 2026.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• DELL (Dell Technologies Inc.)
• FY2025 10-K: …intense competition from existing on-premises competitors and increasing competitive pressures from Infrastructure-as-a-Service providers. Accordingly, we expect we will be required to make additional investments to address such competitive pressures and drive future growth. Such pressures could result in the erosion…
• FY2025 10-K: …which may continue to impact ISG results. CSG - We participate in all segments of the PC market with a focus on commercial and high-end consumer computing devices, which we believe represent the most stable and profitable markets. We anticipate that CSG will benefit from advances in AI over the long-term as customers…
• HPQ (HP INC.)
• FY2025 10-K: …enablement. Competition We encounter strong competition in all areas of our business activity. We compete on the basis of technology, innovation, performance, price, quality, reliability, brand, reputation, distribution, range of products and services, ease of use of our products, account relationships, customer…
• FY2025 10-K: , Lenovo Group Limited, Logitech International S.A., Microsoft Corporation, Samsung Electronics Co., Ltd., and Toshiba Corporation. In certain geographies, we also experience competition from local companies and from generically-branded or "white box" manufacturers. Our competitive advantages include our broad product…
• IBM (INTERNATIONAL BUSINESS MACHINES CORP)
• FY2025 10-K: …revenue percent change for Strategy and Technology and Intelligent Operations. These changes did not impact our Consolidated Financial Statements or our reportable segments. The following table presents each reportable segment's revenue and gross margin results, followed by an analysis of the 2025 versus 2024…
• FY2025 10-K: …33.1 % 32.1 % 1.0 pts. Software gross profit margin of 83.5 percent in 2025 decreased 0.2 points compared to the prior year. Segment profit of $9,920 million increased 14.2 percent and segment profit margin of 33.1 percent increased 1.0 points compared to the prior year. The year-to-year increases in segment profit…
• HPE (HEWLETT PACKARD ENTERPRISE COMPANY)
• FY2025 10-K: …Competition We have a broad technology portfolio of enterprise IT infrastructure products, solutions, and services, including our aaS offerings, and these offerings encounter strong competition. We compete primarily on the basis of technology, innovation, performance, price, quality, reliability, brand, reputation,…
• FY2025 10-K: …related to stock-based compensation. Segment Information Hewlett Packard Enterprise's organizational structure is based on a number of factors that the Chief Operating Decision Maker, who is the Chief Executive Officer, uses to evaluate, view, and run our business operations, which include, but are not limited to,…
• CSCO (CISCO SYSTEMS, INC.)
• FY2025 10-K: 3%, primarily driven by software, cloud and virtualization support from Splunk and product offering support services. Services revenue increased across each of our geographic segments. Gross Margin The following table presents the gross margin for products and services (in millions, except percentages): AMOUNT…
• FY2025 10-K: …based on commoditized hardware, referred to as "white box" hardware, to the extent customers decide to purchase those product offerings instead of ours. In addition, the growth in demand for technology delivered as a service enables new competitors to enter the market. As we continue to expand globally, we may see…
• SMCI (SUPER MICRO COMPUTER, INC.)
• FY2025 10-K: …The year-over-year decrease of 2.7% in gross margin percentage was primarily due to our strategy to offer competitive pricing to gain market share, increased competition and a change in product and customer mix. Fiscal Year 2024 Compared with Fiscal Year 2023 The year-over-year increase in cost of sales was primarily…
• FY2025 10-K: …the risk of inventory write-downs. Competition The market for our products is highly competitive, rapidly evolving and subject to new technological developments, changing customer needs and new product introductions. We compete primarily with large vendors of x86-based general purpose servers and components. In…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.