Apple Event – Pleasant Surprise

Apple surprised me somewhat.

• Apple launched its usual slew of new devices with enough new form factors and features, complete with just enough AI to keep its competitors at bay and maybe see a slight lift in the replacement rate of iPhone.
• Three of Apple’s product lines were updated:
  • First, iPhone: where both iPhone and iPhone Pro were updated and a new pointlessly thin iPhone Air was introduced.
  • iPhone Pro is remarkable in that the 17 Pro represents a significant shift in the form factor, which will give buyers the impression that they are buying something new as opposed to a tweaked version of last year’s model.
  • Apple has also made significant changes under the hood by upgrading the cameras and especially the front-facing camera on all models, which is now a substantial improvement on all iPhone 16 models.
  • I think the form factor change and the upgrades are probably enough to trigger a slight increase in the replacement rate, meaning that there may be slightly better growth this fiscal year than previously expected.
  • The iPhone Air is a pointless product, as almost everyone wraps their expensive device in a case, which means that almost all the effort that goes into making the device so thin will be lost the minute the case goes on.
  • However, it is well known in the industry that pointless gimmicks sell phones, and so I suspect that it is going to sell reasonably well regardless.
  • It could also be the precursor to a rumoured foldable in 2026 or 2027, as this will require 2 very thin phones stuck together with a single screen, and so this may not be quite as pointless as it seems.
  • The net result is a better-than-expected upgrade that should help earnings estimates rise slightly for the rest of this fiscal year.
  • Second, AirPods Pro 3: which was unremarkable other than a significant improvement in noise cancellation and the real-time translation feature.
  • This is not a new feature as Google has had it for some time, but for Apple to launch it must mean that it has managed to get it to work well.
  • The service uses models on the iPhone to translate what the AirPods Pro 3 pick-up and relay them to the user using voice while reducing the volume of the speaker’s voice to maximise clarity.
  • The AirPods Pro 3’s users’ replies can be displayed as text on iPhone screen, or if both are using AirPods Pro 3, then a true conversation can be had.
  • This all depends on how well it works in the hands of users and if it lives up to billing (which many don’t), then this will be a good reason for an upgrade.
  • This is the sprinkling of AI that I was referring to and represents just enough for Apple to claim that it is not being left completely behind.
  • Third Apple Watch Series 11, SE 3 & Ultra 3: all of which represented incremental upgrades that I do not expect to have much impact on sales.
  • The one exception is the hypertension warning feature, which represents both some progress on blood pressure monitoring as well as an admission that this remains a huge problem to solve.
  • The feature works by collecting data from the user over a certain time period (days or weeks) and then warning the user if it thinks there is a risk of hypertension.
  • This can then be verified in the usual way and the appropriate action taken.
  • Apple has yet to receive FDA clearance for this and was at pains to point out that this is not going to detect all cases, making this not much more than a wellness product.
  • This is a nice feature to have, but the minute someone has a stroke, and the Apple Watch didn’t warn them, there will be a slew of negative headlines regardless of the qualifying statements.
  • However, if Apple is confident enough to launch the feature, it’s an indication that some progress is being made, but it is clear that we are years away from reliable non-invasive monitoring of blood pressure, regardless of what the niche device suppliers claim.
• The net result was that this launch was quite a lot better than I was expecting, and I think that there will be a small uptick in replacements for iPhone and maybe AirPods.
• This means that we could see some growth return in the coming fiscal year (ending September 2026), although in the absence of a major new product category or a sudden and substantial AI upgrade, sales will become sluggish once the cycle subsides.
• For this reason and its ongoing weakness in AI, which has yet to be fixed, I still would not want to own the shares.