In the first two months of her new position, Apple's new CEO John Ternus has been celebrating a series of new products, especially the release of the foldable iPhone Duo. On Monday, this 51-year-old executive made her debut before Wall Street at the quarterly earnings conference call.

The market reaction was not favorable.

Despite Apple's quarterly results in September exceeding expectations, investors sold Apple shares in after-hours trading due to the company's outlook on profit margins – Apple stated that the shortage of memory chips would continue to squeeze profit margins – as well as a slowdown in the growth of its services business, and the company's failure to clearly explain how this business segment would rebound. Apple has also been trying to tell its story through the revised Siri AI products, but it seems that investors still do not believe that Apple has found a winning formula suitable for the AI era.

During the post-earnings conference call with analysts, Ternus answered some questions, but also deferred some responses to the Chief Financial Officer Kevan Parekh and the Chief Operating Officer Sabih Khan. Apple stated that these two executives will now participate in earnings conference calls, which is not common over the past few years. Ternus appeared very confident during the call, but he seemed to stick mainly to pre-prepared marketing slogans, such as "Apple is the greatest company in the world," which made the conversation somewhat monotonous.

From certain indicators, Apple's performance can be considered to be at its best in history – its iPhone sales in September set a record – but the more complex reality is that this company, with a market value of $4.9 trillion, has to raise prices to offset the soaring costs of memory chips and relies on its vast installed base to continue moving forward. The pressure also comes from supply chain shortages of products including iPhone and Duo, with new orders not expected to arrive until the end of January.

At the Monday teleconference, Ternus said to analysts, "The memory pricing situation we are seeing now is unprecedented. This is putting pressure on our pricing." He added that, except for the December quarter, the company expects memory procurement prices to continue to rise.

Apple stated that it expects the gross margin for the December quarter to be between 45% and 46%; whereas in the September quarter, the gross margin was 47.9%, with tariff refunds contributing to a boost of about 1 percentage point. Apple noted that the decline in gross margin reflects the ongoing increase in memory costs, as well as costs associated with the accelerated advancement of Siri AI.

Apple investor Gene Munster said in an interview with Fortune before the financial report was released: "As we enter this [holiday] period, there are more negatives than positives." Munster wrote on X after the financial report was released: "It's clear that they don't want to talk about personalized agents. They represent the biggest risk for the Apple ecosystem."

Siri situation

When asked by analysts about the roadmap for Siri AI, Ternus and Parekh did not provide much detail. When questioned about the shift in the industry towards consumer-grade AI agents such as Muse, Ternus pointed out that Siri "is currently mainly request-based," but he stated that this assistant is built on a certain architecture, so there is potential for significant future capacity expansion.

He described proxy capabilities as "a very promising tool for users," but at the same time, he reminded users that they must fully understand what permissions they are granting and emphasized the importance of user security and privacy.

Apple has always promoted Siri AI as a key upgrade. This feature is currently being rolled out to users in a beta version and is one of the core components of the company's recently released new products, including its first smart home display screen. The new version of Siri is designed to understand the content on the user's screen and take action accordingly, to assist with writing, and to search for context within the user's device, among other functions.

The market's reaction to this update has been mixed. Some analysts have expressed their liking for these new features, but overall, this assistant is still significantly behind the leading chatbots such as OpenAI and Anthropic, as well as the personalized agents launched by companies like Meta. These new types of AI assistants are capable of independently completing tasks such as shopping and checking bank statements.

Bank of America analyst Wamsi Mohan told Fortune: “Siri AI is much more powerful and useful today, but how can you take it to the next level?”

When asked how Apple will cope with the slowdown in its service business – which includes iCloud, App Store and other services – as well as how the company will find new sources of revenue, Ternus and other executives mainly mentioned on Monday that Apple has surpassed 2.5 billion active devices, stating that this will bring future monetization opportunities. They also said that functions that rely on AI running outside of local areas will have certain usage restrictions, and the iCloud tiered service, which has historically focused on storage, will also evolve.

A wave of hardware releases

Since the beginning of his tenure Ternus, the focus has mainly been on a new round of hardware releases. At the beginning of September, during his first public event as CEO, Ternus unveiled the iPhone Duo. There was strong demand for this model, with backlogs of orders, but supply constraints made it difficult to assess the sales volume. Apple acknowledged that some units had screen cracking issues and stated that they were replacing them.

When an analyst asked about the launch of the Duo phone and hinted at potential "supply chain" issues, Ternus asked Khan to respond. Khan stated that the product rollout was progressing smoothly. "It's very difficult to predict when supply and demand will reach equilibrium."

Analysts from Yorkville Ives expect that Apple will be able to sell approximately 10 million units of iPhone Duo in the coming quarters.

Apple has decided to release iPhone in phases. Currently, the Pro, Pro Max, and Duo models are already on the market, but the base model and the iPhone Air are expected to be launched in the spring. BofA Mohan believes that this approach, combined with rising component costs and a slowdown in the growth of its service business, may affect Apple's future performance.

Apple's sales in the key market of Greater China increased by 21% year-on-year in the September quarter. However, according to Bloomberg's estimates, this figure is still $1 billion less than what Wall Street had targeted. Apple also plans to launch a AI feature for Chinese iPhone users after reaching an agreement with Alibaba Group; the two parties negotiated for a long time to reach this deal, but the launch does not mean that Chinese users will be able to enjoy a complete Siri AI experience.

"We have all the conditions to achieve extraordinary success," said Ternus. "With this team, this vision, this mission, and these values, I have no doubt that we will succeed."