The Tim Cook era is coming to a close with an existential challenge for Apple: figuring out what comes after the iPhone.
Why it matters: Cook extended the iPhone's success into products like the Apple Watch and AirPods and built a powerful services business. But the company hasn't broken into a major new category — and has stumbled into the AI era.
Driving the news: Apple announced Monday that Cook will cede the CEO reins to hardware chief John Ternus, while remaining with the company as executive chairman.
- The company also promoted Johny Srouji, the driving force behind Apple's chip success, to the new role of chief hardware officer.
- That could entice Srouji, whose name is often mentioned in tech CEO searches, to stay in Cupertino.
The big picture: Cook has executed masterfully to maximize the company's iPhone success and transform Apple into one of the world's most valuable companies.
Yes, but: His efforts to expand far beyond that device have largely sputtered. The company assembled a significant team to try to enter the autonomous car market, but gave up before bringing anything to market.
- The company's initial foray into the mixed reality market, Vision Pro, remains for sale but at a price that has attracted relatively few buyers.
Zoom in: Apple's position in AI remains uncertain.
- In 2024, Cook painted a compelling vision for Apple Intelligence, personalized AI that would be able to answer questions from data stored in a variety of places, but do so in a way that would not be accessible to Apple or anyone else.
- But it has struggled to turn the vision into reality, repeatedly delaying the most ambitious features outlined in that keynote. A revamped Siri with some of those capabilities is expected later this year.
- Apple also decided to strike a deal with Google to have access to its Gemini family of models to power future Apple Intelligence features.
The other side: Apple's restraint could pay off if it can maintain its hardware advantage while others spend heavily on AI models, as Dan Primack outlined in an article last week.
- While most of its tech giant peers have spent billions on data centers and compute capacity, Apple has avoided such large outlays.
- If the AI models turn out to be a commodity, Apple may look wise to have avoided the compute capacity craze entirely.
Zoom out: That still leaves unsettled what the next big hardware breakthrough will look like.
- OpenAI paid $6.5 billion to acquire legendary designer Jony Ive and his hardware team, with an initial device expected to be unveiled later this year.
- Meta continues to advance both its Quest virtual reality headsets and its Ray-Ban smart glasses.
- Google is also making a renewed push into smart glasses and VR headsets, in a joint effort with Samsung.
The bottom line: Cook proved Apple could continue to grow without Steve Jobs. Ternus must prove that it can still innovate.
