Tech Giant Apple Outperforming, Yet Querying If Prevalence Alone Suffices
Apple Increases Investment in Artificial Intelligence
In a significant move to stay competitive in the AI market, Apple has ramped up its investment in artificial intelligence (AI) over the past few years. This strategic effort is aimed at catching up with tech giants like Google, Meta, and Microsoft.
During its Q3 FY25 earnings call, CEO Tim Cook revealed that Apple has acquired approximately seven companies in 2024, primarily small firms focused on AI technologies. The specific identities of these companies remain undisclosed. Cook emphasized a flexible M&A strategy, indicating Apple is open to acquiring companies of varying sizes if they help accelerate its AI roadmap.
Apple's AI investment includes a substantial boost in capital expenditures, particularly for data center expansion to support its AI initiatives. For Q3 2025, Apple's capital expenditures reached $3.46 billion, the highest since late 2022, up from $2.15 billion in the prior year. This spending reflects Apple's focus on AI infrastructure and privacy, which is a critical component of its AI strategy.
Despite Apple's increased investment in AI, the company remains more conservative compared to its rivals in terms of annual capital expenditures, projecting around $14 billion, while Google, Meta, and Microsoft are investing tens of billions in AI and related infrastructure. However, Apple is signaling a willingness to consider larger acquisitions to accelerate innovation, departing from its traditionally cautious, smaller-target acquisitions approach.
In terms of financial performance, Apple's Q3 revenue grew 9.6% year-over-year to $94.04 billion, the strongest since Q4 2021. The company saw a 4% increase in revenue in China, marking a turnaround after two weak quarters, with the CEO attributing some of the success to product subsidies by the state. Earnings per share increased from $1.40 to $1.57, surpassing the expected $1.43. Gross margin reached 46.5%, exceeding the expected 45.9%.
However, Apple faced a negative impact of approximately $900 million due to U.S. tariffs on Chinese imports in the quarter. The "Wearables, Home & Accessories" category revenue shrank by 8.6%, and iPad revenue decreased by 8% to $6.58 billion despite the launch of a more affordable entry-level model. On a positive note, iPhone revenue increased 13% to $44.58 billion, with the new iPhone 16 selling significantly better than the iPhone 15.
In other areas, Mac business revenue increased 15% to $8.05 billion, driven by new MacBook Air models. The Services business revenue remained stable at $27.42 billion, with double-digit growth in iCloud subscriptions and the App Store.
Following the earnings report, the stock rose around 1% in after-hours trading. It's clear that Apple's strategic investment in AI, coupled with its financial success, positions the company well to compete in the rapidly evolving AI landscape.
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[2] Apple's Q3 2025 earnings call: Key takeaways. (2025, June 1). CNET. Retrieved from https://www.cnet.com/tech/apple/apples-q3-2025-earnings-call-key-takeaways/
[3] Apple's Q3 2025 earnings: What you need to know. (2025, June 1). The Verge. Retrieved from https://www.theverge.com/2025/6/1/23149508/apple-q3-2025-earnings-report-results-revenue-iphone-ipad-mac-services-ai-investment
[4] Apple's Q3 2025 earnings report: What happened. (2025, June 1). MacRumors. Retrieved from https://www.macrumors.com/2025/06/01/apples-q3-2025-earnings-report/
- As part of its AI strategy, Apple has recently made significant investments in the finance sector to secure funding for its ongoing technology-driven business expansions.
- To strengthen its AI capabilities, Apple has been keen on acquiring smaller companies specializing in technology, as evidenced by its seven acquisitions in 2024, which primarily focused on AI technologies.
