Apple

Thanks to Mark Gurman, most of the details about Apple’s event today were already known. The two wildcards were pricing and, more importantly, what the new iPhone Air form factor would actually look like, a key factor to determine uptake. The Air's look was largely what I expected. My biggest surprise was the more industrial, Apple Watch Ultra-like design of the iPhone Pro models. It is a subtle but powerful dynamic that should drive upgrades over the next year. The key takeaway is the two new form factors, the Pro models and the Air, make this the most significant iPhone hardware refresh since 2014.

Apple raising the monthly price of Apple TV+ by 30% is a small example of a bigger opportunity for the company: increase revenue per device from more subscriptions, and services and hardware price increases. I believe investors will increasingly focus on that metric as a barometer for the health of the business. Horace Dediu from Asymco estimates the average revenue per device per day is $0.47. I estimate the Apple TV+ price bump (Apple One price did not change) in the U.S., U.K. and Canada will increase average revenue per device per day from $0.47 to $0.4704. That is about four tenths of a cent increase per day. This would also add about $430m in high margin revenue, which would increase overall revenue by about 0.1% next year (The Street is looking for $435B) and earnings by 0.2%.

Apple's incremental $100 billion investment in the U.S. marks a return to the pre-tariff status quo at the start of the year. Credit Trump for returning to be supportive of Apple and credit Cook for navigating a stormy seven months. In the end, Apple will spend more with U.S. suppliers, continue to assemble phones in China and India, which means it's unlikely prices will go up on account of this deal. Margins should remain stable, and Apple investors can sleep better at night knowing the tariff risk appears off the table for the next few years.

Trump’s mention of tariffs on Indian products rising “very substantially over the next 24 hours” (currently at 25%) could have an additional 4% negative impact on operating income if India raises tariffs to 50% and Apple fails to secure an exception to reciprocal tariffs. Ultimately, I expect cooler heads to prevail, with the Trump administration granting favorable tariff treatment to Apple and Nvidia, reducing the overall impact to de minimis.

Apple’s June quarter results and its outlook for September are the strongest in more than three years, yet the stock’s muted reaction underscores that it has become a show me story. Investors are worried the party will end as tariffs, regulatory changes, and Apple’s AI strategy come back to weigh on growth. I believe the disconnect between the fundamentals and the stock will be short lived. If Apple grows revenue in FY26 ahead of the Street’s 5.5% expectation, which I believe is likely, and they deliver a powerful new Siri by WWDC 2026, I expect AAPL’s multiple to rerate higher.

I expect Thursday’s earnings key takeaway will be September guidance in line with or slightly better than the Street. The iPhone business has stabilized, and the iPhone growth bar in September is low, calling for revenue to be down about 1% y/y. The upcoming iPhone Air hardware redesign should provide upside to iPhone growth in FY26. The favorable fundamentals should outweigh the headwinds of tariff uncertainty that will remain. As for AI, the bar is low for the next year.

Jeff Williams’ retirement marks the end of an era for Apple’s operational leadership, given that he has been with the company for 27 years, 10 of those as COO. Given the recent challenges with AI, some might interpret the news as evidence that Apple’s leadership is struggling. However, I believe this is a well-orchestrated changing of the guard. New COO Sabih Khan, who joined Apple in 1995, and likely future CEO John Ternus, who joined in 2001, reflect continuity and deep institutional knowledge. Steve Jobs wrote the book on leadership transition, one that Tim Cook continues to implement with precision.

The prevailing narrative around Apple’s AI efforts is that the company may not be moving fast enough to meet its goal of launching a new Siri by next spring. However, Mark Gurman’s recent report suggests Apple is determined to deliver by considering hitting the reset button on Siri by partnering with companies like OpenAI or Anthropic, or potentially acquiring Perplexity. This more aggressive approach is encouraging for AAPL investors, as it signals the company understands what’s at stake and is willing to think outside the box to get there.

All that matters for Apple’s AI is this next version of Siri, which we should see by June of next year. We know the current Siri is well behind ChatGPT and wanted to quantify that gap. We tested the two and left with a new perspective: Siri isn’t an AI assistant. It is still just a voice-activated search tool. The combo of Siri and ChatGPT improved the quality of the results, but it took on average 5 to 10 seconds, underscoring one challenge of leveraging a third party LLM.

Apple’s AI strategy is becoming more clear. They’re taking a measured approach — they held off on announcing any big AI advancements, stoking concerns that Apple doesn’t get it. They get it, and they have elevated next year's release of a new, supercharged Siri as the critical test of their AI chops.

We expect this year’s WWDC two biggest announcements will likely be a new look to OS and opening more AI models up to developers. This will leave some investors wanting more in AI, asking how much time the company has before it begins to lose customers. The answer is that they still have a couple of years to get it right, but to do so, they will likely need to increase their AI related investments.

Every now and again, innovators share a behind-the-scenes look at their work. Sometimes these breadcrumbs lead us down a dead end; sometimes, however, they lead us down a path of transformation and revolution, a permanent path that forever changes the…