While Apple (NYSE: AAPL) has been in the news for yesterday’s iPhone 16 event where the company unveiled its artificial intelligence (AI) powered smartphone, it made several other key announcements. One of these is about AirPods Pro 2 which the company says has “incredible health capabilities” and would dub as a ‘clinical grade’ hearing aid.

Healthcare has been a top priority for Apple and with the latest AirPods the company is gradually moving towards adding to its capabilities in that domain. Here’s everything we know about the new AirPods, how they fit into Apple’s portfolio, and whether it makes sense to upgrade to the new model.

Apple AirPod To Dub as a Clinical Grade Hearing Aid

Apple is set to disrupt the healthcare space with its AirPod Pro 2 and said that it “is providing the world’s first all-in-one hearing health experience.” Its hearing aid feature would provide users with a five-minute hearing test “from the comfort of their own home.” The hearing test uses the iPhone and AirPod and the user can then view the results in the Health app.

The audiogram that the app generates can be shared with health professionals – and depending on the user’s will it can add clinical-grade hearing aid capabilities to the AirPods.

According to Apple, AirPods Pro “can also make adjustments that help you hear media like music, videos, and phone calls.” The AirPods would also come with a default hearing protection mode that can cancel passive noise if the user is in a loud environment.

The “clinical grade” hearing aid mode would however be only available later this year through an update as the feature is currently been reviewed by the US FDA and other regulatory bodies. Eventually, Apple expects to launch the feature in over 100 countries.

Apple Could Revolutionize the Hearing Aid Market With AirPods

The feature sounds quite interesting as many people – which Apple estimates is 1.5 billion – suffer hearing loss to some extent. However, most of them either don’t get hearing aids or simply cannot afford them. Prescription versions of hearing aids sell for around $3,000 in the US but the over-the-counter (OTC) versions – which were approved by the Biden administration sell for much less.

Even so, if the AirPods work as well as hearing aids, they would turn out to be cheaper than even OTC hearing aids on the market now. The new AirPods could totally revolutionize the market, just like how smartphone cameras dampened demand for standalone cameras. The product would make sense for someone who has hearing loss given its ability to work as a hearing aid as well as regular headphones.

Tech Companies Sense a Big Opportunity in Healthcare

Separately, the Apple smartwatch is also set to get a healthcare-focused software update later this month, subject to FDA approval. After the update, the device is supposed to be able to sense sleep apnea, which is often difficult to diagnose, with just its gyroscope.

To be sure, this is not the first healthcare foray from Apple – it already has the Apple Watch –and over the years acquired healthcare startups like Beddit, Tueo Health, and Gliimpse.

The iPhone maker sees healthcare as a key long-term driver and CEO Tim Cook previously said that healthcare would be its “greatest contribution to mankind.” Commenting on the new functionalities, Cook said on X (formerly Twitter) “These life-changing tools will help people connect more deeply & live healthier.”

Tech companies see a big opportunity in healthcare as it hasn’t yet been invaded by many other tech giants. Other tech companies are also investing in the space given its massive total addressable market.

In 2022, Alphabet led a $1 billion investment round into Verily which is its subsidiary focused on healthcare. TikTok parent ByteDance also acquired a hospital chain in China that year. The acquisition had raised eyebrows as China has been against tech companies entering into other industries.

Amazon has also acquired telehealth company One Medical for $3.9 billion. Amazon has always been interested in the healthcare space and acquired the online pharmacy PillPack. It also acquired Health Navigator to complement its healthcare business.

Apple Has Made Multiple Strides in Healthcare

Even Apple has long been rumored to acquire fitness equipment company Peloton with leading tech analyst Gene Munster saying the deal would make strategic sense for the Cupertino-based company.

Apple is also reportedly working on an AI-powered health coach codenamed Quartz. Also on the cards is non-invasive glucose monitoring through the smartwatch and an internal secretive team codenamed Exploratory Design Group is reportedly working on the functionality.

These functions make Apple devices even more helpful to users and enhance their value proposition. Apple does not disclose the revenues from AirPods by itself, but the product is part of its Wearables, Home, and Accessories business segment that generated revenues of $8.09 billion in the fiscal Q3 2024, slightly lower than what it generated in the corresponding quarter last year. Even though we don’t have exact numbers, it’s obvious that AirPods are already one of the most successful consumer products of all time.

AAPL Stock Is Trading Lower Today

While Apple shares closed flat yesterday, they are trading lower today. Notably, the EU’s top court has ruled that the iPhone maker should pay 13 billion euros ($14.4 billion) in back taxes which seems to be negatively impacting market sentiments today.

This is not the first trouble that Apple is facing in the EU and the company won’t offer its Apple Intelligence feature in the region as it engages with the regulators over issues related to data.

Also, according to analysts, Apple’s subdued price action is also because of a lack of major surprises at the event – especially as AAPL shares had rallied significantly since the Worldwide Developer Conference (WWDC) in June where it unveiled Apple Intelligence and other AI features.

However, Goldman Sachs Michael Ng believes that AI capabilities would boost the demand for iPhones which has otherwise sagged, particularly in China.

Ng, who has a hold rating and $276 target price on Apple said, “Overall, product announcements were largely as expected without any upside surprises coming from pricing, outsized promotional activity, or AI features.”

All said, as the installed base of Apple devices – which surpassed 2.2 billion earlier this year – reaches critical mass, the company now seems to be looking at new lines of revenues with healthcare emerging as a key moving piece.