96Why investors are misreading Apple’s latest AI announcement.

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Apple Got It Right This Time

By Adam Levine

Apple iPhone sales rose 23% in the first half of fiscal 2026, despite the company’s troubles with AI. VICTOR J. BLUE/BLOOMBERG

Apple’s Pragmatism . The reviews are in for Apple’s artificial-intelligence reset, and they haven’t been kind. The snap judgment is that the demos from Tim Cook and Co. were unimaginative and full of features we’ve seen on a hundred different stages in a hundred different livestreams.

But in his final Worldwide Developers Conference as CEO, Tim Cook was copying what Steve Jobs did when he left the stage in 2011: bequeathing his successor with a basic foundation for the next generation of the “Apple experience.” It isn’t meant to be groundbreaking.

After failing three times to make an Apple cloud service that was up to the company’s standards, Steve Jobs took the stage at the 2011 WWDC for what would be his last keynote address before he died. While announcing iCloud, Jobs joked about the three previous failures: iTools, .Mac, and MobleMe. “Now you might ask, ‘Why should I believe them? They’re the ones that brought me MobileMe,’” he said to raucous laughter and applause.

No one’s laughing anymore. Today, iCloud is the glue for Apple’s ecosystem.

In 2011, Apple had lost the trust of users and Wall Street with its string of subpar cloud efforts. The first step out of the doghouse was launching basic and free cloud services that worked and enhanced the user experience. Apple has added to its cloud every year since.

With Monday’s announcement, Cook and team have put Apple Intelligence on the iCloud path. The company is offering a free set of basic services that protect user privacy. It will improve from here.

For now, investors aren’t seeing the iCloud parallel, but rather a repeat of 2024, when a much-hyped WWDC event on AI failed to deliver.

Apple shares are down 8% since they peaked midway through Monday’s keynote event.

But this isn’t 2024. Back then Apple tried to roll out its own models that couldn’t complete with the offerings from OpenAI, Google, and Anthropic.

Apple is now being more realistic about Apple Intelligence. It’s turning to its longtime search and cloud partner, Alphabet, to provide the models. There are small ones that live in an iPhone’s memory and larger ones in the company’s Private Cloud Compute, servers which obscure user’s AI interactions, even from Apple. Both of those options optimize privacy over all else, a message that always resonates with Apple customers.

While Wall Street wants everything resolved now, Apple still has time to get AI right. Despite the first troubled launch of Apple Intelligence, iPhone sales rose 23% in the first half of fiscal 2026. AI isn’t yet driving device sales yet. Someday it will, and Apple will be ready.

Only about half of the iPhone installed base is able to use Apple Intelligence, according to Melius Research analyst Ben Reitzes. That means more than 500 million people will eventually need a new phone. Knowing Apple’s sticky customer base, they’ll have just one option.

Write to Adam Levine at adam.levine@barrons.com

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