Key Takeaways
- Apple’s forward P/E reached 37.3x in October, the highest in at least 10 years, as its market value passed $5 trillion for the first time.
- Investors are paying a record price for Apple’s restraint on AI spending: it spent $12.7 billion on capex in fiscal 2025, while Microsoft spent $35.8 billion in a single quarter.
- That restraint lets Apple turn nearly 90% of its operating cash flow into free cash flow, and operating cash flow is up sharply in fiscal 2026.
- At that multiple, a weak iPhone 18 cycle, which Jefferies says is already showing up, leaves little room for error.
Apple (AAPL) now trades at nearly 11x sales. Charlie Bilello, chief market strategist at Creative Planning, called it “the highest valuation level in company history.”
And Apple got there by spending less. (It also passed a $5 trillion market value for the first time this month.)
On a recent episode of The Ezra Klein Show, New York Times columnist Ezra Klein said rivals now spend $100 billion to $300 billion a year on capex. Meanwhile, “Apple just decided to not compete in making a frontier AI.”
The stock is up 26% in 2026 (through the Oct. 19 close).
Investors haven’t paid this much in a decade
Apple’s forward P/E is 37.3x. That’s the same as the 10-year high it set on Oct. 16, and well above its 24.3x average over that stretch.
As recently as December 2018, investors paid 11.1x.
Apple sat out the capex race
Apple’s capital spending has barely moved in five years. It was $11.1 billion in fiscal 2021 and $12.7 billion in fiscal 2025 (years to September).
Now compare that with the companies racing to build AI data centers. Microsoft (MSFT) spent $35.8 billion in cash on property and equipment in its June quarter alone. That’s nearly three times what Apple spent in all of fiscal 2025.
Microsoft also expects its capex to grow again in fiscal 2027.
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So the cash piles up
Because so little goes back into the business, Apple’s free cash flow has stayed between $93 billion and $111 billion a year from fiscal 2021 to fiscal 2025.
And it’s growing again. Apple generated $117.0 billion of operating cash flow in the first nine months of fiscal 2026, up from $81.8 billion a year earlier.
Apple turned nearly 90% of its fiscal 2025 operating cash flow into free cash flow. In its June quarter, Microsoft kept about 35% of its operating cash flow ($19.6 billion of $55.4 billion) after capex. So Apple has plenty to hand back: it returned $33 billion to shareholders in its June quarter, while Microsoft returned $10.2 billion in its own June quarter.
Investors have noticed. “My clients are going to balance sheets and free cash flow,” Baird’s Ted Mortonson said on Bloomberg Surveillance.
A record multiple leaves little room for a weak iPhone
At 37x forward earnings, Apple needs the next few quarters to go right, and the iPhone 18 is already wobbling.
In an Oct. 19 note, Jefferies analyst Edison Lee said demand for the iPhone 18 Pro and Pro Max has slowed: “Our view on weak iPhone 18 sales has been vindicated when media reports (Nikkei/Reuters) indicated AAPL has cut its orders on iPhone 18P/PM by 10%-15%.”
Apple has also guided for 9% to 11% revenue growth in the September quarter. That’s slower than the 16% it posted in the June quarter.
The bet is on not spending
Apple’s record multiple is a bet on what it isn’t spending. Investors are paying up for a company that keeps nearly every dollar it earns while its rivals pour theirs into data centers.
My take: That discipline deserves a premium. But this is the most investors have paid in at least a decade, so I think the stock already prices most of it in, and a soft holiday quarter would hurt.
Of course, Apple reports its September quarter on Nov. 2. A strong holiday guide, plus what it could charge for extra Siri AI, would make 37x look a lot more reasonable.
So what is Apple stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
