Apple Earnings Disappoint, So It’s Finally Talking About AI

Apple reported net income of $39.9 billion on revenues of $119.6 billion in its most recent quarter, but its revenues didn’t grow at all year-over-year (YOY). Even worse, Apple indicated that the iPhone sales would underwhelm in the current quarter. So it was time for a song-and-dance show. A song-and-dance show about AI.

“As we look ahead, we will continue to invest in technologies that will shape the future,” Apple CEO Tim Cook said during the post-earnings conference call. “That includes artificial intelligence, where we continue to spend a tremendous amount of time and effort, and we’re excited to share the details of our ongoing work in that space later this year. … Our M.O., if you will, has always been to do work and then talk about work, and not to get out in front of ourselves. And so we’re going to hold that to this as well. But we have got some things that we’re incredibly excited about, that we’ll be talking about later this year.”

Aside from the hypocritical nature of that last bit, Apple is notably the last of the Big Tech giants to weigh in on its plans for AI. And given how rapidly this technology is now spreading, it’s fair to expect Apple’s first AI reveal at WWDC this summer, followed by the implementation of new AI features across its ecosystem starting with the iPhone launch in the Fall.

But that’s for the future. For now, Apple is stuck in the mud from a financial perspective, though there were a few bits of good news in its earnings release. There are now over 2.2 billion active Apple devices, the firm says, spread between iPhones, iPads, Macs, Apple Watches, AirPods, and other devices. And its services business continues to impress, with “all-time record revenues” in the most recent quarter. Which I guess is different from “record revenues.”

As always, the iPhone was Apple’s biggest business in the quarter, with $69.7 billion in revenue, up 5.9 percent YOY. The iPhone delivered 58.3 percent of Apple’s revenues in the quarter, higher than the 56 percent it accounted for in the year-ago quarter.

Services were again Apple’s second-biggest business with $23.1 billion in revenues, up 11.3 percent from the $20.7 billion it delivered in the year-ago quarter. Wearables, Home and Accessories revenues fell 13 percent to $11.95 billion.

The Mac provided another $7.8 billion in revenues, while the iPad landed at $7 billion. But Mac revenues were flat YOY and iPad revenues actually fell by 25.3 percent YOY. Not surprisingly, Apple is expected to refresh its iPad lineup this Spring.