Apple finished 2024 in record fashion, with a staggering $3.6 trillion market capitalization that not only topped every other company on the planet, but also eclipsed the economic value of all but a handful of the world’s countries.

Even more incredible: It was a year likely to be remembered for Apple’s many disappointments and setbacks.

In February 2024, the company killed its decade-long effort to create the car of the future. That same month, Apple released the Vision Pro virtual reality headset—its first new-category product since 2015’s Apple Watch—only to reportedly sharply reduce production of the device by year’s end. A late start to generative AI put Apple in the embarrassing position of shipping the newest iPhone without its marquee features available at launch. And European law is forcing Apple to open certain parts of its mobile operating system, while U.S. regulators sued Apple for allegedly abusing a smartphone monopoly.

The new year also looks unexciting so far: A thinner iPhone and an iPad-like tablet to control home appliances are in the offing, according to Bloomberg. Nice, but nothing that will dramatically boost Apple’s business.

And Apple’s earnings report on Thursday, for the all-important holiday quarter, was hardly reassuring. Overall revenue grew a modest 4% year-over-year, but iPhone revenue declined by roughly 1%.

You can’t blame Apple fans for staying positive. With nearly $120 billion in annual operating cash flow and a brand synonymous with innovation and elegance, the Cupertino, Calif., company led by CEO Tim Cook is a corporate paragon—even 13 years after the death of Steve Jobs. For the 18th consecutive year, Apple has earned the top spot in Fortune’s survey of the world’s most admired companies, winning praise from the executives, directors, and analysts polled.

Industry titans tend to fade gradually, though, losing momentum and relevancy as they fall out of step with the times. And so, even as Apple’s accomplishments and balance sheet give comfort to the faithful, a nagging question is likely to shadow the company as 2025 unfolds: Does Apple still have its mojo?

Pricey lessons

Recent product misfires are not inspiring for a brand famous for creating the “next big thing,” even if some industry observers see broader explanations.

UBS analyst David Vogt said the abandoned car likely fell victim to changing market dynamics. When Apple began the project, a new electric car cost around $100,000, but EVs can now cost under $30,000, and Apple plays only a premium game.

As for the Vision Pro, the estimated 500,000 units sold may have missed some analysts’ bullish targets, but they were in line with UBS’s expectations. The technology itself is “nothing short of amazing,” Vogt says, but the steep $3,500 price and “technical limitations” such as the external battery and lack of applications kept it in a niche.

“I wouldn’t classify it as a technology flop. I would say it is a product that has a limited addressable market given the price point and the use cases,” says Vogt, who has a neutral rating on Apple stock.

Without knowing Apple’s goals, it’s hard to judge the success of the Vision Pro, said Raphaël Mermet-Lyaudoz, a virtual reality analyst at Yole Group. (Apple did not respond to requests for comment.) By seeding a developer ecosystem, the device could benefit future Apple VR releases, he noted.

And the insight gleaned by starting with a high-end device will help Apple decide which features it can safely prune on a lower-cost version and which to double down on, Mermet-Lyaudoz said.

Still, it’s telling that Apple’s Vision Pro struggles coincided with the buzz surrounding Meta’s AI equipped Ray-Ban smart glasses, which start at $299. Apple is now said to be working on its own such smart glasses, though Bloomberg reports the product is still a couple of years away.

Bad optics have also come with generative AI. Apple’s failure to build a cutting-edge AI model forced it to rely on OpenAI to handle more complex queries in Apple Intelligence—the marketing name for Apple’s various AI features.

An AI jolt

With roughly $400 billion in annual revenue, more than half of which comes from the iPhone, Apple is confronting the challenge of large numbers: New products that might make great businesses at other companies can’t move the revenue-growth needle at a behemoth like Apple.

Plus, Apple’s iPhone, now in its 18th year of life, is not the growth engine it once was. iPhone revenue has declined in four of the past eight quarters.

For years, investors have eagerly waited for the company to reveal its next iPhone-like hit product. Some now believe the iPhone itself will be the next iPhone, thanks to AI. Wedbush Securities analyst Dan Ives, a prominent Apple bull, believes Apple’s “golden installed base” estimated at 1.5 billion iPhones, combined with the irresistible appeal of AI, will create a demanddriving feedback loop that lifts Apple to new heights.

“Cupertino will own the consumer AI revolution as we estimate 25% of the world’s population will access AI through an Apple device over the coming years,” he said in an email.

The bull case goes something like this: Because only the two most recent generations of iPhones (last year’s iPhone 16 and 2023’s top-of-the-line iPhone 15 Pro) have the horsepower to run Apple Intelligence, the stage is set for a wave of upgrades. Better cameras and faster chips didn’t persuade consumers to replace their old phones, but a smarter Siri virtual assistant, automated meeting summaries, and AI-generated pictures should do the trick.

A burst of AI innovation—in the form of new homegrown Apple software features and buzzy third-party apps—has the potential to supercharge Apple’s second-most important business, its $96 billion services group.

The caveats are not inconsequential, though.

Apple has a clear path to monetize interest in AI tools and services through the 30% cut it collects from App Store sales and subscriptions. But the strategy hinges on app developers, whom Apple has only limited control over. Apple’s in-house AI tools, meanwhile, are an unproven business.

Apple CEO Cook declined to forecast Apple Intelligence’s impact to its services revenue when asked during the company’s October earnings call. “I definitely believe that a lot of developers will be taking advantage of Apple Intelligence in a big way,” Cook mused, referencing a great “ecosystem.”

Limits to this ecosystem are already showing. Apple Intelligence is not authorized for use within China—Beijing insists that Apple partner with a local AI provider—and it isn’t available yet in Europe owing to unspecified issues with the region’s new interoperability rules.

More important, there is little evidence so far that consumers are going wild for Apple’s AI features. “What we’ve seen in the last six to nine months since they’ve really started talking about Apple Intelligence is, excitement has far outpaced ultimate demand,” said UBS’s Vogt. “We don’t think there’s anything over the next six to nine months that’s going to change that demand driver.”

Patience is something Apple has been able to count on from investors throughout its year of challenges. As Apple searches for its next big hit, its greatest risk may be what happens if patience runs out.

This article appears in the February/March 2025 issue of Fortune with the headline “Apple goes searching for its mojo.”

Apple is looking for its next iPhone-like hit. Can it find it before losing momentum?