Is Apple Stock a Buy After Record Revenue?

After a tough start to its fiscal year, Apple (NASDAQ: AAPL) finished the year strong, seeing revenue growth accelerate and reporting record quarterly revenue. Meanwhile, there is still excitement around the launch of its artificial intelligence (AI) focused iPhone.

At the same time, there are still questions surrounding its position in China, as well as the potential loss of revenue from Alphabet given that the government could end the two companies' exclusive search engine deal. Apple currently receives a lot of money for allowing Google to be the default search engine on its devices.

Against that backdrop, let's dig into the company's fiscal fourth-quarter results to see if the stock is a buy.

Record revenue

For its fiscal Q4, Apple's revenue rose 6% to $94.93 billion. That was the strongest quarterly revenue growth for the company in the entire fiscal year and an acceleration from the 5% growth last quarter. Revenue declined in both quarters in the first half of its fiscal year. The results also topped analyst expectations for revenue of $94.58, as compiled by LSEG.

Adjusted earnings per share climbed 12% to $1.64, topping the $1.60 analyst consensus.

Revenue for Apple's services segment, which includes its App Store, Google search revenue, and Apple TV, jumped 12% to $25 billion in the quarter. This segment carries a much higher gross margin than its products segment, and its gross profits surged 17% to $18.5 billion. However, Apple's service revenue came up just short of the $25.3 billion analyst consensus.

The company said it now has 1 billion paid subscriptions across its platform, while noting that recurring revenue was growing faster than transactional revenue.

Product sales, meanwhile, grew 4% to $70 billion, while gross profits rose 3% to $25.4 billion.

Sales of iPhones climbed 6% to $46.2 billion and came in above the $45.5 billion analyst consensus. iPad sales jumped 8% to $7.2 billion helped by the release of new iPad Pro and iPad Air models in May.

Mac sales rose 2% to $7.7 billion, while wearables sales -- the home to Apple Watch and AirPods -- fell 3% to $9 billion.

Apple launched its new Apple Intelligence for iPhone, iPad, and Macs in English just three days before its earnings conference call. It said early feedback was good and that adoption of OS 18.1 was twice as fast as OS 17.1 a year ago.

Mainland China has been a weak spot, but Greater China revenue was flat year over year. The company said that the iPhone was the best-selling smartphone in urban cities in China, according to a Kantar survey. It also said many new customers in China have started to buy Macs and iPads as well.

Apple ended its fiscal year with approximately $157 billion in cash and marketable securities and $107 billion in debt. It bought back $25 billion in stock during the quarter.

Apple forecast that its December quarter revenue would grow by low- to mid-single digits. Service revenue is expected to increase by double digits similar to fiscal year 2024 growth.

Image source: Getty Images.

Is now the a good time to buy Apple stock?

Apple turned is a very solid quarter. However, it also failed to answer the big questions surrounding the stock. CEO Tim Cook would not answer a question about the potential impact the government's antitrust win versus Alphabet could have on its Google revenue, since it was an ongoing case. However, with an estimated over $20 billion in pure margin revenue, a lot is at stake for Apple.

China seems to have stabilized, which is good, although there wasn't much indication it could return to solid growth. Meanwhile, the company said Apple Intelligence is a new chapter of innovation for Apple, but whether it will spur a big iPhone upgrade cycle or how much uplift it will have for revenue remains in question. Guidance did not seem to indicate the expectation of a big jump in iPhone sales.

Apple stock trades at a forward price-to-earnings (P/E) ratio of 30 based on fiscal 2025 analyst estimates. Before the COVID-19 pandemic, the stock generally traded at a much lower P/E, sometimes as low as 12 times.

AAPL PE Ratio (Forward) data by YCharts

While Apple will remain a solid stock over the long term, the combination of valuation and the uncertainty around its Google revenue should keep investors on the sidelines for now.