Key Takeaways
- Bloomberg’s Mark Gurman reported that Apple seriously considered laying off 5,000 work-from-home AppleCare employees around July and replacing them with AI, though that plan is on hold for now.
- CEO John Ternus is aiming AI and efficiency at Apple’s own costs, starting with layoffs of dozens of engineering program managers in hardware, and Gurman expects more.
- Apple’s operating margin rose from 29.8% in fiscal 2021 to 32.0% in fiscal 2025, and its free cash flow was $98.8 billion in fiscal 2025, so these cuts matter more as a signal than for the savings.
- Analysts expect normalized EPS to rise from $7.46 in fiscal 2025 to $10.82 by fiscal 2028, and broader cuts would add to that growth.
Apple (AAPL) CEO John Ternus has found a new place to use AI: Apple’s own payroll.
On Thursday’s episode of Power On, Bloomberg’s Mark Gurman said that around July, “Apple had seriously contemplated doing a layoff of 5,000 AppleCare employees and replacing them with AI.”
These are support staff who work from home. When you call in, Gurman explained, “it’ll be an AI assistant.” Apple already uses AI on its phone systems and in chat support.
That layoff didn’t happen. (“That’s on ice for now,” Gurman said.)
But a smaller one did.
The cuts have already started
A couple of weeks ago, Apple laid off dozens of engineering program managers in hardware engineering, the group now run by Chief Hardware Officer Johny Srouji. Those managers keep products on schedule and on budget, but as Gurman put it, “they’re not doing the actual engineering. Ternus wants more people doing the engineering.”
Then came the scoop: “What I can tell you exclusively on this podcast is that I think that is the beginning of more layoffs for more efficiency to make Apple’s engineering ranks, particularly on the hardware technologies and the hardware engineering side, both under Srouji, much leaner.”
So the AppleCare plan was no one-off.
Ternus is pruning bets, too. Gurman says “the Vision Pro and its future is under serious review at Apple,” and that “John Ternus never believed in the Vision Pro as a consumer device.” He was blunter earlier in the episode: “The Vision Pro does not sell well.”
Tech support is the easy part
Investor Bucco Capital made the case for AI support in a post on X on Monday: “You are not special. Your question is not hard. It has already been asked. It is already documented.”
Think about the last time you contacted Apple. A forgotten password. AirPods that won’t pair. An iCloud plan you want to cancel.
Bucco’s conclusion: “Tier 1 tech support won’t be a job in a few years.”
Hard to argue, isn’t it?
Apple doesn’t need the money
Of course, Apple is hardly squeezed. Its operating margin climbed from 29.8% in fiscal 2021 to 32.0% in fiscal 2025 (its years end in September)…
…and it generated $98.8 billion of free cash flow in fiscal 2025.
Apple had about 166,000 full-time equivalent employees at the end of fiscal 2025, according to its annual report. So 5,000 roles is about 3% of the workforce, which is a lot of people.
The dollars are another story. For Apple to save even $1 billion a year, each of those 5,000 roles would have to cost it $200,000. And $1 billion is about 1% of fiscal 2025’s free cash flow. I doubt many work-from-home support jobs cost anywhere near $200,000.
Gurman sees the same problem: “From a financial standpoint, they don’t need to do it.”
Here’s why it still matters
I’d argue the AppleCare number matters less than the direction. Gurman says Ternus wants “fewer people” and “fewer layers,” and Apple’s phone and chat support already use AI.
Remember Mark Zuckerberg’s “Year of Efficiency” in 2023, when Meta Platforms (META) set out to flatten its management? Same playbook here.
And Wall Street already expects growth. Analysts expect normalized EPS to rise from $7.46 in fiscal 2025 to $8.83 for fiscal 2026 (which ended in September; Apple hasn’t reported it yet) and $10.82 by fiscal 2028, about 45% above fiscal 2025.
Nothing Gurman reported should move those estimates yet: the AppleCare cut is on hold, and a few dozen program managers won’t show up in EPS. Broader cuts would add to the growth analysts already expect.
So are more cuts coming?
According to Gurman, yes. Apple “has contemplated doing broader layoffs” than the small ones so far, and he thinks the program-manager cuts are only the beginning. For shareholders, that’s a new margin lever under Ternus, on top of a 32% operating margin.
Of course, the AppleCare plan shows a cut can be weighed and then shelved, and Gurman says the hard part is working out “the exact right time to do it.” Apple’s next earnings report is the first place to look for it.
So what is Apple stock actually worth?
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