Apple exceeded expectations when it reported its quarterly earnings on Thursday. The company revealed $143.8 billion in revenue, a 16 percent increase year-over-year. During the earnings call, as analysts asked CEO Tim Cook mostly favorable questions, one analyst from Morgan Stanley, Erik Woodring, posed a more direct challenge.
Woodring addressed Apple’s AI initiatives, noting the clear added costs. He pointed out that many competitors have already integrated AI into devices, yet the incremental monetization from these features remains unclear. He then asked the fundamental question lurking in the minds of many investors: “So, how do you monetize AI?”
This question is surprisingly rare in Silicon Valley. Big Tech has largely taken a vibes-driven approach to AI development. Consider OpenAI, which seems dominant as ChatGPT embeds itself into the cultural consciousness. However, the company reportedly does not plan to make any money until 2030. Analysts from HSBC are doubtful of that timeline, especially given estimates that the effort may require another $207 billion in funding. When asked how OpenAI will break even, the tech industry’s response is often a verbal shrug.
Tim Cook, having just reported a stellar quarter, was in a position to possibly explain how these massive AI investments will be recouped. His answer, however, was vague.
Cook stated that Apple is bringing intelligence to more of what people love, integrating it across the operating system in a personal and private way. He believes this creates great value, which opens up a range of opportunities across Apple’s products and services.
In essence, Apple plans to monetize AI by creating “great value,” which will in turn “open up a range of opportunities” within their existing ecosystem of products and services. The answer provided little concrete detail. Credit goes to the Morgan Stanley analyst for attempting to get a clearer answer.