Apple’s New CEO Has a Hardware Event and an AI Problem

John Ternus has been Apple’s CEO for all of eight days, counting weekends, which I’m sure he worked. This coming Wednesday he headlines his first keynote, an event Apple has titled “Surprise and shine.” The press has already told us most of what’s on the slides. I’ll be listening for what isn’t.

I’ve spent the better part of two years writing that Apple Intelligence wasn’t at all that, that a smarter Siri was a promise on a slide and that the engine that made Apple one of the most valuable companies in the world was losing torque.

Not the iPhone itself. The economics wrapped around it.

The App Store commission is under legal and regulatory pressure on four continents, and the Supreme Court takes up the Epic case next month. The roughly $20 billion Google pays for the Safari search default survived the recent antitrust ruling, but the exclusivity is gone, the contract now has to be rebid every year and the DOJ is appealing to kill the payments outright. AI chatbots are making that default worth less every month anyway. The NFC chip is open to rivals. And the AI Apple promised in 2024 finally shipped in 2026 with Google’s Gemini models underneath it.

And it’s still not that smart.

How does Apple’s AI strategy become a business?

None of that’s shown up in the numbers yet. Tim Cook’s last quarter as CEO was a barn burner with $109.4 billion in revenue, up 16%. iPhone up 22%. Services at $30.7 billion. More than 1.5 billion paid subscriptions. The stock dropped 6% anyway.

That’s because investors weren’t reacting to the quarter. They were reacting to the absence of an answer to the question Ternus now owns.

How does Apple’s AI strategy become a business?

What We Already Know About Surprise and Shine

Here’s the consensus rundown from the people who already cover Apple for a living.

We will see three iPhones, all pricey. The iPhone 18 Pro, the 18 Pro Max and Apple’s first foldable, expected to be called the iPhone Ultra. The price points start somewhere near $2,000 and go even higher for the primo brands. Good thing they’ve activated Buy Now, Pay Later.

The standard iPhone 18 and the cheaper 18e don’t show up until spring 2027. Prices on the Pros are expected to go up, blamed on memory shortages. Under the hood there’s a lot of engineering magic including Apple’s own C2 modem with satellite 5G and a variable-aperture camera.

Beyond the phones, there’s wearables. The Apple Watch Series 12 and Ultra 4. And rumors of AirPods with cameras that feed what they see into Siri. (Side note: For a brand that’s all about privacy, can someone explain how AirPods that record everything they see and hear without permission meet that requirement? Should I now cross the street when I see someone with AirPods?) Possibly the long-rumored smart home hub, hopefully more usable than the unusable Home Pod, a new Apple TV and an updated HomePod mini. See earlier comment. The ship dates for iOS 27, which is the release that puts Gemini under Siri and lets users pick which third-party model powers Apple Intelligence features, is reported by some to be September 14.

What does that lineup say about the business beyond the device?

Now, if you read that list as nothing but a hardware extravaganza, you’d be correct. An almost over-the-top one, in fact, run by the best hardware executive Apple has. The foldable is the first new form factor since the iPhone X. The camera AirPods are an innovative alternative to smart glasses, if that’s your thing. Ternus will be in his element.

But poke a little more and here’s what I believe that lineup says about the business beyond the device.

Apple is skipping the mainstream iPhone this fall and leading with three phones that cost more than a laptop. It’s raising prices on the models it’s shipping. That’s what you do when unit growth is behind you, and you need more dollars per customer from an installed base that isn’t getting much bigger. Remember, Apple no longer reports on units sold, it reports on sales made. So, pay no attention to the man behind the curtain jacking up the prices of iPhones, they hope. Ignore the margin strategy dressed as a cool new product strategy.

And the AI in the room is Google’s with options.

So, the event will answer fully the question, “what are Apple’s latest device moves?” It won’t answer the one that matters, or at least not as advertised so far.

The Device Still Decides, but Only While Apple Is the One Deciding for it.

I wrote this in June and I’ll stand behind it. The device determines the defaults, the defaults determine the distribution, the distribution determines the usage and the usage determines the revenue.

That chain has been Apple’s whole business model since 2008. It only holds while Apple controls what sits in the default slot. Look at what’s changed though. Siri now runs on Gemini. It’s worth being precise about what that means. Apple didn’t put the Gemini chatbot on the iPhone. It licensed Google’s Gemini models to run underneath Siri and Apple Intelligence, inside Apple’s privacy wrapper, with the Apple name on the front.

Siri is renting someone else’s brain.

The deal isn’t exclusive, and ChatGPT may stay opt-in for certain complex queries. iOS 27 lets users choose which third-party model powers Apple Intelligence features, with Apple refusing responsibility for what those models produce. The outcome is the same either way. Siri is renting someone else’s brain and hoping iPhone users love it as much as Android users love the Gemini chatbot. PYMNTS Intelligence data shows ChatGPT is the preferred AI on iOS by 10 percentage points over Android. iPhone users didn’t wait for Apple and Siri to get smarter. They found something they liked better.

So, the first thing I’d love to hear from Ternus is what Apple owns in the AI layer. The chip, yes. The privacy story, yes, but with the camera AirPods, it can get a little muddy. But when the model belongs to Google, the assistant people actually open belongs to OpenAI, and the phone is the enabler, “we make the best hardware” is a description of the past, not a strategy for the next decade.

How About a Revenue Model, Not a Feature List

On his final call, Cook floated the idea that heavy Siri users might “buy up the stack” on iCloud+.

A meaningful and growing slice of its App Store commission is on other people’s AI.

A $2,000-plus foldable is a revenue model, but it’s the old charge-more-for-the-product one. What I want to hear is who pays Apple for AI and what they pay for. Services is the real beachhead now, bigger than Mac, iPad and Wearables combined. A meaningful and growing slice of its App Store commission is on other people’s AI. ChatGPT alone generated $1.35 billion in App Store revenue in 2025. Regulators are working to route around that commission. So are the apps. Ternus needs a plan for Services growth that doesn’t depend on a toll booth everyone is building a bypass for.

Wallet Should Be the Agent’s Front Door, and it Isn’t Yet

This is the one I care about most, and the one I expect to hear the least about, especially as October marks year twelve since the launch of Apple Pay. Nobody’s rumor roundup mentions the Wallet at all.

In agentic commerce, I’ve written that top-of-wallet becomes top-of-agent. Whoever holds the credential the agent uses holds the relationship, the data and a claim on the economics.

The WWDC gave the Wallet camera-based bill splitting and a way to digitize a paper ticket. Wow, but not agentic. Now Apple is said to be putting cameras in AirPods and a hub in the kitchen. Those are exactly the end points where an agent would act on the consumer’s behalf, and there’s no sign Apple is connecting them to the credentials it already holds.

Whoever holds the credential the agent uses holds the relationship, the data and a claim on the economics.

Visa, Mastercard, Google and OpenAI are all working intently to enable agentic payments right now. Apple has a very strong hand to play. I’d like to know whether Ternus sees Wallet as the identity and payments layer for agents acting on behalf of a billion iPhone users, or as a utility app that gets two minutes at the end of a keynote.

A Hardware CEO Has to Answer a Bunch of Software Questions

Ternus is a product engineer, 25 years at Apple, the person behind the Apple silicon Macs and the Vision Pro. He’s told interviewers Apple never wants to ship junk. That’s a good sign. That instinct, however, went missing when Apple Intelligence launched.

Distribution without a product of your own means you’re a tollbooth for others to pass through.

But the job he’s inherited centers on a question hardware alone can’t answer, and Wednesday’s lineup shows why. Every product on that list is a beautiful place for someone else’s AI to live. AI is becoming a consumer utility, and consumer utilities live on smartphones, earbuds and kitchen counters. Apple has the best distribution in consumer technology to a user base that outspends Google’s. Distribution without a product of your own means you’re a tollbooth for others to pass through. And toll collectors get regulated or disintermediated. The Steve Jobs comparison is about amazing products. The problem Ternus has is a platform problem.

What We Should All Listen for During the Surprise and Shine Keynote

The hardware innovations will be covered by everyone. These are the five things that will shape my view of Apple after the applause has ended and Ternus walks off stage.

Does he talk about Apple’s AI or AI on Apple? The first means Apple has something it owns. The second means it’s a distributor with a great case.
Does Siri get a business model or a demo? Gemini-powered Siri on a foldable will demo beautifully. A demo, though, is table stakes.
Does Wallet get real airtime? Anything about agents, credentials or acting on the user’s behalf is the signal. If Wallet is absent from a keynote that introduces camera earbuds and a home hub, that tells you where it sits on the priority list.
What does he say about Google? Google is now Apple’s AI supplier and its largest single Services customer through the search deal. That’s a dependency on a competitor, twice over, and the AirPods make it a smart wearable without the need for glasses.
How does he justify the prices? Besides giving consumers credit to pay for it over time, higher prices on fewer models is a choice. Listen for whether he frames it as value from AI or as value from better hardware and cameras. The first would be new. The second is Cook’s playbook with a new presenter.

Ternus has a clean slate, a record quarter, a folding phone and a committed installed base who lives inside the Apple ecosystem. What he doesn’t get is another two years of promises. Investors already priced those in. And judging by last quarter’s reaction, they didn’t like the math very much.