Biting the apple after cooking it
The speculations began. Media reports appeared. Apple’s board, it seems, is preparing for CEO Tim Cook to step down next year. The chief of hardware, John Ternus, is being viewed as the new successor. The Cook loyalists within the media began a counter-campaign. Bloomberg’s Mark Gurman, whose newsletter, Power On, is a proxy for Apple’s internal dealings, said that he would be “shocked” if the CEO exited in the first half of 2026, and confidently described the talks of an imminent transition as “simply false.” According to him, succession “moment is not at hand.” The apple is yet to fall.
Cook is 65, has led the company since 2011, and taken its valuation to four trillion dollars. The internal corporate governance guidelines allow directors to continue till 75. So, there is a third theory. Cook may transit to the role of the chairman, when the current one, Arthur Levinson, who has reached this age, steps aside. Whether Cook walks away from the apple tree, or takes another bite in a new role, the question being debated is how Apple changed in the past 15 years, after Cook took over from the legendary founder, Steve Jobs.
Of course, the company is much bigger in terms of revenues. When Jobs left, it was a 350-billion-dollar company. Now, it is more than 10 times larger. In 2011, it was on the steep part of the iPhone ‘S’ curve. iPad was new, Mac was a niche but growing franchise, and the App Store was an uncrowded toll booth. Today, Cook’s inheritor will lord over an installed base of active devices that are at all-time highs across categories, and smartphone shipments will constitute a 19.4 per cent global share in 2025. Apple is by far the world’s largest smartphone maker by volumes for the first time.
Explosive growth has given way to maturity, which implies intense competition from China, even as the regulators in Washington and Brussels rewrite the rules around App Stores, and mobile ecosystems that target Apple’s business model. The next CEO will need to defend an enormous, high-margin base, and persuade investors that the current ‘S’ curve will lead to another one. Yet, Apple’s centre of gravity, like normal gravity, has not changed. The former is grounded in iPhone, despite the more layered and complex portfolio.
However, the narratives around recent launches are not upbeat. Early sales of iPhone 16e were muted. Counterpoint data reported in June suggests that sales were 17 per cent lower than iPhone SE 2022, and 20 per cent below the SE 2020 in comparable launch windows. The iPhone Air story is worrying. This ultra slim flagship did not find traction. Reports talk not just about weak sales but that the trend is discouraging rivals from launching ultra-thin devices. Apple’s 17 series is on track despite the lackluster launch.
The future will be about whether the company has reinvented itself for the AI era without breaking its privacy promise. Apple Intelligence is the flagship bet. It runs a mix of on-device models, and cloud-hosted ones, orchestrated via Private Cloud Compute to keep user identifiers away from the data used for inference. Its fortunes are tied to newer chips, which are intended to drive upgrades across the iPhone, iPad and Mac family. This is where AI intersects with product segmentation. iPhone 16e supports Apple Intelligence, which implies that AI can be a hook for cost-conscious buyers.
Wall Street treats Apple as a cautious AI follower rather than a leader. Wedbush’s Dan Ives argues that its AI strategy “held shares back” but that the iPhone 17 cycle could mark a “new era,” and set up a multi-year super cycle if it executes on device-centric AI. Other research reports frame Apple’s consumer AI opportunity as a “once in a decade” style upgrade event, echoing the 5G cycle. Internally, the tradeoff is sharper. Every increment of AI capability eats into Apple’s carefully cultivated privacy stance. Private Cloud Compute is meant to square the circle, but adds cost and complexity.
If Jobs left Cook with world-class products, but fragile operations, Cook may leave his successor with world-class operations but fragile geopolitical maps. China matters disproportionately to Apple as both a manufacturing base, and a revenue source. Over the past three years, iPhone sales in China have come under pressure from Huawei’s comeback, and local brands’ aggression. Political scrutiny of foreign tech has increased. On the supply side, Apple has not done enough to derisk the global business fully.
Bloomberg sourced estimates suggest that in FY24, India accounted for 14 per cent of global iPhone output, or one in seven devices. Indian policymakers expect the share to climb up to a quarter by 2028. Vietnam and Thailand have emerged as important nodes in the supply chain, especially for AirPods, and a few iPad and Mac lines. The US tariff policy overlays this with complexity. Donald Trump’s two tenures have pushed Apple to explore more sourcing out of China. It is still work-in-progress, as the US forces it to invest locally.
Services are the Cook era’s crown jewel, and biggest regulatory headache. Apple’s services revenue, which includes the App Store, iCloud, Apple Music, TV Plus, and other subscriptions reached nearly 100 billion dollars in 2024. The company counts over one billion paid subscriptions across platforms. In the most recent quarter, services revenue hit a record 26.3 billion dollars, up 14 per cent year-on-year. However, this high margin growth is under pressure. In March 2024, there was a civil antitrust lawsuit that accused Apple of a monopoly in smartphone markets through exclusionary conduct, and restrictive App Store rules, including the “Apple tax” on in-app payments.
The European Commission opened non-compliance investigations into Apple’s treatment of steering and alternative app stores, and found the company in breach of the law. Apple responded with a complex fee structure that includes a Core Technology Fee of 0.50 euro per annual install over a one million threshold. Those changes prompted a 500 million euro fine for anti-steering practices, and have become a test case for how much rent Apple can extract from services. The next CEO will inherit litigation in the US, continuing enforcement in Europe, and renewed debates in other jurisdictions.
Bloomberg’s deep dive into Apple’s leadership noted that many of the top executives are long-serving, and approaching the later stages of their careers. It highlighted Ternus as the most probable successor to Cook, and quoted insiders who saw “little doubt.” The choice, of course, is not just about personality. It is about a CEO that Apple, and its board, believes that it needs now.
