Apple monetizes its own and rivals' AI while limiting spending

Apple reported its best fiscal year for revenue and earnings per share, using its latest earnings release to outline an AI strategy that seeks to monetize the technology without matching the massive infrastructure spending of larger cloud rivals. In the fourth quarter, iPhone revenue rose 17.5 percent from a year earlier to a September-quarter record of $57.6 billion, while Mac revenue climbed 24 percent to $10.8 billion, its highest level in four years. Shares fell in premarket trading after Apple warned that rising memory costs would pressure margins in the holiday quarter. Apple executives tied much of its growth outlook to artificial intelligence, framing it as a reason for customers to upgrade devices, purchase new capabilities and rely on Apple’s platform even when the underlying AI models come from others. CFO Kevan Parekh described a wide range of AI-related revenue opportunities, including product upgrades, third-party apps and partnerships, and first-party services. CEO John Ternus said Apple sees tremendous opportunity in AI, and the company discussed AI and Apple Intelligence a record number of times on the call. A central part of the strategy is low-cost infrastructure. Apple spent $2.2 billion on capital expenditures in the quarter, far below Amazon’s $77.3 billion and Alphabet’s $51.4 billion. Its operating expenses rose 21 percent to $19.2 billion as it increased research and development spending, including on AI. Siri AI cloud costs will be reflected 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. Apple is also monetizing local AI demand, especially on Mac hardware. Ternus said Mac is having its own AI moment, citing Gap’s use of Mac Mini computers for in-store loss prevention and Christie’s use of Mac Studio systems to run local models for pricing and workflow tasks. These examples position Apple devices as affordable, private AI platforms for enterprises, developers and hobbyists. Apple continues to roll out its revamped Siri assistant, launching a beta for US English users in September and expanding it to additional languages in October. Future server-side features, including advanced Siri capabilities and intelligent photo editing, will have usage limits, with expanded access available for purchase. Apple can also earn from rivals: it is on pace to collect more than $1 billion in App Store fees from generative AI apps in 2026, although companies such as OpenAI are testing ways to bypass Apple’s commission system. The briefing shows Apple attempting to profit from AI on multiple fronts: selling devices, collecting subscription fees, charging for premium features and leveraging its 2.5 billion-device audience.