Key Points
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The iPhone continues to impress users, who are buying it at a fast rate.
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The company’s costs are on the rise.
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There should be a lot of progress in Apple Intelligence this year.
- 10 stocks we like better than Apple ›
Although most of the big-tech stocks faltered last week after the companies announced huge increases in artificial intelligence (AI) spending, Apple (NASDAQ: AAPL) is keeping its gains since its own phenomenal earnings report.
After ignoring the company for much of 2025 due to its falling behind in AI, the market is finally embracing its other excellent qualities as well as expectations for improvements in AI this year.
Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »
Here are three updates Apple just gave investors that you should note.
Image source: Apple.
1. iPhone sales are soaring
Probably the most fantastic part of the report on fiscal 2026 first quarter (ended Dec. 27) was that iPhone sales increased 23% year over year. That’s an incredible rise considering the base number, and it means that Apple’s users are loyal and engaged.
There was record demand across global markets, so much so that it was constrained by supply. And it’s not just the current users who are upgrading; the iPhone installed base reached record levels in the first quarter, implying there are plenty of new users, too.
The market has been concerned about the company not keeping up with advancements at large in AI, but CEO Tim Cook mentioned the Apple 17’s long battery life, advanced camera, and design as attractions for the device’s fans. The market wasn’t giving these other qualities enough weight, but it’s starting to change its tune.
2. Its costs are expected to rise
All hyperscalers are raising their capital expenditures this year, and they’re all competing for scarce resources on the AI supply chain. Apple isn’t the largest or most important AI company, and it may be losing some leverage to other tech companies. Cook said that the price of memory is “increasing significantly,” and so his company is looking into many options.
In the first quarter, Apple reported an impressive 48.2% gross margin, and management is guiding for 48% to 49% for the second quarter. However, it didn’t provide a full-year outlook, and management hinted that there may be pressure on the horizon.
3. It’s moving ahead in AI
Although fans are enjoying the non-AI capabilities, the company has made recent strong progress in Apple intelligence. Cook said that users are enjoying the visual AI they interact with on the iPhone screen, including live translation and quick searches. The company recently announced that it’s teaming with Alphabet to use its large language models to drive its own AI platform, and it’s going to launch a revamped Siri later this year.
Cook didn’t elaborate on the Apple Intelligence upgrades, but he said that the company is “integrating it across the operating system in a personal and private way.” Rather than release individual AI services, it plans to embed the features in the broader platform and monetize it by adding value to its device and ecosystem.
Look for improvements in Apple Intelligence this year, and for the market to celebrate them.
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Jennifer Saibil has positions in Apple. The Motley Fool has positions in and recommends Alphabet and Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
