Apple Inc. (NASDAQ: AAPL) has hit an unimaginable milestone. Its market cap is $3 trillion, well ahead of Microsoft’s $2.7 trillion. It is also just shy of California’s gross domestic product. The company struggled to hit the milestone, but belief in the power of its brand helped it along. (See which 25 huge companies Apple could buy right now with cash.)

Apple’s shares barely beat the improvement in the S&P 500 a year ago. Today, its shares are up 48% year to date compared to the market’s rise of 18%. Concern about iPhone sales and earnings halted its run-up two months ago. It started another rapid climb to a share price near $193.

What Apple Has Done

Apple’s improvement is based on the fact that Wall Street has decided to trade Apple’s earnings problems for much better numbers in the future. The bet has risks. iPhone sales did start to slow with the iPhone 15. They barely budged last quarter, from $42.6 billion a year ago to $48.3 billion.

Optimism about Apple is based largely on its services business, which has grown rapidly for four years and continues to do so. In the most recent quarter, revenue for the unit reached $22.3 billion, up from $19.2 billion last year.

The services business takes advantage of what is known as its “walled garden.” Apple has over a billion hardware devices used by people around the world. This, in turn, gives it a platform to sell videos, songs, cloud storage systems and more. To access most of these, consumers must own at least one Apple device.

Apple has begun a rotation from hardware sales to software and services. While iPhone, Mac and wearable sales will still represent the major part of Apple’s revenue, they have become a platform for new revenue going forward.

What Apple has done, it has done before. It has reinvented itself and has already started to benefit from that reinvention.

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