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Analysts and investors want answers to Apple’s floundering AI strategy

MacDailyNews

Aug 1

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Apple Intelligence imagery on iPhone, Mac, and iPad.

On Thursday, Apple announced third-quarter iPhone sales that exceeded Wall Street’s forecasts, driven by a tariff-related demand surge and a recovering China market. Despite the strong iPhone performance easing some concerns, analysts and investors remain focused on clarity regarding Apple’s struggling AI strategy.

Apple reported net sales in China of $15.36 billion finally seeing growth again in China.

On the company’s conference call on Thursday, CEO Tim Cook said:

We did grow in Greater China by 4% during the quarter versus the previous quarter. It was driven by an acceleration by iPhone, although we also had substantial growth on the Mac year over year. From a as you know, the government has placed certain subsidies that affect some of our products, not all of them, but there are some of them. And I think that had some effect. It was the first full quarter of the subsidy playing out… it cut in during a portion of the previous quarter.

The also the other things I would say are the that the installed base hit a record high in Greater China, and we set an all time record for the iPhone installed base. The iPhone upgraders in Mainland China set a record for the June. And according to World Panel, which was formerly known as Kantar, iPhone had the top three models in urban China, which is extraordinary. Also, you look at the other products, Mac, iPad, and Watch, the majority of customers that are buying in China Mainland were new to the product.

So lots of good things there. And the other thing I would point out, which is an interesting point, the MacBook Air was the top selling laptop model in all of China, and the Mac Mini was the top selling desktop model in in all of China. So overall, a positive very positive quarter.

Hannah Parker for Quartz:
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While Apple’s iPhone sales momentarily pushed concerns aside, analysts still want answers to the tech giant’s floundering AI plan.
“AI is the elephant in the room. While Apple is expanding its AI investments internally, the reality is its not moving the needle and patience is wearing thin about investors,” according to Wedbush analysts. “It’s clear to us the innovations around AI are not going to come from Apple Park…it has to be external partnerships and significant M&A looking ahead.”
The analysts added that they believe Apple should acquire Perplexity to catalyze its AI strategy.
“The AI Revolution is the biggest technology trend in 40 years and right now Apple is watching this from a park bench drinking lemonade while every other Big Tech company is racing ahead like F1 drivers building out its AI strategy and monetization plan,” the analysts said. “Time is ticking for Cook to find the answer.”
The company’s AI struggles were on full display at its Worldwide Developers Conference in June, where AI announcements were widely seen as underwhelming compared to competitors like Google. Plus a Bloomberg report from July found that Apple might bench its own generative AI technology and instead use either Anthropic or OpenAI’s tech to power a Siri update due next year.

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MacDailyNews Take: Regarding AI, during the conference call, Cook said:

We’re making good progress on a more personalized Siri, and we do expect to release the features next year as we had said earlier. Our focus from an AI point of view is on putting AI features across the platform that are deeply personal, private, and seamlessly integrated. And, of course, we’ve done that with more than 20 Apple intelligence features so far from visual intelligence to cleanup to writing tools and all the rest.

We are significantly growing our investment. We did during the June. We will again in the September. I’m not putting specific numbers behind that at this point, but you can probably tell in the guidance that things are moving up. We are also reallocating a fair number of people to focus on AI features within the company that are you know, we have great, great team, and we’re we’re putting all of our energy behind it.

In terms of other products, I you know, I don’t want to really comment on specific other products, but we have an exciting road map ahead. And I could not be more excited about it…

I the way that we look at AI is that it’s one of the most profound technologies of our lifetime. And I think it will affect all devices in a significant way. What pieces of the chain are commoditized and not commoditized, I wouldn’t want to really talk about today because that gives away some things on our strategy…

We’ve acquired around seven companies this year, and that’s companies from all walks of life, not all AI oriented. And so we’re doing one think of it as one every several weeks. We’re very open to M and A that accelerates our road map. We are not stuck on a certain size company, although the ones that we have acquired thus far this year are small in nature.
But we basically ask ourselves whether a company can help us accelerate a road map. If they do, then we’re interested, but we don’t have anything to share specifically today.

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