Upgrade - 614: $100 Billion Is the Floor

Episode Date: May 4, 2026

From Relay, this is Upgrade, episode 614. Today's show is brought to you by Delete Me, Squarespace, Factor and Steam Clock. My name is Mike Hurley, and I'm joined by Jason Snell. Hi, Jason. Hi, Mike. How are you? I'm good. It's Big Money Day today, Apple earnings.

We're going to talk about that later on, but I have to start off, as we always do, with a Snell talk question. An anonymous, anonymous question asker wrote in and said, assuming that the next Apple CEO transition is another 15 years from now, do you think you will still be podcasting to cover it? Oh, interesting. And we've only been doing this podcast for, what, 11 years? Yeah.

So on one level, I want to say yes, because I want to, you know, I want us all to be here and alive and healthy and doing podcasts. This is, like, if this had been 10, I would have said, I would have said that that's my plan. 15. I always So at least you know, the conversation in the U.S. always was like 65 was retirement age. And I always said I can't even imagine doing that. Yeah.

And that's 10 years from now. So 15 is 70 for me. That is a long, that is, that is, we're talking, we're talking 2040, 2041. That seems like an impossible time period. Impossible future time. So I think my answer to this question is this, which is, I imagine that as my career goes along here, some of the work that I do is going to fall off because it's just not going to make sense anymore.

They're not going to want to pay me or I don't want to do it or whatever. And that will just kind of, some of it will fade away, some of it will stay. and I hope that one of the last things to fade away would be upgrade actually. No. Upgrade in six colors, really. So, because I can't really imagine not. But also I would say at some point, you know, there comes a time where you say I don't need to work anymore. And I'd love to, I'd love to reach that point. But I also, I imagine not working and I can't conceive of it. I don't think I could do nothing. All I think of is, projects I would do if I wasn't doing what I'm doing, right? I would literally just fill it back up with projects. Maybe they would be different. So, I mean, my answer is, I think I'm still going to say, I hope so.

But I don't know. I mean, I hope so, though. I do because I hope that I still love it and I still want to do it and I'm still capable of doing it. And there's enough of an audience that it's still worth it for us to do it. Yeah, I agree. I mean, I'll be 53. Like, I very much expect to be working at that period. Like, I think that I would just be one of these people who just works in some capacity forever. I just can't imagine not.

That's what, that's what I've always said is the same. It's exactly the same. I just can't, I can't, I don't have a, you know, I don't play golf or something where I've got a hobby that I just wish I could devote all my time. My hobby is, essentially is making stuff. Mm-hmm. And working on projects. So, like, it's indistinguishable.

I guess what I'm saying is me retired is indistinguishable from me not retired. I mean, we were just having a little walk down memory lane before we started the show today. Right. We were chatting. It was eight years ago this week was when we were all together for my bachelor party. And so we were kind of just like, we were just talking about a bunch of different things. And some of the stuff that was happening around that time, like, for example, the airport, Apple's airport routes was discontinued. And I said to Jason, like, I, sometimes I hear about things that happened during the course of this show.

And it feels like there was no way we were recording that long ago. And so if I project backwards, you know, like 12 years from the beginning of the show or whatever and do that again into the future, it seems completely plausible to me that we'd still be doing it. Yeah. So I hope that we, I agree with you. I hope that we're in a position where that is something that we can choose to be doing because that would be wonderful. Right. So bring on Upgrade episode 1,394. Can't wait.

I hope that at that point, I probably will stop saying the number of the episodes, but I mean, Leo still does it for Twitch. It'll be robots. Yeah. The robots know the number. Nobody else needs to know. This is 1-0-0-1-1. You know, that's the only...

There's just a welcome to upgrade. It's just a little data squirt that happens for robots to use. That's the whole thing. It contains the complete transcript. It's just shortening the context. And then there's the human... version that happens right after that. Yeah.

If you would like to send that a Snow Talk question of your own to help us open a future episode of the show, please go to Upgradefeedback.com. Thank you to all of you that do. I have some follow-up. First, we're going to start out with a question from Upgradia Mark who writes in and says, you mentioned the Bloomberg report that Johnny Suruji felt burned out and now he has been promoted to the chief role. I've heard this on multiple podcasts and multiple reports, but it doesn't make sense.

sense to me. Surely you don't give more responsibility to someone who is burned out. Usually they retire. Why hasn't this been discussed more? We don't know. That's part of the problem here. If Johnny Sruji is truly burned out, yes, one reasonable scenario is that they're trying to keep him for reasons that are not wise. And I will bring up Johnny I. Ive. I think Johnny I was burned out and they tried to keep him and it, uh, I think didn't go that great. But I don't know Johnny Surugi personally. Is he burned out? When he says he's burned out, does that mean he feels like, does that mean he, you know, is, is actually burned out or does it mean that he's looking for another challenge? A lot of these people who are high power to Apple executives, they are,

they are looking for another challenge. They are working on thinking of whatever the next big hard, hard driving thing is going to be. So I'll also throw in, could also be a negotiation tactic, right? To say, you know, I'm not sure I'm feeling a little burned out. I might go do something else

as a way to get them to spring into action and give them more of an offer. So I guess what I would say is, we don't know from the outside. And that's one of the reasons it's hard to discuss it. Johnny Sruji, like, because that's really like between him and his family

and his therapist and whatever, like if Johnny Sruji is truly what we think of as burned out, he should take a sabbatical is what he should do right but is he or is that just a statement that was made that actually means something different because um and and the reason that i i don't think i discussed it is i i don't know but i'm inclined to believe that this was a negotiation and that that was what was going on and that if johnny shruji truly was like what we consider burned out given everything he's got he could retire and go away and play golf or do whatever for a year and then maybe come back and do something different somewhere else

and that's not what he chose to do you know and we we can't know whether he's choosing poorly because it's too great an opportunity for him not to say yes i've been there personally where it's like this is probably not something i should agree to but i'm going to agree to to it because it seems like a good idea and you can regret those decisions but it's so first of it's impossible to know from the outside and second i i just kind of tend to believe that this is a more about negotiating uh in the wake of tim cook's succession plan and not about a legitimate burnout situation but i don't know i would say that in my career i have been burned out on particular types of work and and maybe he was not interested in running the apple silica

team. Yeah, maybe it's like, I have done this too many times. And what he would like to do is take a much broader, bigger picture role where he's more interfacing with people about how they're working in teams rather than like, all right, so how many causes this one going to have? Maybe he's done with that kind of like ground level work. Yeah, which I would say is not quite the same as like what we think of it. And I think what Mark is referring to as as burnout, that's more like, I'm looking for a new challenge. This is too samey for me. I want to do something different. I'd like more responsibility here. Or, and again, if this is part of the negotiation process, a great way for me to get new challenges

is to leave and start my own company or go work somewhere else and then build something new. And that will be a new challenge. And Apple's response is, wait, wait, wait, what if we give you a new challenge here? Yeah. So moving on, Apple was released their trailer for season four of Ted Lasso. It debuts on August 5th. The trailer feels like Ted Lasso. Looks like Ted Lasso. I am nervous about this show, but I'm hopeful that they're going to do it right. But we're just going to have to wait and see. I'm hopeful that this is not the obligatory Ted Lasso, but more like that they came up with a good story for this new next chapter in Ted Lasso's life.

And I'm encouraged by the idea that they sort of told the story they wanted to tell, which was about him trying to figure out who. he was and he goes he run he's running away from his failing and failed marriage and figuring out his relationship with his kids but figuring out who he is and and and and then ultimately going full circle and going back to America um this is going to be a different story right because presumably he's not running away from his life so what is this story mean and i and i'm encouraged like i think i think that could be perfectly valid but it also is fair to say that this is kind of ted lasso too right like it is what's the next story. It's what they said about shrinking, right? They just finished the third season of shrinking, and they said that the whole point of that was, that was a three-season arc about Jimmy going through grief and getting to the end and then being able to look forward again. And they felt strongly that they wanted to tell that story. They didn't want to suspend those characters permanently in the middle. And that if they wanted to do more, which they do, find a new story to tell. with those characters about where they go next in their lives

because so many TV shows you end up with a premise and then you have to suspend the premise and just it hovers there forever and nobody can ever progress because we don't want to change the show and I think some of these modern prestige comedy shows they don't want to do that and I think that's great because that's not how life works.

Life is always moving forward. So last weekend, this past weekend, F1 returned, for the fourth race of the season, there had been a break of over a month because a couple of races got cancelled because they were in the Middle East. And with this fourth, it's now statesides,

so it was the Miami Grand Prix. With it, Apple was debuted their first originally produced content for the sport. So there's two different initiatives. One is called circuits in focus. This is available in Apple TV. Weirdly to me,

not outside of America. Like, this is original content like the Apple's producing, but they're not making it under the F1 license, I guess. So basically what it is, it's a track preview series. The two hosts are former world champion Nico Rosberg and content creator. And I'll read from Apple's press release, record breaking car builder and driver Amelia Hartford.

They're using, this is fascinating to me, they're using the F125 video game made by EA to produce the show and show the tracks, which is a great way to do it because the tracks has. all the courses in them. I will need to see what this show looked like, but couldn't. So I don't know what it looks like, but interesting. And then there's also something called the POV, which is a social series featuring former Red Bull Racing senior technician Callum Nicholas. Callum became popular on Drive to Survive. He was featured quite heavily in Drive to Survive and built a social following and now has left Red Bull and is doing this, is a content creator. And content and engineer Christina Rourke as they react to key moments from the weekends.

This is a social series. Like, look at this, overtake, look at that, that kind of thing. I find this fascinating because why at this point in the season are we debuting our first original content? Like, why was this not at race one? I think, again, says to me a thing

that I think we were feeling is that this came together maybe a little late and then everybody would have wanted, the deal in general, and they did not have enough time to get their ducks in a row. Yeah, I think that's true. Which is why they went with F1 TV and just like kind of like taking all that as I will just do what they're doing.

And this is a multi-year relationship and they're progressing it. And they figure this is also this is the first US race. So it's actually one of the better ones in terms of time slot. Yeah, although hilariously it got moved. Then they moved it up because of the rain because who could figure there would be rain in Florida. I have a note here, Mike, which is I watched not all, but I watch some of their. So I turned it I turned on the TV

I was like oh the F1 race is today and it was already over Okay But very very soon Shockingly soon A few hours after the race was over They posted their Race in 30 cutdown

Where you can watch the entire race In 30 minutes I thought that was great I thought that was really well done And I love that idea That you're not necessarily invested Enough to watch the race live Or watch a playback of it in real time

But you can watch a 30 minute cutdown And I'm a big fan of that For sporting events you miss I watch baseball games like that sometimes that are these condensed games that are only like 14 minutes long but they show you everything that happened in the game and the Giants used to do a

thing here in the Bay Area. I don't think they do it anymore. That was I think Giants in 30 and they would take that game's game and cut it to 30 minute time slot. And I just, I like that idea a lot. So I watched some of that, which was fun. There was very dramatic stuff

at the beginning and end of the race. It was a good race. I was a lot of highlights package of. I would say that. The beginning of the end were bananas. Like there was all kinds of weird stuff happening. So it was worth watching. Spinning cars.

Lots of spinning. Yeah. So it's an angry. But you're doing Miami, I guess. I guess so, so yeah, I think they're doing pretty good. I also noticed that, friend of the show, Carolina Mileney,

so he went to an IMAX screening of F1 in Atlanta, which is fun because they did it in theaters. And then all the theaters are like, it's starting three hours. early. Terrible. They're doing this of a few races.

I think it's the US races. Although I actually did it for the season open. Anyway, but it's one of the IMAX

races. So they're showing an IMAX. I had a friend who went to one of these. And he said it was fun,

but didn't really feel like it made any sense for why it was in IMAX. Like there wasn't any, there was nothing specific for the IMAX

showing. It was just the Apple TV feed. So it's like it could have been in any theater. Like it didn't really, It was like nothing IMAX-y about it.

Right. And they also said at the screening that they went to, there were... You know, big screen, good sound. That's nice. Yeah, sure. But, like, they said that there were Apple, there were people from Apple at this screening. And they were doing, like, a focus group with a selection of people and, like, giving out pieces of paper afterwards. Like, what did you think of this?

I guess is the idea. So they're trying to collect information about what people think. Sticking on the motor racing vibe, Porsche. of celebrated Apple at 50 we have an homage to their 1980 Le Mans livery, which is a very like, it is an iconic

the Lamon livery with, this is Apple Computer in the classic Apple 2. And Modern Techura, oh my God. And it has the Apple Rainbow, but it also has it on the top it's got the rainbow Apple logo. Yep. It's so good. Yes, they crushed it. They crushed it with this one.

Oh, my God. Apple, music is a sponsor of the Porsche team. And so I think this was like a fun extension of that, right, with them working together. So, yeah. But staying with this, Eddie Q spoke about John Turnus and his love of racing

as part of the buildup to the F1 weekend. This is a quote from friend of the show, Eddie Q. John actually drives a Porsche and does amateur racing. He would actually be here this weekend, here being Miami, but he's at Laguna Seca. So rest assured, if anything, he's going to be at more races even than Tim. He's a huge, huge fan of F1, and he's known about this. He's a huge supporter.

So you'll continue to see full support from him. I find this whole quote hilarious. Like, I think we may be saw evidence of Tim Cook being at one race, so I don't even wave to flag. Maybe it more. But like, sure. Okay. Well, I look forward to seeing John Turner some more F1 races in the future. Yeah.

Well, I love that he's, yeah, he apparently, you know, drives a Porsche and, and I think you made the prediction that we'll see, you know, turn us. I think he said, you let's see turnus in a car sometime. This car. I was thinking he's going to be in this one. And maybe during practice or something, he did do that at Laguna Seca. I'm convinced he was in the car. I just get to see any evidence of it. Yeah, like, well, I mean, yeah, but there's like putting a kid in a car and being like, we, I'm in the car. and that's not quite the same. Hot lamps. But yeah. So it's fun and the car looks really cool.

Can I do, well, you had a note about John Turnus before. I'm going to do a little quick follow-out. But please tell me another fact about America's favorite Apple CEO. Well, this was in me thinking about John Turnus. Can I find any evidence of John Turner's having been in this race car? I realized John Turner has no public social media of any kind. And I wonder if this is going to change if he will get public social media and where that will be, or if he's just saying, I ain't doing that. Like, it's going to be interesting to see. I think he'll have to have something.

Well, I mean, even saying he will, I think Apple's marketing people will put together a John Turnus channel of content somewhere that will be fed by Apple's pre-ar marketing people. But I think that's what it will be. I think it'll be real hands off. That's my guess. his people will do it. And like any kind of handled celebrity, I mean, Tim Cook is like that too, I would argue. So I think they will do that for Turner. Someone told me once that Cook posts his own tweets. Yeah, it's possible,

but I'd be surprised if that happens for, for Turneris. And it's actually kind of a shame that they don't create like an Apple CEO account. Like president? Like the Tim Cook account just becomes the John Turner's account on September 1st, right? Or John Turner just becomes at Tim Cook, you know? At Tim Cook?

Maybe, you know. At John Apple. Yeah. My follow-out is to, I enjoy the podcast you do here on the Relay Network with Federico and Stephen called Connected, the Connected Program, formerly the prompt, now called the Connected Program. You did episode 601 last week. episode 600 is funny

and it's got a clip show and then Stephen makes some videos but 601 I feel like is a perfect distillation of the silliness of connected because you all chose to do a tier list of things Tim Cook said Tim Cook quote tier list

that was completely Federico's idea is brilliant so I recommend it because it's wild and it's a great way to kind of like revisit things that like we were talking about earlier you're like I can't believe that that happened back then and that things that our brains have just suppressed or have filed away in the deep prehistory, and it turns out that, no, there's a whole episode of our own podcast about it. I have two notes that I want to mention here, though. And I've shared these with you earlier today because I was listening to the podcast this morning and I was thinking about it. One is you have a tier list. And so many of the quotes in your Tim Cook quote list are from the D conference, which used to be Walt Mossberg and Kara Swisher did it. And then it became like Wall Street Journal conference and it turned into the code conference. But like the D conference had a lot of great quotes.

from Steve Jobs and Bill Gates and other people and Tim Cook. And you had a tier list and I thought it was a real missed opportunity not to just declare that the D tier was things he said at D. You're right. I wish we would have. Unfortunately, it would have mean about 95% of the quotes. I know, but still, by definition, you're like, well, I mean, this is a good quote, but it goes in the D tier because it's all the D conference. We could have had a tier list within the D tier. Yeah, the DT, D, D, D, D.

Yeah. Here is my other piece of feedback for you, which is, it is, it is, Literally, I can't believe you didn't mention. I thought I would share with you my favorite, underrated Tim Cook all-time quote. Yep. If you'll allow me. With other developers, the kinds of products you see, like Pokemon.

And so that's the reason you see so many iPhones out there in the wild, chasing Pokemon's. Yeah. I think Tim Cook said, chasing Pokemon's. Whenever I hear great Tim Cook quotes, I think, Pokeymans, Pokemon. I found an article from, the Guardian, Apple CEO Tim Cook outs himself as a huge quote,

Pokeyman's fan. That's great. So this was Pokemon Go, right? This is Pokemon Go time. Yeah. Yeah, 2016. I love the Pokeymans. It's great.

I wish we would have had this one because that would have been an S-tier for all the wrong reasons. I think that's an S-tier, Tim Cook quote, that I love the Pokemans. It's like, why did he even? Why did anyone even? I just, you know? I mean, well, look. I'm sure we said this at the time. Okay, but just to replay this now,

if he's going to talk about Pokemon Go on an analyst call, write the script for him and make it clear that it's Pokemon and Pokemon or... Or Pokemon's if you would like. No, you wouldn't.

Don't say, well, if you would... Just like, I would accept that. But do not... Actually, I would. Say Pokemon's. Yeah. Please do not. do it, but they didn't. They just let him go wild. Let's let him freestyle this one.

Anyway, I think that's an S-tier, Tim Cook has him put up. I love the, I love the Pokeymans. I love them. I'm bullish on Pokeymans. Yeah, that could be a Pokemon cool, bullish. And everyone will be happy about that. What does it evolve into? Barish. Barish. Oh, we're on it. We're on it. Oh, man. We're killing it today. Good, good, good

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Money, money, money, money, money who has all the money? Money, money, money, money, money. It's Apple We're back once again, everybody. It's Apple's Q2 Earnings Report. I have some headlines for you. We have some areas to dig into.

I'm always happy when there's actual interesting stuff to talk about after one of these things, and this is unbelievably one of those quarters. I think there's a lot to talk about. I think there's a lot to talk about. I mean, you've written many words about it, Jason, so I would like to assume

that you have some things that you want to say. I did write a lot of words about it, but I will say it's a challenge in the sense that... Oh, interesting. The... Well, the numbers... The things said in the call are interesting. Yes.

The things on the charts, I found profoundly uninteresting. I found one spot that I like, which I'll get to in a second. Because, just to be clear, all of the numbers went up everywhere. Yeah. That's it. That's the whole... Like, everything was up. Globally, every category, every region, everything just was up.

up. So that part is boring, but yes, there are interesting things. I did spend, whatever, Thursday night, right, until late writing 2,000 words about it. So yes, fair. So this is Apple's second quarter. Revenue is $11.2 billion for the quarter that is up 17% year of a year and is the record Q2 quarter. You know, we was talking about money going up, but they're not always record quarters. I mean, they're very frequently. Very frequently, but not They are. I think the most notable thing here is that this is three straight quarters over $100 billion in revenue. And the boring, I referred to this in my article as these are the boring quarters, right? There's a holiday quarter, which is like super exciting and they always make a huge amount of money.

And then there are the more boring quarters where they make less money. The boring quarters now, two boring quarters in a row have been over $100 billion. And I'll just say, if you look back at my chart, you'll see that in 2021, the boring quarters, were 80 and now they're over 100. That is wild, right? Like that is that that is kind of the the growth that is harder to notice, which is that Apple just their baseline of what they make in a quarter just keeps ratcheting up every single year.

Well, now it's like what, we just assume a hundred billion is the floor, the quarter floor. I mean, their previous, at 111.1.2 billion. their previous Q2 record quarter was 97, I want to say. And it's been a while. Last year was 95. So like 111. It's not even close.

It's pretty wild. Because it's like, you know, looking at the chart, right? So from with the overall revenue, with like the year-over-year growth, it was like from 2024, it was a single-digit percentages most of the way through into 25, you know, like a little bit of growth here or there. And then these last two quarters, 16% and 17%. Yeah. Like, it's not just that they're growing. They've hit like a little jump again. And we'll talk about where that's come from in a minute. Profit is $29.6 billion up 19% year over year. Also incredible to me that they've made more profit, right, than they have revenue. Like,

there's nearly 20% up. So it's 90% of 70%. The iPhone is 57.5%. point billion dollars. That is up 22% year over year. So there's clearly some strong growth in the iPhone line and I want to jump to a chart we don't always talk about, which is the greater China revenue, which Apple

pulls out specifically in their earnings report. They don't do this for any of a region, but they do for China. That is up 28% year over year. And the thing that really stuck out to me from looking at your charts is if you take the iPhone chart,

and like the revenue change chart and the greater China revenue change chart, they essentially overlap. They're pretty similar. What you can see is this growth, this like this huge, this big growth and then this big growth for the iPhone, again, like up like 22% year over year, it seems to be that China has driven the majority of that change because China has also finally started rising again. Did they give a lot of context as to why the China, like China, China, like China. or has been down essentially for years.

Yeah, it's been flat to down kind of all over the place. I don't know. I mean, they didn't give a lot of color on that. It was very much like Tim saying, you know, we're the best selling phone. I think they made broad statements about the iPhone 17 line. I think it is fair to say. They said this is the best iPhone launch they've ever had. Now, they defined it in a very specific way that you can find in the charts,

which is if you look at Q1 and Q2 performance are put together, which is like the first two quarters of, on sale for the iPhone. This is the best iPhone launch ever. But it is clear to me that the iPhone 17 has been very successful, which is funny, right? Because going into it, there was a lot of talk about how it was going to be kind of, you know, Apple was making the same phone over and over again for a while.

But like they changed the enclosure. They changed the colors on the pro models. They added some new models. And they brought a bunch of pro features down into the slightly more affordable models. And I think generally the iPhone 17, people in our world have suggested that it's very good, that it's a successful product. And the market has suggested that it's a hit product with people. Like people like it and are buying it in great numbers. So I think that that is strength of the iPhone 17.

I think phones that offer something new do better in China. And so I think that might be part of it too. I think it's also really funny just to see the polarization, I don't know if that's right, almost like a multiplier in China. Like when China's going kind of bad or not bad but not great, the results in China are sort of down a little bit from what they are in the rest of the world. And so like Q4 China was down 4%, but the iPhone was up 6%. And Q3 China was up 4%. But the rest of the or overall the iPhone was 13%. So it's like there was a period where the China number was just a little bit less.

but it kind of tracked, but it was a little bit less. Now it's greater, right? It's 38 and 28 and the iPhone number growth numbers are 23 and 22. So it's just interesting to see that China and overall revenue kind of track, but there are like the places where China's ahead and the places where China's behind. And with the iPhone 17 line, China's ahead. They're dragging the numbers upward. I you know my best guess is just really that it's the strength of the iPhone 17 line that this was a combination of features that resonated and sold more iPhones it's going to be really interesting to see what the next two years look like knowing what we believe to know about Apple's roadmap that we have kind of some big iPhones on the horizon yeah and it's going to be interesting to see do we end up with more

multiple years of solid growth in China and the iPhone because the lineup continues to strengthen. It's going to be interesting to see it. But yeah, I think it is pretty clear that what we felt about the 17, you know, we were both talking about it on this show of like this feels like the strongest lineup of phones Apple has ever produced. Like there was wins across the board. I mean, the iPhone Air, I think, did not go where we thought it would go, right? but it's showing it all off like

oh there is every single one of these phones is good in its own way and I think that that has bared out in the fact that they've made an ungodly amount of money from the iPhone in the past year.

The Mac is at $8.4 billion up 6% year over year. The iPad is at 6.9 billion which is up 8%. Services is at 31 billion billion dollars now up another 16%. I feel like we say the same things about services every time, but

we do. It just keeps growing. It just keeps going up. It is a, it has been growing double digits, sort of low to mid teens, every quarter since Q4 of 2023, right? So it's been a few years of double. There was an explosive growth period and then it kind of tailed off. But since late 23, it's been 16, 11, 14, 14, 14, 12, 13, 15, 14, 16.

So, like, it's just, they've just kind of dialed it in that this is. And this is why, look, I think sometimes we can overstate services. I think Apple talks about services a lot because Apple wants Wall Street to hear it. services narrative serves in part to insulate Apple from the vagaries of iPhone sales and other product sales and and cycles because Wall Street's always worried about is the next iPhone going to do good or going to do bad or all of that, right? Services allows them to point a thing and say, look, constant growth, don't you love it? And they do love it and they know it. And that's fine. So services is now 28% in this quarter of their of their revenue. it is important to note, I've said this many times before, I'll say it again,

when we talk about services, it's important to note. Services is best thought of as add-on services for Apple products you already use. And since half of Apple's revenue is from the iPhone, you could really strongly argue that, you know,

because sometimes people, this is that freak out thing and my freak out chart hasn't happened. It hasn't hit yet, but we're getting close, where there's going to be a quarter or Apple makes more profit on services than products. Yeah.

And everybody's going to have that existential moment of like, oh, oh, no, Apple's just a services company. But the fact is, the services all emerge from the products. Like, you don't buy Apple services unless you have an iPhone. And it's the ongoing payments that we continue to make to Apple for everything. Like, it's Apple Pay, it's App Store, it's everything. And like, you know, one of my favorite charts that you do is the quarterly revenue by category. and in this this past quarter it's 51% iPhone 28% services.

I reckon within the next five years, there will be, the quarter will happen, where the services quarter will be bigger than the iPhone. Yeah, yeah, this year and next, yeah. Yeah, but again, if you want to think about it that way, I would encourage you, and I would say the services is probably even indexed further toward iPhone, but like, so we said 57 billion in iPhone revenue. it would be very easy for us to say it's 57 billion in iPhone revenue but you know really it's more like 80 billion yeah because a whole bunch of that services is tied into people who are primarily iPhone customers because most of Apple's customers are iPhone customers right just the law of numbers there aren't as many Mac users as there are iPhone users right so like the there are so many people who are using Apple services who just have an iPhone and and so that's all iPhone money it's not services

services, if Apple wasn't selling products anymore and was just a services company, I assure you their services business would not be good. Yeah, it would shrink. I mean, if you think about it though, right, like even people that do have all of the products, service the iPhone is just where the services money comes from no matter what you're doing because of what the services money is, right? Like on the Mac, you may not be encountering a lot of the daily services as often. You don't only get your software from the app store. or you're not using your app for Apple Pay, right? Like you're not, you know, you probably,

you may be using Chrome, so you're not even, you know, benefiting Apple in the search deals. Like, no matter kind of where the user is based, the iPhone is the core of the services. So yeah, if you thought of it as we have iPhone hardware and iPhone software and we just put services in the software, then it just makes Apple, you know, like 80% of their revenue for this, quarter was iPhone in that scenario

if you would think of it that way. You could make that argument. It's not, you know, not 100%, but and I'm sure that there's some, I'm sure they've done the numbers inside, that there's some amount of capture of like the more Apple devices you have, the more services revenue you probably are likely

because then you're more in the ecosystem. Like, I get it. I get, I get why that's probably true. But like, it just, I just want to restate the idea that services is very impressive and it's important, especially I think for Wall Street, and it allows Apple to set a narrative a certain way. But I think we can talk about it a little too much because in the end Apple services revenue is largely generated from the success of Apple's hardware. Yep. I'm actually going to bring in an ask up for a question now because it's

very related to what we're talking about. Thank you. This comes from Tom who says, I was reading Jason's Six Colors Post about the earnings and I have a question about the categories Apple report. Do they make sense? Why do they separate the hardware products into distinct categories, and then there is just the bucket of services, which maybe makes more sense to report separately than the hardware. Is this for historical reasons, or is there still a good reason for doing it this way? A little bit of both. First off, there are some filing, there are actual regulations in, because Apple is a public company, about how they disclose. What they don't have to do is disclose like every detail of every iPhone

model, right? But there is, above a certain point, point, you need to break out your categories. You can't just say hardware. So part of this is historic. Like Apple used to have a Mac category and then like other. And then they added the iPod, which the iPod then, you know, faded away and vanished. They have the iPad category. Wearables, home and accessories used to be other. They renamed it. Yep. They added services in at some point. I don't even remember when. So, but there's, there's a point at which it's a material to your business and I don't know the actual regulations. Um, and so Apple is comfortable with numbers that characterize the trajectory of their hardware business in certain ways. There are things that they used to disclose that

they don't anymore. They used to disclose unit sales sales sales. Yeah, now they only disclose revenue numbers. So we have to guess about how the, like, is the business growing or is it only becoming more revenue generation focused, right? Like, if the revenue goes up, did they sell more phones or did they just raise the price of the phones? And we can't tell, or the Macs or the iPads. So there's that. And services, I think, they don't need to break it out further. And so they're not going to. No. I would also say, you say maybe makes more sense to report separately. But what we know about services is that Apple's deal with Google is in there. Yeah. Not to Apple. doesn't. They don't want people to know how much money they make from Apple TV compared to

Google. Exactly. The Google search deal, which is pure profit, is in there. And they get to, it allows them, talking about the service narrative earlier. It allows the service narrative to seem bigger. And it's not a lie. It's not a lie. But it allows it to seem bigger than maybe, it allows people to think of it as, wow, that Apple TV is doing great. When actually, you know, a huge amount of it is the Google Search deal. And so they don't want to break that out. And if they don't legally have to, they will not. So I would say Apple is, as a public company, legally obligated to disclose a certain amount

about their business. And they will obviously abide by that law. And then I would say beyond that, their disclosures are a combination of historic, but also choices they make about. how they want to explain the narrative of their business to investors. Because I'll tell you, if Apple was privately held, we would know nothing about their business. Yeah. They don't tell us because they want to.

They tell us because they have to. And they've chosen philosophically, I think smartly, to view that as an opportunity to market. I mean, it's investor relations is what this whole part of the company is called. They are essentially marketing their business to investors because it's, their fiduciary duty to do so. It's their regulatory duty to do so, but also it allows them to set a narrative that makes, I mean, it keeps them happy. The Apple shareholders are so happy. And this is what they want. They want them to be happy. They want them to just be like, oh, man, Apple, I love it. They give me dividends. They're buying back stock and raising the price of my

stock. It's great. So that's what's going on here. It's a combination of what they're legally required to disclose and then the story they want to tell. But that's it. The last category is wearables, home, and accessories. $7.9 billion up 5% year of a year. This is the first growth quarter since Q3, 2020, 3 for other. Yeah, for wearables, home and accessories. Yeah, they said something about the Apple Watch. I imagine AirPods are a driver here too. Yeah. But this is, I'll say it again, John Ternis is rumored be behind a lot of their push into a new set of smart home products, which, I mean, we've been saying it for a decade that this is a place that Apple could actually do something. And that

would certainly help this category. Yeah. If it added more products in, it is not, it is by far not Apple's most important product category, but it, it grew, it had growth phase for a while and then it stopped. And now it, it, it doesn't do that. But it did grow. It had, I'm looking at the numbers here what? Like it had two and a half years of down of year over year losses until this quarter. So at least they stabilized it a little bit. A $500 home pod of a screen on it would help. Yeah, well, and I would say like you can go through the whole upgrade archive and hear us talk about this at depth.

But I would say the home pod with the screen will not move it much. just like the HomePod didn't, just like the HomePod Mini didn't, just like the Apple TV doesn't. But if they had a coherent strategy, and honestly, the one that I keep coming back to is if Apple could put out a privacy-focused

set of doorbell cams and security cams that didn't share your video with the cops or the FBI or whoever, but was like just for you and Apple could use its security promise to say, we're going to keep your data secure, and we're going to keep your home secure,

and it interoperates with everything else. But, like, I think that's a really interesting sales pitch at a point where there are a lot of people, especially who are just so dissatisfied with, like, ring cameras and where that data goes and that the feeling that it's not private. I think that, but I think this is the larger point here,

which is if Apple's going to do this, they can't just toss another product in the mix. They need to actually have a strategy and they need to have multiple products. Yeah. Absolutely. We'll see. We will see. Yeah. Yeah. I mean, I'm not saying I necessarily believe that they will do it and then they will succeed in it, but I would like, I sure like them to try. Yeah. Yeah. This episode is brought to you by our friends over at Squarespace, the all in one website platform that is designed to help you stand out and succeed online. Whether you're just getting started or scaling a business, Squarespace would give you everything that you need to claim your domain, showcase your offerings of a professional website. grow your brand and get paid all in one place. With Squarespace, you can get discovered fast with a suite of integrated SEO tools,

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So I want to do some analysis stuff. and there was some news that came out during and after the results. So this was Tim Cook's 89th call. He's going to do one more? He called it out. He said, this is my 89th.

And I thought, oh my God, I've been doing this so long too. Yeah, don't think about that. Not as long as Tim, but pretty, I mean, I remember when Tim would do the calls when Steve was CEO. And Steve would occasionally appear and we got excited when Steve appeared, but usually it was just Tim.

And I think Fred Anderson, the CFO. I think he's going to be on the 90th. I think he's on the next year. one. And then he's not the CEO after that. So I think we've got one more, one more, one last dance with Tim Cook to talk about the numbers in like late, late August. That'd be nice. Or late, late July. So he'll still have a month to go. Is he, right? Like he's still there. So, so you would assume that he would do one more. So, because it kind of felt like when I was looking at your report, it kind of felt like, all right, goodbye everybody. But it's not that way.

But like, obviously he kind of, kind of, they treated it a little bit. bit of, because you can't not, of like, oh, okay, we're, we're acknowledging the fact that we all know he's leaving now. Yeah, they had to do that, right? I think you could even argue that it's kind of a victory lap about how they managed it, where they got the information out there, and let's just not, you know, make no bones about it. The FT report in late November or whatever was a leak. And that's good because Wall Street, Wall Street likes growth. They also like not to be surprised by anything. And that's not what, that's, that's how they handled it. So it was a little bit of. of a, you know, yes, as you know, we're doing a transition. We're very responsible. John

Turnus is here. John Turneris read a little statement and then he threw it back to Tim and then Tim continued on and like, it's very much like, let's introduce you to John on the call. You'll be hearing him in the future. But like, but I'm still doing it now because we're adults here and this is what we said we would do in September 1st he'll take over. Like that's all part of the plan. You know, it's like, get used to this guy. You're going to be hearing a lot from him. You know, like here's your guy. And Turner's had a bunch of to say as well, like he was there, he appeared. Yes.

And he says, I got to read a couple of quotes. I mean, let's just say he was introduced by Tim Cook, who said lots of very kind things about John Turnus. And then John Turneris immediately said, Tim Cook is one of the greatest business leaders of all time. I mean. He's right. He's sitting right there, John. You got the job already, okay? Yes.

You have to suck up at, no. You got to. It is, though, right? Like, he is. And that's a thing you say on an analyst call is what it is. Absolutely, yeah. She's saying it's for a captive audience. It also said one of the hallmarks of Tim's tenure has been a deep thoughtfulness, deliberateness, and discipline when it comes to financial decision-making of the company. And I want you to know that is something Kevin and I intend to continue when I transition into the role in September. Yes. We will still be doing, you know,

good work. We're not going to blow it all on a race car or something. I mean, and it's like obviously right? Like obviously I was going to say I think maybe people have been reading into the same. You see, he's the same.

It's like, there's nothing. It's literally message to Wall Street. Don't worry about it. Apple's going to be fine. Which is the whole message of the whole CEO transition. That's the whole point of the CEO transition is to let the business community understand that it's all being done carefully in response. and everything's going to be okay.

Yep. Which, again, remember how it happened the last time, where it was sudden and shocking, and Tim Cook was thrown into it, and they had to scramble. And the whole purpose here is to not do it that way. Yep. It's like, is he the right guy or was he just the guy, right? Like, is it just, is Tim Cook the right person for this? And it's like, well, now you all know Tim, you've trusted Tim.

He's chosen this guy to succeed him. And he's saying, I'm going to, I'm going to uphold the value. values of the greatest business leader of all time, you know? And Tim is like John is, I mean, Tim also importantly does say John is great and he's going to, with like great, some great detail about John Turner's very similar to in his other public statements. But that's, that's what they're trying to do here is just make everybody feel okay about it. Like it's going to be fine. Yeah, be happy, everybody. We're all good. There was something interesting, though, to me. Yeah. There were some surprises in the, in the call. There were surprises that I, I, I, I, I,

find that interesting because sometimes the call sometimes the charts are interesting and the call is boring. The charts are not that interesting this time. The call was interesting. So CFO Kevin Perrick said, as we move ahead, we are no longer providing net cash neutral as a formal

target and we will independently evaluate cash and debt. Now, to translate this, previously Apple has pledged, had pledged, to have less of a cash reserve because they were just sitting on mountain of money. In 2018,

Luka Maistrey, the CFO at the time, announced that Apple's policy was to become net cash neutral over time. So essentially, the more money, what they had done is they had built up a cash hoard of, I think, $163 billion at its highest point of just cash. Net cash. So they actually had like $200 billion and then $40 billion debt. So the net cash was $163 billion. They had lots and lots and lots of cash. And I think you could look at the narrative and say that in some ways Apple's culture was to bank the cash because Apple had been on the brink of bankruptcy and they never wanted to be that way again. And they decided, and I think part of it too was how do we make Wall Street happy with us? How do we make Wall Street happy when we know that the iPhone is going to hit some pockets of turbulence?

Services narrative was part of that. This was part of it. Because they reinstated the dividend. And then with this policy, they said, we're going to be net cash neutral. So if we've got $100 billion in cash coming in and we spend $80 billion and we have $20 billion left over, what they're basically saying is what we're going to do is use that $20 billion to buy back stock, which raises the price for the – so basically if you remain a shareholder, your price goes up. Or dividends, which is they literally send you money.

at a, for each share of Apple stock you have. You just get money from the company. It's like you got a share, you get 50 cents from us for free. So you got 100 shares, you get 50 cents. And I imagine that this, this, like the net cash neutral idea was, it wasn't every, it was post anything they were assuming they might want to use money for, right? Like if they were going to make an acquisition, they have to have cash around to do that. But, well, not necessarily there's, there's, there's other ways.

But yes, I think, and I think net cash. neutral over time. Over time did a lot of work there. It was over time. And they always had, they were starting from a position where they had an enormous amount of cash. I think they still have like 50 billion or something. I don't know how much cash they have now, but they still have an enormous amount of cash. It's just not what it was when it was 163 billion. And yeah, the idea was that they wanted enough to do work, but they also didn't want to have this huge cash hoard laying around. And what Kevin Parrick announced last week, is they're not going to do that because they want more flexibility.

So they said they'll independently evaluate cash and debt. So I think this, look, this could mean a lot of things. It could be as simple as we found the net cash neutral policy to be a little too inflexible for us. And we'd like a little more breathing room to take a little money here and there, take a little debt out here and there. and having this stated policy ties our hands a little bit. What is it good for? You could even argue. What is it good for?

We've shown that we are going to do stock buybacks and we are going to do dividends. We will continue to do so. We don't need to promise that we'll be net cash neutral. It's just a thing that complicates matters. And they pointed out the board has already approved $100 billion in stock buybacks in the future. And that's an amount. They haven't even gotten through the last board approval of stock buybacks. money. So they are approved to spend a lot of money buying back stock and raising the stock price as they go.

So that's all true. I do wonder if the real motivator here is they would like to have more cash on hand because they are now in an era where they may need to spend more money than they usually have. Yeah. And that that that cash hoard might actually be very good. in terms of strategy to buy other companies, and not even buy other companies, buy or invest in other companies, right? You see some of that now, where there are these high valuation AI companies especially, where you can have a strategic partnership or investment where, you know, you're not buying the whole company, you're buying 30% of it or whatever, and then there's a special deal and all of that. Like, it gives them flexibility to do all that, or if there's like a bubble pops

and there's an AI company that's in trouble that Apple says, like, we've got a lot of cash, we can help you out. And then they get advantageous access to that company. They could also do huge capital. They may realize they need to build out more data centers or whatever, and they would have a cash to do that. I had the idea, and this is just, I made this up,

but I'm saying, you know, if they're worried about things like the RAM shortage or their limit on nodes at TSMC, one of the solutions is you go to one of your providers and you give them a giant bag of money. And you literally say, it's a shame that you don't have another factory making cutting edge nodes. Here's $8 billion. Go build the factory for yourself. And then we want the output of that factory for the first five years or whatever it is.

I don't know what the details are, but that idea. Or RAM. You go to the RAM manufacturers and they're like, you know, we're just making too much RAM here for AI. We can't, you know, it's very expensive. and you could, and again, it's very expensive to do this, you could hand them a bag of billions of dollars and say, build us a factory where you will make RAM for us

and we will pay this rate over the course of this many years. And the calculation you make there is we're going to, by putting the money in up front, you're guaranteeing yourself a price over time that will actually be a good deal for you in the end. That's the idea.

There may be opportunity for stuff like that, where they can spend the money because they've got the cash. And some of their competitors might have a harder time with that. They can just say, let's make this happen. So I wonder if that's part of what they're thinking, too, is just like there are a bunch of things about Apple's business that right now are a little, there's a little more uncertainty than normal. And one of Apple's superpowers, if not its greatest superpower right now,

is that it's a cash generation machine. It's all that revenue every single quarter and all that profit, every single quarter. And that cash can be given back to the shareholders or put into dividends and given back to the shareholders directly. It could also be used to improve the business, which would also make the shareholders happy. So I think something's going on here, but I am also not an MBA. Something is obviously going on because they've made a change. Sure, sure.

But I mean, it could be something minor. But yeah, it strikes me that what happened is they're like, what if we want to do this? And they're like, God, we've got our net cash neutral thing. And they're like, we should just drop it. And the way they've messaged it, because remember, they're talking to the financial community. The way they've messaged it is, don't worry. We're dropping the net cash neutral target because we might want to manage those independently. But don't worry.

We still care about you. We're still going to do some stock buybacks. We're still going to do dividends. But we're not going to. focus on being cash neutral over time. And that is obviously was prompted by something. A lot of ink has been spilled over the last couple of months about the huge capital expenditure of Apple's competitors and that Apple is in a position where they've not been doing that and maybe they'll just benefit from not having done it. And I wonder now if it's

funny where Apple's like, yeah, you know what, actually we would also like to spend some of that money and stuff. For the same reasons, but maybe now they're like, okay, we're at a point now where we may need to start doing some of these things, whatever they might be. It's not as Apple, well, I mean, and it's not even start doing these things.

Apple does these things now. Apple pays companies to build factories for them in China, and it pays TSM, and it pays RAM suppliers, and it signs up for multi-year supply deals on memory to guarantee and other parts, right? It already uses its financial wherewithal.

But what this suggests to me is, maybe they want more. cash. Maybe things are getting more expensive or there's more tactical stuff out there. They are aware of the moment that we're in in that they may have desire for flexibility that they've otherwise handcuffed themselves from being able to do because of a pledge. Because right now they may need more money than they've been banking on. That may be the case. And so this is where we are. I think they want that cash. It could also be that they're looking at, they had some conversation about what if we did?

a strategic investment or an acquisition. And they're like, you know, right now we would have a problem with that because we're giving away too much of our cash. And that like it's literally let not necessarily that they are going to make an acquisition even, but that they want to be in the position where if it happens, they don't get, like, it would be a shame if you're Apple and you want to make a vitally important strategic decision and you can't do it because you spent that money on stock buybacks. Right? I mean, fundamentally, that's dumb. So I think that's what's going on here. But beyond that, who knows? I mean, Kevin Perrick knows. I don't even think I really believe this, but I would say, maybe that was a Tim and Luca thing. They really liked that. And maybe Parrick and Tornis don't. Who knows? I think it was also a product of that era. I think that in the late teens, they were really trying to reassure Wall Street. There was the iPhone revenue had kind of flattened. And there was a narrative that like the iPhone was over, which is silly.

In hindsight, but that was that idea of like, well, it's only incredibly profitable, but it's no longer going to be explosively a growth. And iPhone growth has continued. Revenue growth, certainly, right? We don't know if the numbers have grown, but we know that the money has grown. And then services narrative was a part of that. But I think this was a part of it too. And so they're tweaking it a little. It's not a wholesale, right? They're not saying we're eliminating the dividend and we're not going to do any stock buybacks. But they are saying we're going to kind of unhook that from this goal of being cash neutral. That is not necessary anymore. I want to read a quote from Tim Cook on memory shortages. Tim says in the December quarter, we really had a minimal impact due to memory, and you can kind of see that in the gross margin results. We said it would be a bit more in the March quarter, and we did see higher memory costs in the March quarter, and they were partially offset by benefits from carry-in inventory that we had.

For the June quarter and what's embedded in the guidance that Kevin went through earlier, we expect significantly higher memory costs. They are also partly offset by the benefit of carry-in inventory, and then where we don't give color beyond June, I can tell you that beyond the June quarter, we believe memory costs will drive an increasing impact on our business, and we'll continue to evaluate this, and as we said before, we'll look at a range of options.

So this is a long way to say we're running out of the benefit that we had, of the memory that we already had, that's running low. And there are places where you're going to see things go a bit wonky. One of those. So we'll come back around to what I just spoke about in a minute. So on the call, Tim called out the Mac Mini and the Mac Studio

are seeing increased demand due to their AI usage. And then actually later that day, Apple stopped offering the 256 gigabyte storage for the Mini. So now the starting price for the Mac Mini is $799. So they've got. rid of the base tier. So they're kind of pushing up the margin, I guess, in the Mac Mini by default.

So, you know, it's like Apple are now saying that essentially as we move forward through the year, something's going to change. And as you point out in your piece, really, there's two things. Either they make less money or they make you pay more money. Yeah. Yeah. And there are different

ways for them to do it. One of the ways is they keep the starting price. They raise the price by eliminating low, low tiers like they literally did later that day with the Mac Mini, right? They're not, they're not increasing the price of the second one up. They're just making it not, the first one is no longer available. And you've got to start, they change the starting price. Sometimes they do that. Sometimes they find a way to keep the starting price around. And they raise,

so these are the levers they can pull. They can change the prices on the products. Or they can keep some base prices around and change the upgrade prices to be more in order to get more money out of it to offset the cost. There are different ways that they can do it. And they can eat margin, but Apple hates to do that, right? Like you've seen their margins. Their margins are not enormous because they know that they can eat margin and give that money back to people.

Like, they're enormous because they like having big fat profit margins. But they're not immune from the ramp price thing, and they're going to get bitten by it. And they've done what we've seen, I feel like what we've seen is very Apple. which is that they built in cushion, but the cushion can't last forever. No. And that's what they're warning against. And then also,

and maybe this is related to what we talked about, about their cash, but they also hate being buffeted around by markets like this. They like hedging. They like long-term contracts. They don't like getting surprised. So is the, the cash they want on hand for,

what I was saying earlier, which is, are there ways that we can, we can spend money to guarantee us access to RAM and processors? Um, because we don't like where we are right now in being at the whims of the constraints of the suppliers of our RAM and processors. We'll see. But, um, it's not, Apple's not immune to what happens in the world. They can, they can seem like it sometimes because they do a lot of planning to avoid that. But in the end, in this case, there's only so much they could do. And maybe not similarly, but in regards to shortages, so Cook and Parrake spoke of supply constraints in the quarter. Yeah.

But the issue was not RAM. It was actually Apple Silicon with TSM, saying it will persist. Essentially, they blame themselves. Apple say that they did not correctly forecast demand for the iPhone and the Mac, specifically talking about the MacBook

Neo, Cook said, we were very bullish on the product line before announcing it, but we undercalled the level of enthusiasm that would be with it. Yeah, it is a side effect of the iPhone 17 doing so well because it's on an advanced node at TSMC, and they have to estimate what they need, right? They underestimated what they needed because the iPhone 17 was a hit. And again, I think Apple Apple thinks highly of itself and plans for the upside. But if you're above the upside, you end up in a situation where

there's no more capacity for them. TSM's making them as fast as they can. And so, yeah, this was a great iPhone quarter, but they said they could have sold more. And that's interesting. And then on the Mac side, I think it's interesting. They talk about the Neo,

because we think about it. and think about them using that bin chip. So I'm actually kind of wondering here what that demand forecast is referring to. Is that they can't make them fast enough? Is that they can't ship the bin process? Like, I don't know what's going on there. They, you know, they're telling the story

about undercalling the enthusiasm for the MacBook Neo, but I don't know what that means in terms of what, what was the constraint there on the MacBook Neo? Was it, because we've been all kind of assuming that this chip has been, and it's just sitting somewhere, is there some other part that their supply constrained on? Because, like, if those chips were already made by TSM, there can't be a supply constraint on there. So I'm a little confused about what's going on with that. Yeah. And this was, I found this fascinating.

So on the call, Cook said that Apple will be applying for a refund of the tariffs that they had to pay to the U.S. government. But they will take that money and invest it into U.S. manufacturing. Yeah, this is the judo move. Yeah. And this was notable, by the way, because somebody asked something vaguely related. Yeah. And in the middle of the call, Kevin Perrick was like, now I'd like to throw it to Tim, who has a statement about tariffs.

And it's like, that's weird. Like in the middle of his answer, he throws it to Tim who says, I'm going to make a statement here about tariffs since you asked, which they didn't kind of didn't. but they were obviously waiting for an opportune moment to make this statement. And the statement was, we are following standard procedure on tariff refunds. Because it turns out that these tariffs are ruled illegal. If we get that money back, we're not doing anything mean, right? We're just following the standard procedure that the government tells us to follow.

So don't get mad at us. And if we do get money back, we're not going to put it in our pocket. We're going to add it to our commitment of reinvesting it in the U.S. So if the U.S. government has to pay a billion dollars to Apple for tariffs, Apple will add that billion to their commitments, their existing commitments to U.S. manufacturing. And that is your political statement of, don't worry, don't get mad, don't claim that Apple is trying to steal money from the American people. And it's such a, it's just a really smart move because it's Apple just saying, you know, you can't be mad at us and we're reinvesting it in America, which completely defangs the argument. about like Apple is this profitable company is stealing money from the American people. It's like,

no, no, no, we'll reinvest all of your tariff money in our, our initiatives. Money they literally would have spent anyway. Right? Like, it's 100% clever. It's very clever. Yep. Yep. And then your line of the call, Cook says, net, net, I'm over the moon excited about India. Yep. So basically, I'm going to miss that jargon. I'm going to miss Tim Kirk Jorgon. Well, they'll teach China as how to say it too. Okay, good. Basically, Apple's excited about the prospect of India becoming the next China from a buying perspective for them as well as from manufacturing perspective. Yeah, one of the last questions, which was from Aaron Rakers from Wells Fargo, is about asking Tim to play the hits of being bullish on China and India. And so he did, right?

He listed all the ways that they've been doing great in China and pointing out, I think, importantly, that it's not just that the iPhone was top selling in urban China, but the Mac Mini was the top desktop in China, and the MacBook Air was the top laptop. So they're spreading that out. And then he said something he said before about India, which is it's the second largest smartphone market. It's the third largest PC market.

And despite being there for a long time and doing pretty well, Apple's share in India is modest. It's very small. Apple is not very strong in India. So from Apple's perspective, they have an enormous amount of growth potential in India. And that's why he's net net over the moon. Net net over the moon.

Is that like the cow jumped over the moon? Yeah. Tim Cook ran away with the spoon. Yeah, yeah. After he did some, he worked on his spreadsheet, he saw where it was net net, and then from there it placed his position above the moon. Above the moon.

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WWC this year. So we have three, oh he's upset, three new editing tools, all right? One of them is called extend. Now Jason, it took me maybe 10 minutes today to try and write out a summary of this. So ignore my summary and wait. If it doesn't make any sense, wait until I get to my example. So to extend an image, this would essentially let you generate imagery around the photo to make it larger. So for example, if you have a photo that you would like to make a lock screen image,

but say so if you're a family and the lock screen image is too close and they get covered up by the clock, you could extend it to make sure it would fit correctly. So I did this. So with Photoshop, a little while ago, I had a picture of Edina and Sophia, but when I put it into the lock screen, the clock was over their face. And I wanted there to be kind of space above, so they would be kind of more towards the lower third, lower half of the lock screen. And so I used Photoshop and their generative fill, and they were standing in front of a tree. So it just created a fake tree, and then the clock goes over it. And it's brilliant.

I was really happy with this. And I remember Stephen Hackett wrote a blog post about this years ago that I'll find a put in the show notes asking Apple to do exactly this. Like just because Apple has a thing that says extend. Like you can extend the wallpaper, but it doesn't do a very good job. It like kind of blurs everything a lot and it doesn't always work. So this is like I think a really clever way of letting you kind of frame an image exactly the way that you would want. I can't think of any other use case other than making a wallpaper. But I'm sure they'll try to show us some.

I mean, that's a nice, the idea. And yeah, Photoshop does this, and it does a pretty good job to do this kind of like AI extension where it's looking at the contents at the edges and it's trying to extend. And there are places in the system where the photo isn't the right shape, right? And so if you've got an engine that can look at the content at the edges and the content of the photo,

so that you can have a photo that is placed properly even though it wasn't quite framed right, I think this is a fun feature. I've used this feature in Photoshop too for the same reason, right? Like I've used it for a few custom thumbnails on incomparable episodes where I wanted to use an image

from a movie we were doing and all the movies are widescreen and all the podcast artist Square. And it's like, you know, can I just, it's the people in the Soylent Green factory. Can I just make the factory a little taller? Yeah.

So that I can put the logo above it. and, you know, Photoshop was able to do that very easily, and it solved a problem for me of, like, the pipes that are going up go a little further up, and it allows me to have the art be the art that I want. And so it's like, it's little stuff. And in this case, it's Apple's UI saying, you want to use this photo, but you can't,

because it's not quite the right shape. It's frustrating. So this is smart. Yep. There's also Enhance. this one's easier to understand. Apple intelligence powered editing to improve lighting and image quality.

And then reframe. No, I am just going to read from Mark Gorman here. Design primarily for spatial photos, it allows users to shift perspective after the shot is taken. A photo of a car, for instance, could be adjusted from a front-facing view to emphasize the side.

Okay. I guess maybe this is to give another life to spatial imagery. Like if you have more data from both cameras, maybe you can do more bold things and still kind of get them somewhat based in reality. Yeah, I don't know. I mean, there's obviously this is some image math. I mean, there's amazing things you can do with imagery to calculate ways of moving things. So, okay.

Yeah, it's like, and then I, my assumption is this isn't like, oh, make your vision pro photos better. This is like, no, this is just the use for that feature that they didn't have before. Maybe they can encourage people to use this feature. Because it's in the camera app. They can do it. But we're not taking spatial photos for our Vision Pro, especially when, as we've mentioned, on this show, they have an algorithm now that is so good to make any photo spatial. It's almost wasted to take a photo in spatial.

You don't need to take a photo in special. So this means they can keep that feature in the camera app and it has another reason. But again, it's like with all of these things, you have to pre-think that this is what you want from the image. Where if you're editing, like you're reframing an image, it's because it wasn't right, but you had to have made that decision before you take the photo. So why not just go to the side of the car in this scenario and take it? You know what I mean? It's like, I'm interested to see how they can sell to me this idea of me using the spatial photos I don't currently take. you know, like for something later,

we'll see about that one. Mark is also reporting that visual intelligence will be receiving some big upgrades at WDW. Well, we'll be receiving some changes at WWC this year too. It's likely to become branded as Siri mode and just live in the camera app now rather than only being launched from camera control or the control center.

You'll be able to choose the Siri mode from the selector at the bottom of the UI, which I hope that they make better. if they're going to put more options in there to be able to point your phone and ask questions. Basically the way Mark describes it is it's like all the features that we currently have.

So ask chat GPT, what am I looking at? Do a reverse Google image search and Apple will be adding some features like scanning nutrition labels, adding contact information. This mode will show an Apple intelligence logo instead of the shutter button in the camera app.

I just think that if you're going to do this, you're going to make it way better than the way it sounds here. Like, I, I, this doesn't sound compelling. I've never used visual intelligence, because I just, I don't know why I would do that. Like, I don't, like, I can imagine, I imagine these features being useful on a product

that is already out in the world, right? So, like, on a pendant, on glasses. Like, I can just ask the computer. But at the moment that I'm taking my phone out on my pocket, I'm searching for this thing in another way like I've been doing for decades at this point. So the idea of if it being persistent feels good to me, but like I just,

I don't know what I'm using this for. I mean, I think there are probably use cases. The one I keep coming to is what is that product, right? Like, can I take a picture of this and it will show me the Amazon page so I can go buy that product? That's valuable. Yeah, okay.

If it can actually match, Like if you see somebody with a, you know, it's like everybody was looking up like what shirts and pants John Turnus and Tim Cook were wearing. Like if you if you're like what is that shirt and you take a picture of it and it says, oh, you can buy this shirt here. That's cool. Like I can see some value in that. Nutrition labels is an interesting idea. The idea that you could you could log stuff that way. I think the problem is we all would need to change the way we think of how we use our phone and the camera to have it be a data game. and not just a photography thing. And that just requires a brain switch. I still have that for, I still have that for scanning QR codes where I'm like, oh, right. I got to do the,

I got to do the QR code here. And that's, I just don't think of it that way, but that's the way to do it. And fortunately, they put a QR code, a reader in the photos app that if it sees a QR code, it puts up a thing that says,

this is a QR code. You should just tap here and it'll do its thing. And that's, that's fine too. So I think the challenge in part is just recalibrating what we think our camera is for. Yeah. Yeah.

If they want to make this a thing, they kind of have to start getting it out there, right? Like this is the kind of the Apple way, right? Like if they're going to try and build products around this, they want people to try and get used to it and they need to start developing it in some way and they can just put it in the camera app. But man, putting something in the camera app,

that is prime real estate. Like, I just want it to be more flashy or interesting than the way it's being described here. Because to me, it just, I can't see enough of what I want it for. It doesn't seem exciting, does it? No, not at all. It doesn't see exciting. In fact, I would say, what if, like, that it's a mode I also find kind of fascinating.

Like, if I open my camera and I take it out and I'm looking at something, like the QR codes, like maybe it's not practical because of the amount of ML effort required, but like, shouldn't it just tell me what? it sees? Why do I go into an AI mode and then grab something and all that? Like, I'm not sure this is the use case that maybe is what would work the best, even if it's the use case that is doable today. Yeah. So it's a, it's a real UI challenge. And I think that that's something that Apple should embrace is how do I make people want to use this feature? And it's got to be good and it's got to be reason for us to change our habits. Yep. Yeah, it's like funny that you would put it in the camera app maybe to make it more visible when I have an actual hardware button on my phone that I just need to long press

and it will open it and I still don't do that anyway. So like I don't know if putting it in the camera app is then going to make me go like oh I should use this because I haven't been. In this report Mark added a line at the end saying quote the changes come ahead of the iPhone 18 Pro this fall which

will include some of the biggest camera hardware upgrades in the lineups history. Wasn't any more data than this information I should say but there has been previous reporting of a bunch of different things including variable on the pro line this year. I am curious to see what this will end up being

and how much more painful it will make the camera system that will be on the folding phone, because it's not going to be as good as the pro, and that's going to hurt. And then speaking of the folding phone, Felipe Esposito at Mac Worlds is reporting that Apple has decided on the name iPhone Ultra for the upcoming model,

and that this branding will also come to future Mac models most likely to touch screen laptop. I think there'll be a MacBook Ultra above the MacBook Pro. Yeah. While I understand it, and like I like the name, it's still to me,

like, everything that we think we know about the folding phone, it just doesn't matter of Ultra for me because it isn't the best one. It's best at one thing. They'll have to redefine it as being it's the best because it can become more. Yeah.

And they'll just, they're good at that. Yeah, that's what they do. They're good at that. We can question names and then they redefine them and everybody kind of, accepts because they kind of these tags don't mean anything in a way. Yep.

Other than how Apple defines them. And so we'll figure it out. It's certainly a possibility. What strikes me about Ultra as a name is that you're using that name because you want to differentiate it from the pro. So like iPhone Ultra, okay, fair enough. It. MacBook Ultra though. I'm not sure what I think of that.

In the short term, I can understand how you might want to actually have a line above the MacBook Pro. It might actually solve one of your problems of having those kind of like low-end MacBook Pros. But do you really want four lines of MacBook laptops, Mac notebooks? Do you want Neo Air Pro and Ultra? In the long run, do you want that? I understand that like if these touchscreen OLED laptops are coming out, that they're going to be expensive and that maybe there even is a reluctance to replace the MacBook Pro at the current price slot because you can't really hit that price. But like, are you committing Apple to having four laptop spots going forward instead of just having the ultra be just the high in pro?

and then, you know, over time, it creeps down the line. It seems, are they planning something where the MacBook Pro looks more like the iPad Pro and Air, where there's a very expensive high-end model that is great, but is expensive. And then there's a lower-end model that's actually still pro and still pretty great and still does all those things. It's just not as cutting edge.

And again, like, is that what you want that to be long term? That's what gives me pause about iPhone, about MacBook Ultra is, okay, yeah, you take the M6 with the touchscreen and the OLED and you call that Ultra. What happens the next year? What is the MacBook Ultra and the MacBook Pro? Are they just separate at that point? And the OLED only goes in the high-end model ever.

And the touchscreen is only in the high-end model ever. and what differentiates that Ultra from the pro that you're selling? Or does the pro get diluted to the point where like the pro is more just those low-end models that aren't that interesting? And then you've diluted your MacBook Pro model, which is,

it's a pretty powerful product line that a lot of pro users spend a lot of money on. So I, yeah, so I'm skeptical about that. I'm not sure I buy that as a, not saying about this report. It's like, that doesn't sound like a good, move to me in a way that calling the phone Ultra out like, fine, whatever.

The only way I could imagine making it work is if you gave it what I think is not a great name of the MacBook Pro Ultra. And it's only for the time until they merge the lines, right? And so it's like you have it as this really expensive one with the touchscreen in it until all the MacBook Pros get touchscreens and then you can kind of just let that one go away.

Because you've got to give, because I do believe, as we spoke about on the show before, that is going to sit at a price point above the MacBook Pro. And so then it's like, do you just call that the MacBook Pro with touch? I mean, you could. Is that what they do?

Because you probably want to give it a name, at least. I don't know. We'll see. It's a challenge. My issue is more like what happens in a year. Like, do you, do you, is the plan that you're going to make MacBook Neo, MacBook Air, MacBook Pro, MacBook Ultra.

If that's not your plan into the long term, then don't do this. Yes, exactly, exactly. Because you risk doing harm to MacBook Pro when, if it's just going to be for a year or two, you know, just sell both versions and deal with it. This episode is brought to you by Steam Clock. A lot of mobile apps are mediocre. They're not broken. They're just okay. But you notice the difference the moment you use something good. Steam Clock software builds mobile apps for companies that care about taste. They are a design and development

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on acquiring a company that will make a splash for him as the new CEO. What company would you suggest? It doesn't have to be massive in keeping of Apple's long-standing tradition of acquiring smaller companies from time to time. Personally, Logan says, I would suggest Procreate for the Creator Studio Suite. I like that suggestion from Logan. I am convinced Apple was tried to buy Procreate and it has not worked for them. Because they bought PixelMater, right? Procreate is, I think, the most popular iPad app and people love that app.

And Apple loves them. They featured them frequently. I would feel it'd be fascinating if they hadn't at least asked. But yeah, that would be a good one. I'll go first. Sonos would be who I would say. I think Sonos are also they're accompanied not necessarily what they once was, so they might be a bit more purchasable than before.

I bet Sonos have a bunch of patents for their technology. And also their equipment looks good, sounds good, works, incredibly well together that you would be benefiting from all of their knowledge on soundbars and getting their soundbars to speak to other speaker products. They're a company that make really good stuff

absolutely in Apple's wheelhouse so they would just benefit from all of the good work that they've done. So it's hard to know what companies, like there are products and then there's like, do you want the whole company and all of that? I think Sonos

is a good choice. I think if you're talking to John Turnus about his desire for Apple to play more in the home, I think Sonos would be a good choice, especially if you can get them on the cheap because they've had a bunch of trouble. Because I think that that line of products

would make perfect sense as either as Apple products or literally as Sonos products like the beat stuff that is run by Apple and that they're also building home pods on the side as well. Either way, I think having Apple be more in that market. is a good idea that it feels like a fit to me honestly and if we want to you know see

apple do more in the home one way you can do it is through purchases so I don't know the problem is um who owns what right like in in the smart home market are there other purchases that they could do like Akara is interesting, but they're a Chinese, they're like a privately held Chinese company. So I think they can't, I don't think they're for sale, right? Even though they do some interesting stuff and maybe there is something there. Ecobee, similarly, again, it's just a niche product of the smart thermostat, but it would add another piece to Apple's home strategy. if they're trying to build it up.

EcoB is owned by, this is amazing. Generac, makers of gas generators and other products. Whoa. Yeah. Okay. Yeah. Oh, yeah. Generac Holdings, I guess, owns EcoB.

They bought $770 million. I was like, you know, that's nothing. So I would look at smart home companies and say maybe that's, is just a company we could acquire and add it to the portfolio that John Ternis is maybe trying to build. So I think that would be a possibility. I like the creator studio idea. I would imagine, like, did they sniff around affinity before it got bought by Canva? No.

Because that would have been maybe a nice product to have that would have allowed them more of a direct competition with Adobe than what they've got. because those apps are very much duplicates of what Adobe offers basically. So yeah, I mean, beyond that... The Formula One group? Sure, yeah, it's just buy it. I would say, never buy a company to make a splash.

But if there are... If there's value out there that helps you get... which is why I focus on home is they've struggled and haven't really had much of a home strategy. Could you make some tactical purchases that give you a home strategy or at least help lift your home strategy? The challenge with some of these, like we could talk about like home networking, but the challenge there is that those companies already got snapped up. Yeah, all the good ones have been bought already. Right? Because like ERO is an example, but they're just owned by Amazon now. Yep.

So that's not going to work. Or ring or something, right? Like if you wanted security camera. And by Amazon, exactly. Exactly right. So that, that, it's already been picked over. So there's not a lot left. And Generac just rolled in and took that ecobee.

Everyone's talking about that all the time. We all know about that. Man, Generac, well, who could stop them? Oh, you can't stop those guys. You can't stop those guys. Can't stop the genera. Well, that's the point, really, is that if the power goes out, they just keep going. They, they can't stop the generac.

You wouldn't want to. Um, I don't know. Those, I, I would say, right now, I would say, I'd be, interested in making some tactical investments, not necessarily even out-and-out purchases in AI companies. In fact, I would be doing that on the sly. I would be like, you're an interesting AI startup. I will give you money. You're an interesting AI startup. I will give you money. And an option to buy more or whatever. But like, you don't want to scare them off. Honestly, Apple's reputation in that space is so bad now. You wouldn't want to say, we're going to buy you

and put you inside Apple. It's more like, we're just going to give you money. Do your own thing. Do great stuff. And if it comes down to it that we, you know, we want your stuff at Apple, we'll make you all rich beyond your wildest dreams and we'll buy you. I would do a lot of that kind of like seed money, get started, have a, have access to smart people who are building next gen AI stuff. I think I might, I think I might do that. Ed Wrightson says, if I remember correctly, when Tim Cook took the helm as CEO, the product roadmap was seemed to have been set for several years. it seems like it was maybe around the third year before we really see Cook's influence on the company with products like the Apple Watch. How long do you expect Ternus to be at the helm before you see his influence's CEO?

Will it be a certain new or modified product, axing a product or product line, maybe some new HR or corporate policy like Cook's with the charity matching, that kind of thing? Yeah, it'll be immediate and take forever, is the answer. Yeah. Right? like there will be things that change the first month he's there and some of those may be visible and there are things that will be there'll be years of debate about whether that's really a Tim Cook thing or a John Turner's thing. It will be funny because there'll be new hardware and people will say, well, is that a Tim Cook thing or John Turner's thing?

And it's like, well, before John Turner was CEO, he was the guy in charge of the hardware development group. So it's a John Turner's thing either way. and that stuff's impossible to pick apart. Yep. That's a problem. Yeah, that's what I was thinking. It's like, I think Apple's going to start painting the picture of Ternus in charge from

September this year, right? Like, I think he's going to play a significant role in the introduction of the folding iPhone. And they're going to be like, look, he was the product guy in charge of this before, and here he is now, and he's giving it to you, and it's going to be amazing. And this is, like, the difference between Ternus and Cook is, I think, going to be harder to discern where his influence begins because he's already been influencing the things that we see anyway

which is the products. Exactly. And maybe like in a few years' time there will be stuff that he is driven through that otherwise he was getting blocked on or would have got blocked on, but we're not going to know. And I think it's going to be quite different to cook.

I don't think we're going to have this like, and I don't think there's going to be all those questions of like, when's Ternis's revolutionary product going to appear? Like, which is a different Apple now. Yeah. Because he's not Steve Jobs and he's not following Steve Jobs.

And they haven't had a revolutionary product. Yeah. Also, a lot of this, I mean, sorry to Ed, I'm not trying to pick on Ed here, but I'll say a lot of this is nonsense, right?

Apple's a giant company. And ascribing anything to the CEO is kind of wrong. I would say the closest you could come is, is approving a project that happens or approving that a product ships or or killing a product so it doesn't happen or whatever those big decisions like Tim Cook is responsible for Project Titan and for killing Project Titan right like we can talk about that that that idea but like is it fair like the CEO is steering the ship but it's a big ship there's lots of people there's the vagaries of like what's happening in the outside world what they're capable of doing

on the inside so it's very difficult to get a read on this so I think there'll be policy changes and I think there'll be a few big things where we'll say that sounds like it was or they'll be reporting. It's like this was always his baby, this home strategy, you know, whether it works or not, like this was always his baby. That stuff will come out. But like most of it is just, it's too fuzzy. It's just it's not, don't over ascribe to the CEO what happens. But we will anyway. Sam wrote it and said a lot of the coverage of Tim Cook announcing John Turner says his replacement,

especially from people who've taken particular issue with some of Tim Cook's decisions, is understandably optimistic about what the change of leadership might mean. But do we actually know enough about John Turnus to think that he's not going to be maybe even more money-focused than Tim or make even more decisions

that developers and those passionate about Apple will take issue with? Well, there's a lot of wishcasting going on. There's no doubt about it. What I would say is John Turnus knows how products are made. John Ternis has had to sweat the details. Not all the details, but details,

because he's been working on hardware for a very long time, not just the last five years either, a very long time. And so he knows about the act of building hardware products at Apple. That's super valuable. And I think it gives him a perspective that will serve Apple well on a hardware side. But as for the rest of it, I don't think the argument is Tom's going to, or John's going to, to be more focused on money than Tim or something or or treat developers worse than Tim and all that.

I would say what what I would flag is the the danger is that if John Ternis is less interested in the money than Tim Cook is that he will delegate it to the money people and that the money people Kevin Perrick and the rest may make decisions that we don't like. And part of his job, and this is going to be, I would say the most difficult part of his job, is if your money expert, your CFO says, yeah, we need to do this thing, John, because it's a lot of money. And this makes us more money. And you're saying to do this thing, the other option here, it's not even you're saying, The other option here is to do a thing that makes us less money.

So we should always say yes to more money. And the job of the CEO is to think of the big picture and say, this is not wise. This more money actually hurts Apple overall. It hurts our brand. It hurts our long-term success. And he needs to be, I mean, first off, I don't know that the money people at Apple actually work that way. At that high a level, hopefully you are thinking big picture too, but it's the CEO's job to think big picture. So that's going to be a challenge.

But I would say that's the greater danger, is not that he's coming in and saying, let's screw those developers, whatever. I think it's far more likely that he's focused on this stuff, and he delegates that to people. And it's, it's who do you delegate to and what do they think and what do you allow them to do?

And do you as the CEO have the ability to come in and say, actually the way you're looking at this is not how I want you to look at it. Because under me as CEO, I want to look at this a little bit. I want to look at app store revenue a little bit differently. I want to look at whatever it is. I want to look at it a little bit differently. And that's his job as agenda setter to do that.

And the danger is that that stuff gets out of control. And what's the classic? I think it's a Steve Jobs line of like Microsoft let the salespeople be in charge. Like don't let people who don't care about Apple, but only care about their little slice of it, make decisions that define Apple. And that comes to the CEO, The CEO has to be the one to decide that.

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