Four key takeaways from Apple’s change of leadership

1. Fix the AI strategy

Artificial intelligence has been a surprising weakness for Apple, at least in the eyes of some investors. It has stood on the sidelines as Microsoft, Google, Meta and Amazon have poured hundreds of billions of dollars into AI development.

Instead, Apple has preferred partnerships and announced in January that its AI tech will be based on Google’s Gemini, including in a revamped version of its voice assistant, Siri.

Dan Ives, an analyst at the US financial services firm Wedbush Securities, said: “We can’t say it enough but Apple cannot watch the AI era from the sidelines as this 4th industrial revolution takes hold. In essence, Apple is a toll collector on the consumer AI highway and Ternus needs to finally get the AI strategy right.”

Jony Ive (left) and Tim Cook at an iPhone launch day in 2018. The iPhone brings in half of Apple’s revenue. Photograph: Qi Heng/VCG/Getty Images

2. Diversify away from the iPhone

This is something of a counterintuitive challenge for an executive who has received plaudits internally and externally for overseeing recent iPhone model launches. It is also not a new quandary.

The iPhone, one of the signature consumer products of the 21st century, represented just over 50% of Apple’s $416bn in sales last year and has 1.5 billion active users worldwide. Nonetheless, the market is saturated and highly competitive.

“They need to diversify away from the iPhone and make sure it no longer represents 50% of their revenue,” said Thomas Husson, an analyst at Forrester Research.

Ternus, 51, will be looking at what OpenAI produces from its collaboration with iPhone designer Jony Ive. Apple is expected to launch a foldable iPhone and has reportedly explored personal robotics as a new product offering, while an Oura-style ring could be another option. Ternus, however, does not have a reputation for taking big swings.

Ives said: “Innovation going forward around foldable phones, an AI-enabled smartphone, new sleeker/affordable Apple Glasses, and future hardware developments will be the hearts and lungs of Apple’s success.

“While we can talk about supply chain, political navigation, and branding … it comes down to innovation and this will define the future of Apple and Ternus.”

3. Deal with the geopolitics

Apple has all the diplomatic, political and regulatory issues one would expect for a $4tn company whose products are in billions of people’s pockets and homes.

Cook has managed his relationship with Donald Trump carefully and Ternus will have to do the same, given the US president’s tariff policy and his repeated calls for Apple to bring back iPhone manufacturing from China to the US.

Apple also has to maintain a relationship with China, its third largest market behind Europe and the US and where it assembles the majority of its iPhones. Europe and the UK are also putting regulatory pressure on Apple over its app store, long a bugbear of developers who resent the cut it takes on app and in-app purchases.

Husson said: “He will have to deal with massive geopolitical challenges such as diversifying the supply chain away from China and dealing with Donald Trump. It may not be easy navigating this period of massive geopolitical tension, when you have to deal with Trump, [European Commission president] Ursula von der Leyen and China. It’s a big challenge.”

Severance starring Adam Scott and Britt Lower has been a big hit on Apple TV. Photograph: AP

4. Keep expanding Apple’s services business

One of Cook’s great successes was building Apple’s services unit into a $110bn-a-year business. This unit includes Apple’s technical support service and the Apple Music and Apple TV streaming services, which produces hits such as Severance and Ted Lasso.

This is a high-margin business with consistent revenue streams, two facets that any executive would like more of. “The challenge there will be to maintain and develop that trust with consumer to enter adjacent markets like healthcare and financial services,” said Husson.