Apple’s latest earnings show how it’s continuing to capitalize on the AI boom without busting its budget on the infrastructure spending consuming its competitors.
Overall, Apple posted its best-ever fiscal year for 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 climbed 24% to $10.8 billion, its highest level in four years. Shares nevertheless fell in premarket trading Tuesday after Apple warned that rising memory costs would squeeze its profit margins in the holiday quarter.
Apple hasn’t disclosed how much of its revenue growth reflects AI demand or higher prices, but its executives clearly see the technology as a way to drive further sales.
During the earnings call, CFO Kevan Parekh cited a “wide range of ways that AI can contribute to revenue growth over time.”
“On the product side, we feel AI offers a compelling reason for customers to upgrade and switch in order to get the latest capabilities,” he said. “And we also feel there’s opportunities across third-party apps and partnerships as well as first-party opportunities.”
Apple can sell its giant user base the devices they use for AI, even if the AI itself comes from someone else. It can collect fees on subscriptions to AI apps. And it can charge customers who want more access to its own AI features.
“We see tremendous opportunity in AI,” John Ternus said on his first earnings call as CEO.
AI 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 following Apple’s unveiling of the technology and plans for a revamped Siri in June 2024.
Mentions of AI or “Apple Intelligence” on earnings calls
On the call, Apple continued to position itself as the interface through which consumers use AI — including competitors’ technology. With more than 2.5 billion active devices, it already has an enormous audience for whatever AI services emerge.
Apple, unlike its Big Tech peers, isn’t pouring comparable sums into infrastructure. Its approach combines on-device processing, its own servers, and outside AI technology. Siri AI uses models developed with Google’s Gemini technology while Apple reportedly plans to let users choose among outside AI providers for features such as writing tools and image generation.
Apple spent $2.2 billion on capital expenditures last quarter, compared with Amazon’s $77.3 billion and Alphabet’s $51.4 billion. Those totals cover companywide CapEx, not just AI, and exclude some AI expenses. Apple’s operating expenses rose 21% to $19.2 billion as it increased R&D spending, including on AI. Siri AI’s cloud costs will appear in services cost of sales. Those costs could grow with usage: Parekh said it’s too early to predict how many requests will require servers rather than on-device processing. Still, Apple’s capital spending remains just a fraction of its peers’.
More AI usage also gives Apple something to sell.
Siri AI is only beginning to reach customers. Apple launched the revamped assistant in beta for US English users in September and expanded it to French, Japanese, Korean, Portuguese, and Spanish in October.
Apple plans to turn some of that usage into subscription revenue. Ternus said features relying on server-side models, including Siri AI and intelligent photo editing, will have usage limits. Customers who need more capacity “will be able to purchase expanded access in the future,” he said. “In the beginning, iCloud tiers were largely about storage, but we’ve been adding more capabilities and features to it.”
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 all its own.”
“We feel AI offers a compelling reason for customers to upgrade and switch in order to get the latest capabilities.”
Apple offered specific examples of companies putting its computers to work on AI. Gap is running AI entirely on Mac Mini computers for loss prevention across hundreds of stores, avoiding cloud token costs for those tasks. Christie’s is running local models on Mac Studio computers to improve workflows including pricing estimates.
For those customers, buying Apple hardware provides a way to use AI without paying a cloud provider for every request.
Mac Mini and Mac Studio, Ternus said, “are pushing the boundaries of local, private AI, giving users the ability to do things once considered impossible.”
The Mac Mini’s emergence as an AI machine has given the small, screenless desktop a new constituency among 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 AI and agentic 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. Earlier this year, The Wall Street Journal reported that Apple was on pace to bring in more than $1 billion in App Store fees from 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, bypassing Apple’s commissions, The Wall Street Journal reported. Apple’s position gives it a way to profit from competitors’ AI, but those competitors have an incentive to find a route around its fees.
Still, Apple already has multiple ways to benefit from people using AI. It can sell the computer, collect a subscription commission, and eventually charge for more of its own services. It doesn’t have to build every model — or fund infrastructure on its competitors’ scale — to get paid.
