Apple at $3.5 Trillion: Innovation, Loyalty, or Just Buybacks?

Cumulatively over the decade, Apple Inc. bought back $704 billion worth of shares, according to market researcher Charlie Bilello. To put this figure into context, Apple’s decade-long buybacks exceed the market capitalization of 488 individual companies in the S&P 500 index.

In Q2 2024 earnings, Apple’s stock buyback resurged, as the company surpassed its own $100 billion buyback program from 2018. This begs the question now as it did back then – is Apple too financialized for its own good?

Or to put it differently, does Apple have the fundamentals to keep pushing its value with more than financial engineering – through genuine innovation, product growth, and ecosystem expansion?

Why Apple’s P/E Towers Above Samsung’s

Presently, Apple has a price-to-earnings (P/E) ratio of 35.02, which is more than double that of Samsung’s P/E of 16.17. Worldwide, Apple has a mobile vendor market share of 25.68%, while Samsung’s share is 20.93%. From a year ago, both companies suffered market share drops, with Apple declining from 27.71% and Samsung from 23.58%, as Chinese brands like Vivo climbed.

At a market cap of $3.48 trillion, Apple’s premium P/E reflects a self-reinforcing cycle: brand prestige fuels ecosystem lock-in, which in turn strengthens loyalty. Case in point, Apple’s Net Promoter Score (NPS) in 2025 is 61/100, above the industry’s average of 58. This metric measures brand loyalty by gauging how likely it is for the customer to recommend products.

Moreover, although reliant on carrier loyalty, for the 12-month period ending June 2025, iPhone loyalty rate is high at 89%, according to CIRP’s August report. At the same time, Apple has steadily ratcheted prices upward, leveraging high branding loyalty.

Adjusted for inflation, the iPhone 6S Plus cost just $397 in 2015; today, the entry-level iPhone 17 Pro starts at $1,099 – $100 higher than last year’s model. This marks the first time since the iPhone X that the baseline ‘Pro’ has crossed $999.

Likewise, iPhone 17 Air, replacing iPhone 16 Plus, now costs $100 more at $999. However, these price tweaks were somewhat expected as President Trump’s tariff regime repriced a wide range of products.

Earlier in the year, Bank of America Securities analyst Wamsi Mohan calculated that Apple would have to adjust its pricing by 9% to offset tariff costs, or risk a 26-cent hit in earnings per share (EPS).

Taken together, Apple’s lofty P/E ratio appears less about near-term market share and more about its unparalleled ability to monetize loyalty, as evidenced by price increases without triggering a mass exodus. And to further offset new pricing, the tight functionality overlap between iPhone 16 and 17 means consumers have a $699 iPhone 16 alternative, $100 cheaper than before.

Ultimately, while Samsung fights for market share with lower prices, Apple defends margins through loyalty-driven pricing power.

But What About Innovation?

Against the likes of Huawei, Samsung, Vivo and others, it is unlikely that iPhone 17 will expand Apple’s market share. Following its launch on Tuesday, featuring the more powerful A19 chip, stock is now down 4.6% over a week.

On paper, storage and compute increases, alongside display and camera improvements, may be impressive, but they fail to expand genuine functionality for the average user. Nonetheless, iOS 26, combined with enhanced vapor chamber cooling and processing, does lay the groundwork for on-device AI, purportedly to fully come online in 2026.

Yet, Apple stayed away from major AI investments, unlike Meta, Alphabet and Microsoft. Alphabet is advancing with Gemini’s multimodal features, alongside moving in the direction of walling off the Android ecosystem. With the latest 10th generation of Google Pixel phones, Alphabet may even provide greater AI integration, given that these phones are powered by Google’s own Tensor G5 chip and Gemini Nano AI model.

This does not bode well for Apple, as it relies on other companies’ AI models. On the other hand, Apple’s focus on on-device LLMs, better suited for real-time tasks, may pay off in the long run, or at least sufficiently offset the “Apple is lagging in AI” narrative.

Case in point, having Siri seamlessly work across apps may be more useful for end-users than relying on cloud-accessed LLMs. Likewise, the Visual Intelligence feature coming with iOS 26 is likely to fortify user loyalty.

The Bottom Line

It is safe to say that Apple’s valuation has been heavily propped up by record-breaking stock buybacks. But with the mobile market now mature and saturated, Apple faces limits to organic growth. Even the much-anticipated rollout of on-device AI may not be enough to justify the company’s elevated P/E ratio, which leans more on financial engineering than fundamentals.

With that said, investors should not underestimate Apple’s financialization effect. In particular, the inclusion of stock across various funds, amplified by Warren Buffett’s large exposure commitment that ramped up since 2016.

For new investors, stock is unlikely to give outsized returns, having already fallen 7% year-to-date.

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