Is Apple Stock a Buy as iPhone Revenue Soars?

Departing Apple (NASDAQ: AAPL) CEO Tim Cook is looking to go out on a high note, with the company turning in another stellar performance for its fiscal second quarter. This follows an exceptionally strong fiscal first quarter report.

Apple's growth was once again led by resurgent iPhone sales, which climbed 22% year over year to $57 billion. Notably, it was a record March quarter for iPhone upgrades.

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Sales of Apple's other products were also solid. Sales of iPads climbed 8% to 6.9 billion, bolstered by the M4-powered iPad Air. Mac sales rose 6% year over year to $8.4 billion, helped by the launch of the MacBook Neo, while wearable revenue increased by 5% to $7.9 billion.

Total product segment sales jumped by 17% to $80.2 billion. China was once again an area of strength, with revenue climbing 28%, and the company also called out its excitement over India. Meanwhile, Apple said it saw double-digit iPhone growth in most of the markets it tracks.

Apple's services segment -- which consists of its App Store, iCloud storage, Google Search revenue sharing, Apple Pay, Apple TV, and more -- saw revenue grow 16% to $31 billion.

Product gross margin fell by 200 basis points sequentially to 38.7%, while service margin increased by 20 basis points sequentially to 76.7%. Overall gross margin was 49.3%, above analyst expectations of 48.4%. The company saw some pressure in the quarter from rising memory costs, but expects that to have a much more significant effect in its June quarter.

Overall, Apple's revenue rose by 17% to $111.18 billion, while its earnings per share (EPS) jumped 22% to $2.01. That topped the analyst consensus estimates for EPS of $1.95 on sales of $109.66 billion.

For fiscal third-quarter 2026, Apple expects its revenue to grow by 15% to 17% year over year, with services revenue rising at a similar level to fiscal Q2. It expects gross margins to be between 47.5% and 48.5%.

Is Apple stock a buy?

Apple has one of the best business models on the planet. Once people buy one of its products, it tends to lock them into its high-margin service ecosystem. Meanwhile, the company has been able to turn around its previously sluggish iPhone and China sales this fiscal year. That's great news, as this feeds into its service business, which just continues to hum along with strong growth quarter in and quarter out.

New CEO John Ternus is set to take over in September, and he finds Apple in a great place. This should give him the opportunity to innovate and perhaps take a few calculated risks to further drive growth.

While Apple's stock isn't cheap at a forward price-to-earnings (P/E) ratio of around 30 based on analysts' estimates for fiscal 2027 (which will end in September 2027), it's still a great compounding business and a growth stock that should be a long-term winner.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.