Apple Is Falling Behind in AI. Will a New CEO Revive Apple Stock?

In Apple’s service business, high-margin segments like cloud, payments, advertising, and subscriptions continue to scale rapidly, generating $30 billion in revenue, up 14% YoY. Apple’s ecosystem remains its greatest competitive advantage. It also ended the quarter with a robust balance sheet with $145 billion in cash and marketable securities, while also returning $32 billion to shareholders through dividends and buybacks.

Growth Without Innovation

Undoubtedly, Apple has executed flawlessly in its existing business under Cook’s leadership. However, now AI is reshaping what the next phase of growth will look like, and this is where the company is falling behind.

Take the iPhone, for example, which continues to be a dominating factor of Apple’s sales. But it only benefits from extraordinary customer loyalty. According to Accio research, iPhone’s retention rate stands around 92%, one of the highest in the industry. Apple also controls over 60% of the global premium smartphone segment, which reflects its pricing power and brand prestige. However, over the past few years, there has been more hype and fewer upgrades in the new iPhone models. Consumers upgrade not just for features but because the iPhone has become a status symbol and an entry point into Apple’s tightly integrated ecosystem.

Even its much-anticipated AI upgrades to Siri have lagged competitors. Voice assistants driven by large language models (LLMs) are becoming increasingly useful, yet Siri continues to struggle with complex, contextual tasks. This gap is becoming more obvious and damaging for Apple. This indicates that Apple can continue growing even when its products rarely evolve.

From an investor’s perspective, I believe Apple remains a powerhouse and will continue to do so under Ternus’ leadership. However, to reinvent itself and get ahead in the AI race will require bold vision and not just execution.

The Verdict: Can Apple Reinvent Itself Again Under the New CEO?

The new CEO will inherit both a powerhouse and a challenge. AI is an innovation race. And Apple’s next chapter will depend not on how well it protects what it has built, but on whether it can create something entirely new to get ahead in the AI race. Investors willing to bet on this might want to accumulate AAPL stock on the dip now, as it is down 8% from its 52-week high of $288.62.

On Wall Street, AAPL stock holds a consensus “Moderate Buy” rating. Of the 42 analysts covering the stock, 23 offer a “Strong Buy” rating, three have a “Moderate Buy,” one gives a “Strong Sell,” and 15 analysts offer a “Hold” rating. Apple’s average target price of $296.30 suggests it has a potential upside of 11% from current levels. The Street-high estimate of $350 implies that shares can rally as much as 31% over the next 12 months.

On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com