Apple Proves AI Doesn’t Matter

Apple (NASDAQ: AAPL | AAPL Price Prediction) noted three things when it announced earnings and on its earnings call. iPhone sales have taken off like a rocket. Its financial forecasts showed ongoing strength, which is among the essential elements of Apple’s investor appeal. And, high component costs could hurt margins.

What Apple did not say is that AI had contributed to the strong sales of iPhones. It also did not make a big deal of how an ungraded Siri using Google’s Gemini would supercharge growth.

Revenue for the quarter rose more than healthy 17% to $111.2 billion. EPS rose 22% to $2.01. Kevan Parekh, Apple’s CFO, said, “Continued strong customer demand for our products and services once again helped us achieve a new all-time high for our installed base of active devices across all major product categories and geographic segments.” No mention of AI here either.

iPhone revenue rose from $46.7 billion to $57 billion year over year. Apple even did well in China, a market where it has struggled. Revenue in what it calls “Greater China” rose from $16 billion to $20.5 billion. Local Chinese smartphone manufacturers, which include vivo, Huawei, Xiaomi, HONOR, and OPPO, were no longer giving Apple a terrible beating.

Apple disappointed Wall St. and some customers last year when it did not launch a major AI-based product. It is not in a rush to do that this year either. Google’s Gemini AI will be integrated into Apple’s Intelligence features. Most of this will be to integrate Gemini into Siri. The price tag will be small. Apple will pay Google $1 billion a year. The theory is that the $1 billion is not important. The deal gives Gemini tremendous reach in a horse race with OpenAI and other large AI companies. Apple has 2.6 billion active devices worldwide. Apple Intelligence is a feature of many of them.

What Apple passed over when it announced its numbers was the need to invest hundreds of billions of dollars in AI data centers, as Amazon (NASDAQ: AMZN), Meta (NASDAQ: META), Alphabet, and Microsoft will. Apple is not emptying its cash balance sheet. Apple is not risking its future on AI adoption. And, Apple is not trying to bank its future on enterprise AI revenue.

In the last year, Apple’s stock price has tracked the S&P 500 closely. That is well behind Alphabet, which is up 137% over the same period. It is better than Microsoft’s (NASDAQ: MSFT) 3% gain. Apple’s market cap of $4 trillion ranks behind only Nvidia ($4.85 trillion) and Alphabet ($4.62 trillion). That is not bad for a company that has largely stayed out of the AI wars and the high price tech companies have paid to be in it.