Apple is looking to turn the AI boom into sales across its devices and services, while avoiding the scale of infrastructure spending undertaken by some of its largest competitors. Its latest results showed a record fiscal year for revenue and earnings per share, alongside continued growth in iPhone and Mac sales in the September quarter.
IPhone revenue rose 17.5% year over year to a September-quarter record of $57.6 billion. Mac revenue increased 24% to $10.8 billion, its highest level in four years. Apple’s shares fell in premarket trading Tuesday after the company warned that higher memory costs could pressure margins in the holiday quarter.
Apple has not said how much of its revenue growth is attributable to AI demand or higher prices. But executives described AI as a potential reason for customers to upgrade devices, as well as an opportunity across Apple’s own products, third-party apps and partnerships. CEO John Ternus said the company sees significant potential in the technology.
AI and Apple Intelligence came up 45 times during the earnings call, a record according to financial research platform AlphaSense. Apple has more than 2.5 billion active devices, giving it a large audience for AI services, whether those services use Apple’s technology or models from other providers.
The company’s approach combines on-device processing, its own servers and external AI technology. Siri AI uses models developed with Google’s Gemini technology, while Apple reportedly plans to give users a choice of outside providers for tools such as writing assistance and image generation.
Apple spent $2.2 billion on capital expenditures last quarter. By comparison, Amazon reported $77.3 billion and Alphabet $51.4 billion, although those figures cover companywide spending, not just AI, and exclude some AI-related costs. Apple’s operating expenses rose 21% to $19.2 billion, including increased research and development spending. Costs for Siri AI’s cloud services will be recorded under services cost of sales, and Apple said it is too early to estimate how many requests will need server processing rather than running on devices.
Apple also expects some AI features to become a source of subscription revenue. The revamped Siri launched in beta for US English users in September, with French, Japanese, Korean, Portuguese and Spanish added in October. Ternus said server-based features, including Siri AI and intelligent photo editing, will have usage limits. Customers seeking more capacity will be able to buy expanded access in the future.
The company can also sell devices for customers who want to run AI locally. Ternus described the Mac as having an “AI moment,” and pointed to Gap, which uses Mac Mini computers for loss prevention across hundreds of stores, and Christie’s, which runs local models on Mac Studio computers to support workflows such as pricing estimates. Running models on Apple hardware can help customers avoid cloud charges for each request.
Apple may benefit from subscriptions to other companies’ AI apps as well, through fees on purchases made via the App Store. However, that revenue depends on customers paying through Apple’s system. The Wall Street Journal has reported that OpenAI began directing some potential subscribers to its website instead, bypassing App Store commissions.
Apple’s AI strategy therefore spans hardware sales, its own paid features and revenue tied to third-party services. The company can pursue those opportunities without building every model or matching rivals’ infrastructure spending, though the costs of cloud-based features may rise as usage grows.
Sources: The Verge.