Praise be to Allah the Lord of the Worlds. May His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.
After researching the books of Sunnah, it has been established that the mentioned narration was recorded by Al-Bukhari in his Sahih from Aisha (may Allah be pleased with her) with the wording: "Whoever among you worshipped Muhammad (peace be upon him), then Muhammad (peace be upon him) has died. And whoever worshipped Allah, then Allah is Ever-Living and does not die." This narration was also reported by Ibn Majah, Ahmad, Al-Tabarani, Ibn Hibban, Al-Bayhaqi, and Ibn Rahwayh through various chains from Aisha and Ibn Abbas (may Allah be pleased with them) without the additional phrase "in the heavens."
However, Al-Bukhari mentioned it in Al-Tarikh Al-Kabir from Ibn Umar (may Allah be pleased with them) with the wording: "Whoever worshipped Muhammad, then Muhammad has died. And whoever worshipped Allah, then Allah is in the heavens—Ever-Living and does not die." Yet, its chain includes Muhammad bin Fudayl bin Ghazwan—though some scholars of hadith deemed him reliable, Al-Dhahabi reported that Abu Hatim said about him: "He makes many mistakes." Ibn Sa'd also stated: "Some scholars do not consider him as a proof." (See Man Tukullima Fihi Wa Huwa Muwaththaq, p. 167). This criticism weakens the narration, making the addition ("in the heavens") in Ibn Umar’s version unreliable compared to Aisha’s narration in Sahih Al-Bukhari. This extra phrase was not reported by other narrators and was not relied upon by the scholars of hadith in their authentic books (Sihah, Sunan, Masanid). It was only mentioned in Al-Tarikh Al-Kabir by Imam Al-Bukhari—a biographical work not intended for legal evidence.
Moreover, scholars unanimously agree that verses and hadiths that may appear to indicate Allah is "in the heavens" must not be understood literally, as if the heavens encompass Him (Glory be to Him). The creed of Ahl al-Sunnah wa al-Jama’ah is based on exalting Allah (Tanzih), which includes denying that the Lord of the Worlds is characterized by space or time, as both are creations. It is neither rationally nor Islamically valid for the creation to contain the Creator. Imam Al-Tahawi stated in his renowned creed: "Our Lord, Glorified and Exalted, is described with the attributes of Oneness and characterized by absolute uniqueness. Nothing in creation resembles Him. He is exalted above boundaries, limits, directions, limbs, or instruments. The six directions (of space) do not encompass Him, unlike all created beings."
Even if we hypothetically accept the addition ("in the heavens"), the context indicates a metaphorical meaning—referring to Allah’s supreme authority, dominance, and exalted status, not physical location. Abu Bakr (may Allah be pleased with him) sought to strengthen the people’s faith, unify their ranks, and address the gravity of the moment by reminding them of human mortality and Allah’s eternal power and majesty. And Allah the Almighty knows best.