How Tim Cook spins iPhone flaws into gold

Apple seemed to have posted mixed earnings on Thursday. While it was the “best quarter ever” for overall revenue, up 4% in its holiday quarter to a record $124.3 billion, that was largely thanks to its booming services business. Sales from its flagship product, the iPhone, which makes up about half of its overall revenue, declined 0.8% — the Street had assumed a 1.4% increase — suggesting Apple’s AI phone failed to drive a major upgrade cycle for the long-struggling iPhone.

Investors, though, seem happy enough. The stock is up about 3% in early trading.

That might have something to do with how CEO Tim Cook spun the iPhone situation:

“If you look at iPhone, we did set an all-time record for upgraders. So, we’ve never seen a higher level of upgraders before. The installed base hit a new all-time high as well.”

OK... let’s pick that apart.

Upgraders, people who already owned an older iPhone and bought a new one last quarter, were higher than ever. He didn’t provide any specific details, but presumably, the more people who already own an iPhone, the more people there are to upgrade in the first place. Apple’s iPhone has been around for nearly two decades.

Apple said it had 2.35 billion active devices, and presumably more than a billion of those are iPhones. The company didn’t say how many of those are iPhones, but presumably it’s more than half, as it was the last time Apple disclosed the number.

Kinda seems like as long as Apple doesn’t bomb completely and has a good deal of customer lock-in, that number will necessarily go up and up.

Onlookers might note that this quarter last year was also an “all-time record” for iPhone upgraders when the “installed base hit a new all-time high.”

He went on:

“And if you look at the iPhone 16 compared to the iPhone 15, from launch, which occurred, as you know, in September, so this is across now two quarters from September to the end of the December fiscal quarter, the iPhone 16 outperformed the iPhone 15.”

So the latest iPhone is doing better than the last iPhone. There aren’t details here, but that doesn’t necessarily say much.

Again, last year of the holiday quarter, Cook said:

“If you look at iPhone 15 since the announcement of it and shipment in September, so this is including some of Q4, and you compare that to iPhone 14 over the same period of time, iPhone 15 is outselling iPhone 14, and so we feel very good about that and the upgraders hitting a record is particularly exciting for us.”

This year, Cook is crediting Apple Intelligence, AI features only available on the iPhone 15 Pro or new iPhone 16, with driving people to buy the iPhone:

“I think you can conclude from that that there are compelling reasons to upgrade. And in the markets where we had launched Apple Intelligence, they outperformed the markets that we did not.”

Or... maybe that’s just what a certain percentage of the installed base does every year around Christmas.

As a consumer, though, Apple Intelligence to me has yet to prove notably useful.

It’s clear the company sold the AI phone before it was ready. The AI functionality wasn’t available when the iPhone 16 went on sale in September.

Nearly half a year later, only some features — AI summaries (summarizes notifications), writing tools (helps you write), Genmoji (emoji from word prompts), Visual Intelligence (a tool where you can essentially Google image search through your camera, which Google phones have had for years), and a “more natural and conversational Siri” — have been released. They’re only available in a few English-speaking markets.

And many of them are bad.

The summaries are often incorrect or awkward. Apple knows this as it’s disabled them for news and entertainment.

I find the Genmoji sort of fun, a bit cursed, but definitely not a reason to have forked over more than a grand for a new phone when my old one, an iPhone 12, worked perfectly well.

I keep forgetting to use Apple’s Visual Intelligence, but when I have to look up a certain product or get more information about something IRL, that information hasn’t been very helpful to me.

Siri, Apple’s decade-plus-old assistant, is now powered by AI, and it’s somehow less useful than it was. It can’t answer many basic questions that it used to. Don’t just take our word for it.

Here’s a recent post by John Gruber, in his Apple enthusiast blog Daring Fireball, who compared Siri’s responses to the same trivia question with its competition:

“New Siri — powered by Apple Intelligence™ with ChatGPT integration enabled — gets the answer completely but plausibly wrong, which is the worst way to get it wrong. It’s also inconsistently wrong — I tried the same question four times, and got a different answer, all of them wrong, each time. It’s a complete failure.”

Cook, however, disagrees. He says Apple Intelligence tools are great:

“I know from my own personal experience, once you start using the features, you can’t imagine not using them anymore. I now get hundreds of e-mails a day, and the summarization function is so important.”

Apple, however, knows it has a problem. Apple recently enlisted a veteran executive to “fix AI and Siri,” Bloomberg reported last week. A new version of the assistant is coming in April and another “more advanced version of Siri that includes a more conversational interface” won’t be available until 2026 at least.

But as long as Apple’s problems can be shrewdly spun into strengths, they won’t leave a mark on its stock price, it seems.