Apple’s latest earnings show how it continues to capitalize on the AI boom without blowing its budget on infrastructure expenses that eat up its competitors.
Overall, Apple posted its best fiscal year ever in terms of revenue and earnings per share. iPhone and Mac sales continued to grow strongly in the fourth quarter. iPhone revenue rose 17.5% from a year earlier to a September quarter record of $57.6 billion, while Mac revenue rose 24% to $10.8 billion, its highest level in four years. However, shares fell in premarket trading on Tuesday after Apple warned that rising memory costs would reduce its profit margins in the Christmas quarter.
Apple has not disclosed how much of its revenue growth reflects demand for AI or higher prices, but its executives clearly see the technology as a way to drive higher sales.
During the earnings call, CFO Kevan Parekh cited a “broad range of ways AI can contribute to revenue growth over time.”
“On the product side, we believe AI offers a compelling reason for customers to upgrade and upgrade to get the latest capabilities,” he said. “And we also believe there are opportunities through third-party applications and partnerships, as well as first-party opportunities.”
Apple can sell its gigantic user base the devices they use for AI, even if the AI itself comes from someone else. You may charge fees for subscriptions to artificial intelligence applications. And you can charge customers who want more access to their own AI features.
“We see tremendous opportunity in AI,” John Ternus said in his first earnings call as CEO.
Artificial intelligence and Apple Intelligence were mentioned a record 45 times on the earnings call, according to financial research platform AlphaSense, even more than on the call after Apple unveiled the technology and plans for a revamped Siri in June 2024.
Mentions of AI or “Apple Intelligence” in earnings calls
On the call, Apple continued to position itself as the interface through which consumers use AI, including competing technology. With over 2.5 billion active devices, you already have a huge audience for any AI service that emerges.
Apple, unlike its Big Tech peers, is not investing comparable sums in infrastructure. Its 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 allow users to choose between third-party AI providers for functions such as writing and imaging tools.
Apple spent $2.2 billion on capital expenditures last quarter, compared to Amazon’s $77.3 billion and Alphabet’s $51.4 billion. Those totals cover company-wide CapEx, not just AI, and exclude some AI expenses. Apple’s operating expenses rose 21% to $19.2 billion as it increased spending on R&D, including on AI. Siri AI cloud costs will appear in the cost of sales of the services. Those costs could grow with use: Parekh said it’s too early to predict how many requests will require servers instead of on-device processing. Still, Apple’s capital spending remains just a fraction of its peers.
Greater use of AI also gives Apple something to sell.
Siri AI is just starting to reach customers. Apple launched the revamped assistant in beta for American English users in September and expanded it to French, Japanese, Korean, Portuguese, and Spanish in October.
Apple plans to convert some of that usage into subscription revenue. Ternus said features that rely on server-side models, including Siri AI and smart photo editing, will have usage limits. Customers who need more capacity “will be able to purchase expanded access in the future,” he said. “Initially, iCloud tiers were primarily focused on storage, but we’ve been adding more capabilities and features.”
Apple also benefits when customers buy its hardware to run AI locally, including models developed by other companies. Mac, Ternus said, is “having an AI moment of his own.”
“We believe AI offers a compelling reason for customers to upgrade and switch to get the latest capabilities.”
Apple offered specific examples of companies putting their computers to work with AI. Gap is running AI entirely on Mac Mini computers to prevent losses at hundreds of stores, avoiding cloud token costs for those tasks. Christie’s is running local models on Mac Studio computers to improve workflows, including price estimates.
For those customers, purchasing Apple hardware provides a way to use AI without paying a cloud provider for each request.
Mac Mini and Mac Studio, Ternus said, “are pushing the boundaries of private and local AI, giving users the ability to do things previously considered impossible.”
The emergence of the Mac Mini as an AI machine has given the small, screenless desktop a new group of developers and hobbyists looking for a relatively affordable way to run models locally. Earlier this year, then-CEO Tim Cook said customer recognition of the Mac Mini and Mac Studio’s capabilities for artificial intelligence and agent tools was happening faster than Apple had predicted, leading to higher-than-expected demand.
Apple also makes money when customers subscribe to someone else’s AI. At the beginning of this year, The Wall Street Journal reported that Apple was on track to collect more than $1 billion in App Store fees for generative AI apps in 2026, according to analytics firm AppMagic.
That revenue, of course, depends on customers paying through Apple’s system. OpenAI has begun directing potential subscribers to pay through its website instead of the App Store, avoiding Apple’s fees. The Wall Street Journal reported. Apple’s position gives it a way to benefit from its competitors’ AI, but those competitors have an incentive to find a route around its tariffs.
Still, Apple already has multiple ways to benefit from people using AI. You can sell the computer, charge a subscription fee, and eventually charge for more of your own services. You don’t have to build every model (or fund infrastructure at the scale of your competitors) to get paid.
