Apple

My initial read on the first hour of the Duo launch is that lines are surprisingly long given the high price point. My confidence in my estimate calling for 20m units in FY27 (7% of total iPhone units) inched up…

On Sep 18th, I wrote about the lead times for the iPhone 18 Pro lineup and concluded that Apple's decision to split the cycle is working. At the time, the Pro lead times were running 15% longer than last year and the Pro Max 18% longer. Since Duo will cannibalize some Pro demand, the higher lead times suggest that some would be iPhone 18 buyers are opting for Pro models, offsetting much of the cannibalization. Since then, lead times have dropped and are now 31% shorter for the Pro and 1% longer for the Pro Max. While the drop is concerning, the fact that the Pro Max remains in line with last year should be viewed as a bigger positive than the falloff in Pro lead times, given it's still surprising that the lead times for both models aren't 20% lower than last year in the face of the Duo launch (pre-orders started on Sep 16).

With shares of META moving higher on the potential behind Muse, it's worth noting the big picture; personalized AI subscriptions are an underappreciated AI growth lever. On the consumer side, I estimate only 2% of all daily internet users pay for an advanced model. While this opportunity directly benefits the frontier model companies, it is also a big opportunity for Meta and Apple, which are building personalized AI. For example, by 2030, I see a conservative case in which Apple increases its operating income in that year by 18% and an aggressive case in which it doubles it. For Meta, I see a conservative case of an additional 8% of operating income and an aggressive case in which it adds 80%. While the gap between conservative and aggressive is wide, it's built on a belief that these bots will be valuable to consumers and they'll be willing to pay for the technology. On the enterprise side, the average monthly AI spend per employee in the U.S. is only $13 versus the average software spend of $780, suggesting there's lots of room to grow.

This fall, Apple split the iPhone upgrade cycle into two launches: Pro models and Duo this fall, followed by the iPhone 18, 18e, and Air in the spring. Our tracking shows Pro model pre-order lead times are about 15% longer than a year ago on launch day. Since Duo will cannibalize some Pro demand, the higher lead times suggest that some would-be iPhone 18 buyers are opting for Pro models, offsetting much of the cannibalization. Putting it all together, I think the Street is still 10% too low on iPhone revenue for FY27. We’ll get a clearer read when Duo pre-orders open on October 16.

Shares of AAPL moved about 7% from the end of the “Surprise and Shine” event to close of market today (2.5 trading days), while the Nasdaq was flat. The move higher underscores that investors are optimistic that the new Duo will add a measurable amount to revenue in the coming year. That said, a look at FactSet analysts estimates reveal consensus revenue expectations for the next three quarters actually went down by 1% for analysts that have updated their models. The dynamic of shares of AAPL going higher while numbers are going slightly lower underscores the mixed investors feelings on the Duo topic. In the end, I expect Duo will be more successful than current expectations and account for around 12% of overall iPhone revenue in FY27, and add 3% to the company’s overall growth rates. The biggest disappoint of the event was we didn't get an update on the timing of the new Siri.

I've been dreading this day: Tim's last day as CEO of Apple. In the months leading up to his shift to chairman, I've thought a lot about his time at Apple. In the end, Tim accomplished what almost no one thought was possible. He took Jobs's greatest product, Apple itself, and shepherded it into a new era. In doing so, he drove Apple's market cap from $350B when he took over to $4.6T today. That's up about 2,300% vs. the Nasdaq, up around 900%. All that said, what I most admire about Cook is that despite all of the fortune and fame of becoming the world's most powerful CEO, he kept his North Star and always cared deeply about people. Below are the four things that stand out to me when I think about Cook's legacy.

Over the past three months, shares of AAPL are up 22% (Thursday’s close), compared with the Nasdaq, which is up 1%. That makes the 7% drop in shares following earnings and guidance more palatable. In after-hours trading, shares traded down 3% following the June quarter results, which overall were only slightly ahead of expectations. The stock dropped an additional 4% on the September guide, which called for revenue growth of 9–11%, compared with the Street at 12%. I believe the guide would have called for 15% if not for supply constraints and FX. Either way, numbers are going down, and that understandably doesn’t sit well with investors. I believe that in the weeks to come, investors will step back and realize the guide was actually favorable relative to expectations. P.S. Don’t forget we may get a foldable iPhone this fall.

Our X poll found that only about 17% of US iPhone users use Siri daily, a low number considering the phone on average is interacted with a hundred-plus times a day. Today it's used for low-stakes tasks and not trusted as an assistant. Over the next year, that will begin to change with the new Siri expected to be available late this year in the US through an iOS 27 update. We found the feature to be slow in our beta testing over the past 20 days, which was more than offset by an AI assistant that just works. Ultimately, I believe the use of Siri, which is core to Apple's personalized AI, will be the foundation of the Apple devices' value proposition.

This week, we received September quarter revenue guidance from two key AI infrastructure companies, ASML and TSMC, that came in about 5% above Street expectations. IBM’s small miss was far more significant in the minds of investors. June-quarter software growth came in at 5%, compared with expectations of 10%. Given IBM’s 40-year track record of consistently meeting estimates, that shortfall was treated as a major disappointment and sent shares down 25%. Ironically, the miss was a positive read on how early we are in the AI cycle. The weakness was driven in part by enterprise budgets shifting toward AI infrastructure. Despite all of this good news, AI stocks traded down about 6% this week, compared with a 2% decline in the Nasdaq. The AI trade is tired, which raises the question: What will get these stocks moving higher again? The answer is earnings.

The news that Apple is suing OpenAI to short-circuit OpenAI’s AI device initiatives has a wild undertone: Apple is effectively suing Jony Ive. While the complaint’s person of focus, OpenAI’s Tang Tan, does not report to Jony Ive, the two work together (Ive on design, Tan on hardware) to develop OpenAI’s future AI devices. If Apple deemed AI devices a hobby, it’s unlikely they would have taken this aggressive action against Ive’s initiatives. Bottom line: this is a win for Apple because, at a minimum, this will slow OpenAI’s efforts. At a maximum, it will end their device efforts. As for OpenAI, I’ve always viewed the hardware opportunity as optionality. Therefore, the setback has less of an impact on the company’s near-term valuation.

Two Apple updates announced today have implications for FY27 estimates: Tim Cook mentioned to the Wall Street Journal that some product price increases are coming because of higher memory costs, and Bloomberg’s Mark Gurman reported Apple will stagger next year’s iPhone launch between the fall and following spring. My take is the pricing change is the bigger news, likely resulting in gross margins in FY27 around the 49.2% just reported in March. The Street is currently at 48% for FY27.

The elephant in the room going into this year’s WWDC was: Does Apple have the chops to build a compelling personalized AI? While the demo of the new Siri AI lived up to the hopes of personalized AI, the vague details around timing (US, Europe and China will be staged) sent shares down 4.9% intraday, underscoring that they still have measurable work to do to crack the AI code. Next stop: a beta late this year, which lands the timing of a full version at best in spring 2027. The good news is, since no competitor can offer compelling personalized AI today, Apple likely has two-plus years to get it right.