Apple’s new CEO, John Ternus, spent his first two months on the job celebrating a lineup of new products, particularly the launch of the foldable iPhone Duo. On Monday, the 51-year-old executive introduced himself to Wall Street for the first time during the quarterly earnings call.
The market response has not been favorable.
Despite Apple's September quarter earnings surpassing expectations, investors sold off Apple stock in after-hours trading due to the company’s outlook on profit margins—Apple indicated that memory chip shortages would continue to pressure margins—as well as slowing growth in its services business and the company’s failure to clearly explain how that business would rebound. Apple has also been trying to tell its AI story through its revamped Siri AI product, but investors appear unconvinced that Apple has found the right formula for success in the AI era.
During the post-earnings analyst call, Ternus answered some questions but deferred others to Chief Financial Officer Kevan Parekh and Chief Operating Officer Sabih Khan. Apple indicated that these two executives will now regularly participate in earnings calls, a practice uncommon for many years. Ternus appeared confident during the call, but largely stuck to pre-prepared marketing talking points, such as “Apple is the greatest company in the world,” making the conversation somewhat lackluster.
From certain metrics, Apple’s performance has reached historic highs—its iPhone sales for the September quarter set a record—but the more complex reality is that the $4.9 trillion company has had to raise prices to offset soaring memory chip costs and relies heavily on its massive installed base to sustain growth. Additional pressure comes from supply chain shortages for products including the iPhone Duo, with new orders not expected to arrive until the end of January.
Ternus told analysts on the Monday call, “The memory pricing we are seeing now is unprecedented. This is putting pressure on our pricing.” He added that, aside from the December quarter, the company expects memory procurement prices to continue rising.
Apple stated that it expects the gross margin for the December quarter to be between 45% and 46%; the gross margin for the September quarter was 47.9%, boosted by approximately one percentage point due to tariff refunds. Apple attributed the decline in gross margin to ongoing increases in memory costs and expenses related to accelerating the development of Siri AI.
Apple investor Gene Munster told Fortune before the earnings report: “We enter this [holiday] period with more bears than bulls.” After the earnings release, Munster wrote on X: “It’s clear they don’t want to talk about personalized agents. They represent the biggest risk to Apple’s ecosystem.”
Siri's situation
Ternus and Parekh provided little detail when asked by analysts about Siri’s AI roadmap. When questioned about the industry’s shift toward consumer AI agents like Meta’s Muse, Ternus noted that Siri is “currently still request-based,” but added that the assistant is built on an architecture that could enable significant capability expansion in the future.
He described agency capabilities as "a promising tool for users," but also cautioned that users must fully understand what permissions they are granting, emphasizing user security and privacy.
Apple has been promoting its new Siri AI as a key upgrade, a feature currently rolling out to users in beta and serving as one of the core components of its recent product releases, including its first smart home display. The updated Siri is designed to understand content on the user’s screen and take action accordingly, assist with writing, and search for context across the user’s devices.
Market reactions to this update have been mixed. Some analysts said they like the new features, but overall, this assistant still lags noticeably behind the leading chatbots from OpenAI and Anthropic, as well as the wave of personalized agents introduced by companies like Meta. These new AI assistants can autonomously perform tasks such as shopping and reviewing bank statements.
Bank of America analyst Wamsi Mohan told Fortune: “Siri AI is much more powerful and practical today, but how do you take it to the next level?”
When asked how Apple is responding to a slowdown in its services business—which includes iCloud, the App Store, and other services—and how the company is seeking new revenue streams, Ternus and other executives primarily highlighted on Monday that Apple’s active installed base has surpassed 2.5 billion devices, emphasizing that this presents future monetization opportunities. They also noted that features relying on AI running outside the local device will have certain usage limitations, and iCloud’s tiered services, historically focused on storage, will evolve.
A wave of hardware releases
Since Ternus took office, the focus has primarily been on the launch of a new line of hardware. In early September, at his first public event as CEO, Ternus unveiled the iPhone Duo. Demand for the model has been strong, with backorders accumulating, but supply constraints have made it difficult to assess the scale of sales. Apple has acknowledged screen cracking issues with certain units and stated that replacements are being provided.
When an analyst asked about the rollout of the Duo phone and hinted at potential "supply chain" issues, Ternus asked Khan to respond. Khan said the product ramp-up is progressing smoothly. "It's difficult to predict when supply and demand will balance out."
Analysts at Yorkville Ives expect Apple to sell approximately 10 million iPhone Duo units over the next few quarters.
Apple has shifted to a phased release of the iPhone, with the Pro, Pro Max, and Duo models now available, while the base model and iPhone Air are expected to launch in the spring. BofA’s Mohan believes this approach, combined with rising component costs and slowing growth in its services business, could impact Apple’s future performance.
Apple's sales in the key Greater China market increased by 21% year-over-year in the September quarter, but Bloomberg estimates this figure still falls $1 billion short of Wall Street’s target. Apple also plans to roll out AI features for Chinese iPhone users following an agreement with Alibaba Group; although the two parties engaged in prolonged negotiations to reach this deal, the launch does not equate to Chinese users gaining full access to the Siri AI experience.
“We have everything we need to achieve extraordinary success,” said Ternus. “With this team, this vision, this mission, and these values, I have no doubt we will get there.”