Apple (AAPL) heads into its earnings report Thursday after the close with renewed momentum after a sluggish start to the year. Year-to-date, Apple shares are up roughly 8%, ahead of only Amazon, but sentiment has shifted sharply over the past quarter. In the last three months, Apple has surged 30%, outpaced only by Alphabet (GOOGL Quick QuoteGOOGL - Free Report) (+46%) and Tesla (TSLA Quick QuoteTSLA - Free Report) (+39%). These flows suggest investors are rotating back into Apple as they recognize the role it will play in the AI boom.

After several quarters of consolidation and muted excitement, Apple’s latest product cycle has rekindled enthusiasm. The new iPhone Air marks the first major design-forward refresh in years, while the MacBook Pro with the M5 chip delivers another significant leap for its computing lineup, which has steadily gained market share since Apple introduced its in-house silicon. Both releases have been well received and appear to be reigniting consumer demand across Apple’s ecosystem.

With shares rebounding and investors regaining confidence, Apple now sits at an interesting inflection point, where steady execution, AI integration, and valuation discipline could set the tone for a stronger 2026.

Image Source: Zacks Investment Research

Apple’s AI Advantage: Subtle but Strategic

Earlier this year, Apple was widely viewed as falling behind in artificial intelligence, having yet to release a generative AI model to rival its peers. But as competitors wrestle with unclear business models and high infrastructure costs, Apple’s installed user base and dominance in mobile computing have reemerged as a formidable advantage.

Rather than chasing model development headlines, Apple’s approach to AI focuses on deep ecosystem integration, embedding intelligence across devices and services to enhance usability and engagement. This measured strategy plays to Apple’s strength: ownership of the most important real estate in the world—our eyeballs.

Much like Alphabet’s $20 billion annual payment to remain the default search engine on Safari, Apple could soon secure a similar or even larger AI partnership and payday, leveraging its massive footprint as the gateway to billions of daily consumer interactions.

Apple Earnings, Valuation, and Technical Stock Setup

Analysts expect EPS growth of 5.5% to $1.73 on revenue up 6.6% to $101.2 billion. Apple holds a Zacks Rank #3 (Hold) with flat earnings revisions, and the Zacks Earnings ESP currently forecasts a modest 0.63% beat.

At 33.5x forward earnings, Apple trades above its five-year median of 28.3×, reflecting investor confidence in its stable growth profile and cash generation. Despite slower top-line expansion, Apple continues to deliver margin improvement and robust free cash flow. Gross margins are nearing 50%, supported by the growing share of high-margin Services revenue and disciplined cost control. Combined with steady share repurchases and a fortress balance sheet, Apple remains a core institutional holding.

As noted, over the last three months, Apple stock has been on fire. In the last week, shares have broken out to a new record high as investors pile in ahead of earnings. New highs are definitely a bullish development.

Image Source: TradingView

Can Apple Stock Continue to Lead?

Apple’s position among the Magnificent Seven is strengthening again as investors reward consistency over speculation. While Alphabet and Tesla have led recent gains, Apple’s combination of stable growth, expanding margins, and massive user engagement make it one of the most dependable large-cap tech plays heading into 2025.

With iPhone adoption steady, Services growth in the mid-teens, and rising institutional inflows, Apple looks well positioned to deliver a modest earnings beat and sustain upward momentum into year-end. While its valuation remains elevated, the company’s execution, ecosystem dominance, and pricing power continue to justify investor confidence, and could help Apple reclaim its leadership status among the Magnificent Seven.