• DA Davidson reiterates Neutral rating on Apple (AAPL) with a $270 price target, expressing concerns about sustaining growth beyond the current iPhone upgrade cycle.
  • The success of Apple’s next phase under new CEO John Ternus may hinge on a foldable iPhone Ultra, broader price increases, and continued AI improvements.
  • Without these drivers, Apple could face revenue pressure next year after its strongest iPhone upgrade cycle in five years.

A Strong Quarter, But What's Next?

Apple reported a record fiscal third quarter on July 30, with revenue of $109.4 billion, up 16% year over year, and diluted EPS of $2.02, up 29%. iPhone revenue reached $54.3 billion, up about 22%, while services generated $30.7 billion, up 12%. However, roughly two percentage points of the 50.1% gross margin—and $0.11 of EPS—came from favorable tariff refunds, so reported profitability benefited from a non-core factor.

The current iPhone-led upgrade surge is robust, but DA Davidson analyst Gil Luria suggests that Apple’s next growth phase under John Ternus, who became CEO on September 1, 2026, could depend heavily on a foldable iPhone Ultra, broader price increases, and continued AI improvements. Without these drivers, Apple could face revenue pressure next year after its strongest iPhone upgrade cycle in five years.

The Leadership Transition

Tim Cook has become executive chairman, and John Ternus—formerly SVP of Hardware Engineering—has taken the helm. Johny Srouji was named chief hardware officer in April. Ternus arrives from the hardware organization at a time when Apple needs new form factors to complement the iPhone. The strategic question is whether he can turn Apple’s product-engineering discipline into a new growth narrative while also closing the perceived AI gap with rivals.

The AI Catalyst

Apple unveiled a delayed Siri AI overhaul at WWDC in June. It is designed to be more conversational and context-aware, capable of interpreting on-screen information and retrieving information across a user’s device context. Yet its rollout is geographically constrained: Apple says the new Siri AI will not ship initially on iPhone and iPad in the EU because of Digital Markets Act compliance issues, nor in China while regulatory issues remain unresolved. According to Morgan Stanley, more than 850 million iPhones cannot run basic Apple Intelligence queries and more than 1.3 billion cannot use advanced Siri features. That creates a potential replacement incentive, but Apple has to prove the software is compelling enough to drive upgrades.

The Foldable Factor

A foldable iPhone would place Apple into an established but still niche market led by Samsung (005930.KS) and Huawei. Apple’s opportunity would be to make a foldable feel more durable, polished, and integrated with its services ecosystem. The risk is that the category remains expensive and technically difficult. Future innovations—including a glass iPhone, AirPods with cameras, and smart glasses—could also be crucial to sustaining investor and consumer interest, according to the analyst.

Supply and Regulatory Pressures

Supply constraints for advanced chips and rising memory costs are a near-term risk. Trade policy is also front and center: the tariff-refund benefit in the latest quarter shows how trade policy can materially affect reported margins. In Europe, Apple announced revised EU App Store terms following discussions with the European Commission, moving developers to one set of business terms and replacing its per-install Core Technology Fee with a 5% Core Technology Commission for certain external distribution. EU regulators rejected Apple’s request for an 18-month exemption on the AI rollout, turning a product-launch issue into a regulatory and regional-competitiveness issue.

The Skeptical Case

The bullish path is clear: Apple delivers a durable foldable iPhone with premium economics, makes Siri AI sufficiently useful to drive upgrades, sustains services growth, and extends its ecosystem into wearables. The skeptical case is equally clear: foldables remain niche, price increases provoke weaker unit demand, AI features lag competitors or are limited by device compatibility and regulation. DA Davidson’s Neutral stance reflects that Apple may need several of these future bets to work—not merely one—to justify continued growth expectations.

This article was updated to clarify the timing of the leadership transition and the expected product pipeline.