Apple’s March quarter was objectively solid in the face of high expectations. Revenue grew 17%, ahead of the company’s prior outlook for 15% growth. Services and Mac were better than expected, iPad was better than expected, and iPhone was more or less in line with expectations.

Gross margin was also better than expected, an important positive given investor concern around components and the broader cost environment. In other words, the quarter checked the key boxes.

The bigger surprise was guidance. Apple guided June revenue growth to 14% to 17%. On an absolute basis, that translated to the high end of revenue for June at 7% higher than where the Street was going into the print. Given the company typically exceeds the high end of its range, that effectively points to 17% growth, compared to the Street that was at 9% and my prior expectation for 10% to 12%. On gross margin, the midpoint of the guide was about 50 basis points above the Street, and if Apple comes in near the high end, the beat would be closer to 80 basis points despite the component pricing environment.

I believe that guidance was strong enough to justify the stock being up closer to 10%. Instead, shares are up about 4%. That disconnect points to investor concern about what’s next.

The key investment topic for Apple investors has less to do with FY26 and more to do with whether AI can power better-than-expected growth next year.

Taking a step back, Apple has been in an iPhone super cycle over the past five quarters. That matters because from fiscal 2022 through the middle of fiscal 2025, iPhone revenue growth averaged about 1.5%. Over the past five quarters, including the likely June quarter results, iPhone growth has averaged about 15%. Looking just at December, March, and June, iPhone growth is tracking closer to 20%.

That’s what a super cycle looks like.

The concern is the encore. Street estimates for next year imply about 6% iPhone growth. In fact, the strong June guide makes the comp for next year much more difficult. Investors understand the reality of the iPhone business: it can bounce along for a few years, then deliver a boom year when the upgrade pool returns.

I believe there is still value in that super cycle model. Even if Apple is simply a super cycle business, investors now have more evidence that the cycle still works. The iPhone 17 is a great product, but it doesn’t have a single breakthrough feature that explains the magnitude of the growth we have seen more recently. That suggests the installed base upgrade dynamic remains powerful.

The question is whether Apple can do more to step up growth between the cycles.

The path to revenue and earnings upside next year comes down to Apple’s ability to create AI features consumers view as must-have.

I estimate that only about 30% of iPhone users have upgraded over the past five quarters. Factoring in the recent upgrades (about 30% of the base) and other iPhones sold prior to the 17 (15 Pro Models, 16), that leaves about 55% of the base that still needs to upgrade to run the new Siri and Apple Intelligence.

As for the timing of the new Siri, which is code for the new Apple Intelligence, Cook said on the earnings call that Siri is coming this year. He also told CNBC that he is excited about Siri at WWDC. I believe that translates to Apple showing a lot at WWDC, then rolling the features out through software updates, with the experience becoming more meaningful around the new phones in September.

For investors, the AI bar is low. For Apple, it is high based on comments from management. Taking a step back, Apple has been working for more than two years to deliver a more capable Siri and Apple Intelligence features that are must-have. They have shifted the focus to “this year” with the new Siri. This comes down to a question: if Apple can show that personalized AI creates new use cases inside the iPhone, the current 6% growth expectation for next year will prove too low. If they fail, it is likely to land around that 6% growth rate.

At the highest level, I believe the Apple personalized AI opportunity remains underappreciated, given they are one of the few companies with the hardware, software, silicon, privacy policies, and distribution to make it mainstream.

Investors have been critical of Apple that over the past few years they have under-invested in AI. While Apple is not going to be spending big on AI data centers, as evidenced by John Ternus’s comments on the March earnings call that he will maintain their financial discipline, the company has room to increase investments in R&D. We saw some of that in the March quarter, with R&D spend up 32% y/y to about $11.5B in the quarter. While historically, it is difficult to draw a straight line between Apple’s R&D spending and future product success, the fact that it is stepping up is still a good sign.

Relative to other mega-cap tech companies, Apple is still spending less. The other large-cap tech companies that reported in March are averaging closer to $19B in quarterly R&D spend, well ahead of Apple’s $11.5B mark. My sense is Apple’s quarterly R&D spending moves toward $15B over the next year or two.

Another hint that Apple may be increasing investments is a tweak in their language when discussing their capital return policy. On the earnings call, the company highlighted their commitment to capital return, but prefaced that capital return will come after any needs they have to invest in the business. While that approach may seem obvious, investing in the business before returning capital, it does represent a change in their language that caught the attention of analysts on the earnings call. My take is this tweak in language suggests the annual increases in dividends and share buybacks are not a foregone conclusion, and they are open to shifting some of the dollars to products and potential acquisitions, both of which I believe would be viewed as a positive by investors.

The big picture is unchanged. Apple makes the world’s best consumer technology products, and AI gives the company a chance to make those products more useful. The opportunity is to build the world’s first must-have consumer AI devices that are anchored in personalized AI. Whether that is new iPhone features, unlocking the power of what developers can build, or eventually new products like smart pens or smart glasses to drive the next leg of growth.

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