Apple

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.

Monday is the most important WWDC in its 43-year history. Investors have given the company almost two years to get the new Siri right, a feature that is code-named for AI competence. The waiting is over, and now it’s time for Apple to convince investors that future products will be infused with compelling AI features that only Apple can pull off. If they do that, the AI narrative on AAPL will flip from follower to leader, and shares should undergo a measurable rerating. If they fail, investors can sleep well at night knowing that the personalized AI revolution has not begun, and while investors may not wait around, Apple’s loyal base will.

Apple delivered a solid March quarter and guided June revenue 7% above expectations. The stock reaction, up 4%, was muted relative to the guide, which reflects a concern that the June quarter is the last quarter of the latest iPhone supercycle. The good news is the Street is already reflecting a slowdown in iPhone in FY27 to 6% growth from an average of 20% from Sep-25 through June-26. The bigger question is, can Apple Intelligence, starting in the form of a new Siri, which rolls out later this year, break the iPhone supercycle narrative and drive incremental revenue starting next year? I believe the answer is it can. If successful, that will likely rerate AAPL's multiple.

Investors knew this was coming, as evidenced by AAPL shares being down only 0.5% on the news that Cook is moving into the chairman role. This opens the door for a new investor conversation around Apple and AI. Fifteen years ago, Cook began to orchestrate an AAPL multiple re-rating around Services that started with a new narrative. I expect Ternus will take a page out of that book and shift the stock narrative to show that they can win in AI. I'll be watching for success with the new Siri later this year, additions of leadership from AI-first companies, and maintenance of their gold standard culture around product quality as evidence that it's working.

Apple’s product updates this week accomplished two goals: lifting revenue for the June quarter by 2%. It also demonstrates the Company's an ability to protect gross margins despite a tougher memory cost environment. We now forecast June growth of 10% y/y (Street at 8%) alongside slight upside to margins. Beyond June, while the new MacBook Neo should contribute a steady 1% to sales, with the initial tailwinds from the iPhone 17e and MacBook refreshes are expected to normalize toward neutral.

Shares of AAPL are not getting the love they deserve, up only 1% on impressive December results and guidance. I would have expected them to be up 5% or more after the report. I believe the muted stock reaction is largely because investors want more clarity on when and how AI will impact the business. History suggests Cook will deliver the AI goods in the form of the first must have AI devices, likely starting mid to late this year. In the meantime, investors can sleep well at night knowing Apple’s customers remain loyal.

It's becoming more clear that demand for the new iPhone Air is soft. Recent third party estimates suggest the new form factor accounts for around 5% of iPhone sales. Before it went on sale, I and the Street had estimated it would account for 15% of sales. Despite that headwind, the iPhone is growing at its fastest rate in four years, largely thanks to a massive upgrade pool showing up, albeit nine months late.