Apple is staring down 2 different futures for the iPhone

Apple CEO Tim Cook will likely see the iPhone follow one of two paths.

What does the future of the iPhone look like? That depends on how Apple’s AI plans work out.

For a while now, the outlook has been rather bleak. In Apple’s last fiscal year, which ended in September, iPhone sales fell to $200.6 billion from $205.5 billion the year prior.

It did see a small quarterly jump in sales in the three months after that — driven by the phone it launched in September, which it does each year — but net sales of the iPhone look set to be down again this year.

As Apple announced record June-quarter revenue of $85.8 billion on Thursday, iPhone sales proved a weak spot once again, falling from $39.7 billion in the same quarter last year to $39.3 billion.

A huge part of that decline was driven by lagging sales in China, where Apple has spent the past year contending with growing competition from domestic players such as Huawei. But consumers have also generally become less inclined to buy new phones the moment they come out.

For Tim Cook, however, none of this seems to be of too much concern.

Addressing investors, the Apple CEO spotlighted Apple Intelligence, the suite of AI features set to come to Apple devices following the release of the iPhone 16 this fall.

He said Apple Intelligence represented a “breakthrough personal intelligence system that puts powerful, private generative-AI models” at the core of its devices — and something that he felt would drive renewed interest in iPhones.

In effect, then, the iPhone faces two futures.

The first would see artificial intelligence deliver the boom in sales Apple hopes for. The second, less-favorable outcome is one in which consumers deem Apple Intelligence a gimmick they don’t need to rush toward, leaving sales ticking away at the kind of declining rate we’ve seen recently.

Apple is placing heavy hopes on the fall launch of its Apple Intelligence features. 

Apple, for its part, seems confident that AI will put iPhones on a path toward a better future. Bloomberg reported in July that the company had told suppliers and partners that it expected the iPhone 16 to help grow shipments by about 10% later this year.

That said, it seems painfully aware of the two futures its most important device faces, which is why it has been very busy this year in its efforts to find new products to keep consumers tied to the Appleverse, or what Steve Jobs liked to call its “next big thing.”

Whether it finds success in those efforts is another matter. Its mixed-reality push with the launch of the Vision Pro in February appears to be off to a slow start, with a high entry-point price tag of $3,500 and a lack of apps deterring would-be buyers.

The company also seems to be exploring a big push into personal robotics as it looks to people’s homes as a new growth area, Bloomberg’s Mark Gurman reported in April, adding that there’s no guarantee this will happen as the project is at an early stage.

Earlier this year, meanwhile, Apple had to confront the fact that some new areas remain a step too far for it after ditching its electric-vehicle project, which was a decade in the making.

That means it’ll need Apple Intelligence to really keep consumers interested in iPhones. If it doesn’t, it might need a new plan.