Tim Cook's lasting legacy: Keeping Apple's eye on the ball

By Mark Hulbert

Apple has been phenomenally profitable because its CEO resisted demands to change the business's focus

Though critics often claimed that Apple CEO Tim Cook was the wrong man for the job, in each case, he got the last laugh.

Apple under Tim Cook's leadership has illustrated the virtues of sticking to one's knitting.

Unlike many other companies that have strayed far from their core competencies, Cook has kept Apple focused on its "commitment to flawlessly engineered and integrated products," as Gautam Mukunda of the Yale School of Management put it in an email. Though this focus sometimes led critics to allege that Cook was the wrong man for the job, in each case, he got the last laugh.

Cook is stepping down as Apple CEO at the end of August, and this week he had his last earnings call. In the wake of that call, the company's stock (AAPL) plunged nearly 10%. So long as Apple continues to focus on what it does best, however, investors bet against the company at their peril.

To illustrate my point, consider the three occasions over the last decade when I devoted a column to taking issue with a chorus of voices calling for Cook to step down. Here's how Apple's stock performed subsequently to each of those:

-- Summer 2016: In the wake of Apple's stock shedding nearly a third of its value from the prior summer, many began urging Apple's board to replace Cook with someone full of innovative ideas - someone like Elon Musk. Since my June 2016 column questioning this argument, Apple's stock has more than doubled the annualized total return of the S&P 500 SPX - 30.4% to 15.1%, through July 30. Though Apple's stock plunged this week after its earnings call, it still is in second place in the market-cap rankings, at $4.4 trillion. Tesla TSLA is in eighth place at $1.2 trillion.

-- Summer 2025: A major Wall Street firm criticized Apple for missing the AI boat, arguing that the company needed to undergo "dramatic change" and calling for Cook to be ousted. Since my July 2025 column questioning this firm's argument, Apple's stock has produced a 57.6% annualized return, versus 19.2% for the S&P 500.

-- April 2026: Barron's argued that AI was a "glaring problem" for Apple and that the company was in need of "a new era of innovation." Since my April column taking issue with that advice, Apple's stock has gained 60.2%, versus 36.6% for the S&P 500.

Apple and AI

To be sure, fewer critics today are alleging that Apple has missed the "AI boat," since AI stocks' valuations have fallen significantly over the last couple of months. But even if they hadn't fallen, I dare say that Apple's focus on hardware over software would have been the right one.

Mukunda referred in an email this week to the new AI-enhanced version of Siri, the virtual assistant built into Apple's operating systems. He pointed out that early reviews of it have been positive, confirming the wisdom of Apple's focus on the hardware that allows customers to use AI - and then licensing the use of other companies' AI software.

"Apple seems to have been able to largely catch up [to the frontier AI labs] at the cost of a billion dollars a year... which is a rounding error compared to the amounts ... [those] labs are burning," he wrote.

Furthermore, Apple's focus on hardware would have made good business sense even if the frontier AI labs weren't hemorrhaging cash, and even if those labs had found lots of profitable commercial applications for their models. That's because it wasn't clear that Apple had any competitive advantage in developing AI models. Why would they risk untold billions trying to do that when they had an enormous competitive advantage in hardware?

To appreciate just how risky that would have been, consider the performance of companies that tried to diversify by acquiring other firms with different business models. In their recent book "The M&A Failure Trap," professors Baruch Lev of New York University and Feng Gu of the University at Buffalo report that between 70% and 75% of acquisitions over the last four decades were failures - and that the failure rate was higher to the extent that the acquiring and acquired companies were in unrelated businesses.

The odds of success are equally low when a CEO tries to internally diversify the different business lines on which their company focuses. In his book "Indispensable: When Leaders Really Matter," Mukunda predicted that "most of the CEOs who try to radically transform a company will fail."

The bottom line: Give Cook credit for resisting the many calls over the last 15 years to respond to the latest fashion on Wall Street. Apple investors almost certainly are far better off for it - and Cook's successor, John Ternus, would do well to follow in his footsteps.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com.

-Mark Hulbert

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08-02-26 0700ET