Apple reported record results for its fiscal year and pointed to artificial intelligence as a driver of future sales, even as rising memory costs threaten margins in the holiday quarter. The company said iPhone revenue rose 17.5% 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 fell in premarket trading Tuesday after Apple warned that higher memory costs would squeeze profit margins.
AI and Apple Intelligence came up a record 45 times on the quarterly earnings call, according to financial research platform AlphaSense, more than on the call after Apple unveiled the technology and plans for a revamped Siri in June 2024. CFO Kevan Parekh described a wide range of ways AI could add to revenue over time. He said AI gives customers a compelling reason to upgrade and switch to get the latest capabilities, and he pointed to opportunities across third-party apps and partnerships as well as first-party offerings.
John Ternus, on his first earnings call as CEO, said the company sees tremendous opportunity in AI. Apple is positioning itself as the interface through which consumers use AI, including technology from competitors, leaning on a base of more than 2.5 billion active devices. Siri AI uses models developed with Google's Gemini technology, and Apple reportedly plans to let users choose among outside AI providers for features such as writing tools and image generation.
Apple's spending on infrastructure is far smaller than that of its Big Tech peers. Capital expenditures were $2.2 billion 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. Operating expenses rose 21% to $19.2 billion as research and development spending increased, including on AI. Siri AI cloud costs will appear in services cost of sales, and Parekh said it is too early to predict how many requests will require servers rather than on-device processing.
Siri AI launched in beta for US English users in September and expanded in October to French, Japanese, Korean, Portuguese and Spanish. Ternus said features that rely on server-side models, including Siri AI and intelligent photo editing, will have usage limits, and customers who need more capacity will be able to buy expanded access in the future. He compared the plan to iCloud tiers, which began as mostly storage and gained capabilities over time.
Apple also gains when customers buy its hardware to run AI locally. Ternus said the Mac is having an AI moment of its own, and Apple cited Gap running AI entirely on Mac Mini computers for loss prevention across hundreds of stores and Christie's running local models on Mac Studio computers to improve workflows including pricing estimates. Ternus said the Mac Mini and Mac Studio are pushing the boundaries of local, private AI.
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