Here's My Top "Magnificent Seven" Stock Pick for 2026

Apple's (NASDAQ: AAPL) latest earnings report reminded investors that the tech company can still be a growth stock. The iPhone maker just closed out a record fiscal year, with revenue rising at a high-single-digit rate in the September quarter and earnings per share growing even faster. The stock has quietly climbed back to record territory around a roughly $4.2 trillion market capitalization.

Looking beneath the surface, Apple's results reveal a business transitioning from being hardware-driven to a broader platform of services and AI (artificial intelligence)-enabled experiences. Services revenue grew at a mid-teens clip in the most recent quarter and now accounts for more than a quarter of total sales (and an even bigger portion of total profits), helping smooth out volatility in hardware sales.

For investors trying to pick a Magnificent Seven stock to own heading into 2026, Apple looks like a solid option.

Image source: Apple.

Growth where it matters the most

Capturing Apple's business momentum, revenue in its fiscal fourth quarter (the period that ended on Sept. 27) rose 8% year over year to $102.5 billion, up from 6% growth in the same period of 2024. Earnings per share increased 13% year over year on an adjusted basis, marking the second consecutive period of accelerating profit growth.

Notably, Apple achieved double-digit earnings-per-share growth for the full fiscal year.

But there's more to the story beneath these headline metrics. The most exciting aspect of Apple's growth story is its growth in services -- a business segment that boasts about twice the gross profit margin as its hardware business. Apple's services revenue grew 15% year over year in fiscal Q4 and 13.5% for all of fiscal 2025.

This comes as the company's installed base of active devices hit a record high in fiscal Q4. This is important because Apple makes money not just on the sales of its hardware but on the lifetime usage of its products. AI, therefore, could help services growth accelerate as users tap into more AI services on their Apple devices.

Meanwhile, Apple's guidance for fiscal Q1 (an important quarter that includes the holiday season) points to revenue growth of 10% to 12% year over year, with management forecasting iPhone revenue to grow at a double-digit rate and services revenue to expand at a pace similar to fiscal 2025.

A more cautious approach to AI investment

The more specific reason Apple stands out among the Magnificent Seven right now is how it is approaching artificial intelligence and capital allocation. Rather than chasing eye-popping capital expenditure numbers, Apple is taking a more cautious approach. For instance, Apple's capital expenditures in fiscal 2025 totaled $12.7 billion, up 34% year over year. This compares to Meta Platforms' capital expenditures in Q3 alone, coming in at $18.8 billion -- up from $8.2 billion in the year-ago period. Meta's substantial capital expenditures come as the social media company significantly increases its investments in AI-capable data center technology.

Still, on the latest earnings call, Apple CFO Kevan Parekh made it clear that the tech giant is not sitting out the AI race.

"[W]e are significantly increasing our investments in AI, while continuing to invest in our product road map," Parekh noted.

But Apple's approach will likely be far more measured than its peers.

The biggest risk to being cautious with AI spending, of course, is that Apple's AI features roll out too slow, leaving room for competition to gain ground. But it's not unusual for Apple to be late to the party. The company usually waits until technology is more refined and capable of creating a game-changing user experience before diving in. For instance, mobile phones existed long before the iPhone, and headphones were available long before AirPods.

Sure, Apple shares aren't cheap today. The stock trades at about 34 times forward earnings. A valuation like this means investors expect double-digit earnings growth for the foreseeable future.

But with its high-margin services revenue growing as a percent of total revenue, and the ongoing rollout of new AI features potentially leading to a wave of customers upgrading their devices in the years ahead, I believe a double-digit compound average annual growth rate in earnings per share over the next five years is highly likely.

Daniel Sparks and his clients have positions in Apple. The Motley Fool has positions in and recommends Apple and Meta Platforms. The Motley Fool has a disclosure policy.