Apple's stock slipped 1.8% on Monday as John Ternus gears up to succeed Tim Cook as chief executive, ending a more than decade-long era. Ternus steps into a company valued at nearly $5 trillion, where sustaining growth from such a massive base will be a central test.
Under Cook, Apple's iPhone sales have grown from roughly 72 million units in his first year to an estimated 255 million this year, according to Counterpoint Research. Cook also championed disciplined capital returns, with over $1 trillion distributed via dividends and buybacks, while expanding services into a major revenue pillar.
Yet investors are increasingly focused on what comes next, especially as artificial intelligence reshapes the tech landscape. Ternus's immediate priority will be Apple's AI strategy, particularly the evolution of Siri. Daniel Newman, CEO of Futurum Group, told CNBC that Apple must identify the next major computing platform beyond the smartphone. "Apple needs to own this," he said, calling it Ternus's "big job."
Newman noted that Apple currently serves as the "experience layer" for AI, as consumers access tools like ChatGPT and Claude through Apple devices. However, the company has yet to fully monetize that position. Apple has announced software upgrades aimed at making Siri more capable, but early beta tests by the Wall Street Journal found it can be slower than rivals, despite backend improvements powered by Google technology.
The bigger question, Newman argues, is whether the iPhone remains the central computing device. He pointed to efforts by OpenAI and Meta to develop new hardware that could alter consumer interaction with technology. Apple's own attempts at new categories—such as the Vision Pro headset, an electric car, and smart home devices—have largely stalled, underscoring the difficulty of innovation beyond the iPhone.
Valuation adds another layer of pressure. Apple trades at 33 times forward earnings, versus about 20 times for the S&P 500, even though its earnings growth is roughly half the market's pace. Craig Moffett of Moffett Nathanson cautioned that while investors have paid a premium for Apple's perceived safety amid AI investment uncertainty, "when valuation gets stretched, safety isn't safe anymore."
Supply chain risks also loom. AI companies are competing for memory, storage, and logic-chip capacity, which could raise Apple's costs and create shortages. The company has already passed some higher costs to consumers. Additionally, Apple's heavy reliance on China remains a concern, as the US-China trade conflict persists and tariffs threaten margins. Cook managed these risks through political engagement, but Ternus inherits a supply chain still concentrated in China.
Services, a key growth driver, face headwinds too. A California court ruling has limited Apple's ability to collect fees on certain in-app purchases, and Appfigures estimates US App Store commission revenue fell 6% in the June quarter. This adds to the challenge of maintaining growth across all segments.
Despite these obstacles, Apple enters the transition with strengths. The iPhone 17 Pro, with improved camera and battery, continues to sell well. Mac demand is rebounding as Apple's chips handle large language models locally, leading to product shortages. A foldable iPhone is expected in Ternus's first launch event, with IDC projecting it could capture 40% of the foldable market by 2027.
Newman credited Cook with building Apple's global supply chain and strong unit economics, but noted Ternus's hardware and engineering background offers a different skill set. The stock has gained over 2,200% during Cook's tenure, though it has lagged some Magnificent Seven peers. Newman estimated Apple spent about $877 billion on buybacks under Cook.
For Ternus, the task is not just maintaining Apple's existing businesses but defining the next growth chapter as AI transforms the industry. The company's ability to innovate beyond the iPhone will likely determine its long-term trajectory.
This article is for informational purposes only and does not constitute financial advice.
