Apple Inc. (NASDAQ:AAPL) shares recently reached a 52-week high of $248.21, closing at $247.77, showcasing remarkable resilience and investor confidence. A significant factor contributing to this momentum is Apple Services growth, which now boasts over 1 billion paid subscribers across platforms like Apple TV+, Apple Music, and Apple Pay. As Apple ventures further into artificial intelligence with Apple Intelligence, the question remains: Can this services-driven growth push AAPL stock even higher in 2025?
Apple Services Growth: A Catalyst for AAPL Stock
Apple’s services division has emerged as a cornerstone of its growth strategy. In the fiscal fourth quarter of 2024, services revenue surged by 12% year-over-year to $24.97 billion, making up 26.3% of total sales. This growth stems from increasing adoption of platforms like Apple TV+ and Apple Pay. Apple’s expansion of Tap to Pay and Apple Pay into new markets like Egypt, Uruguay, and Germany further strengthens this momentum.
Apple TV+ continues to thrive, with popular shows such as Slow Horses and Pachinko earning critical acclaim, while new offerings like The Gorge and Deaf President Now! aim to captivate audiences globally. Additionally, Apple Music’s launch of live global radio stations promises to attract a broader audience, driving user engagement and revenue.
AI Integration Boosts Apple’s Competitive Edge
The debut of Apple Intelligence, a personal AI assistant integrated into iOS 18.1, iPadOS 18.1, and macOS Sequoia 15.1, signals Apple’s commitment to innovation. Features like ChatGPT-enhanced Siri and tools like Visual Intelligence position Apple as a strong contender against rivals Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), and Amazon (NASDAQ:AMZN).
Since the introduction of Apple Intelligence in October 2024, AAPL shares have appreciated by 6.2%, outperforming the Computer & Technology sector’s 4.5% return. Upcoming features in iOS 18.2, such as Genmoji and Image Playground, aim to further elevate user experiences and retain customers within the Apple ecosystem.
Challenges and Valuation Concerns
Despite robust Apple Services growth, challenges persist. Apple faces stiff competition in China, and muted iPhone sales could weigh on overall performance. Moreover, AAPL’s valuation appears stretched, with a forward 12-month price-to-earnings (P/E) ratio of 32.52X, higher than the sector median of 29.16X. While the stock trades above its 50-day and 200-day moving averages, indicating a bullish trend, its premium valuation raises concerns for value-focused investors.
AAPL Stock: A Long-Term Bet?
Apple’s AI-driven initiatives and services growth are attractive to growth-oriented investors. However, near-term challenges, including competition and declining iPhone sales, warrant caution. Analysts project first-quarter fiscal 2025 revenues of $124.1 billion, reflecting 3.78% growth year-over-year, and earnings growth of 8.26%. While Apple’s earnings consistently beat expectations, current valuations suggest limited upside in the near term.
For investors seeking long-term growth, Apple Services remains a promising driver. However, given valuation concerns, a wait-and-see approach might be prudent.
Featured Image: Megapixl© Bedo
