Apple reported record revenue of $111.2 billion as iPhone 17 demand surged and Cook prepared to hand over the CEO role to Ternus.

Apple has released information about this The best March quarter in Thursday’s historyRevenue was $111.2 billion, up 17 percent year over year with net profit of $29.6 billion. iPhone revenue rose 22 percent to a record $58 billion in the March quarter, thanks to what Tim Cook called “extraordinary” demand for the iPhone 17, which he described as the most popular launch in the company’s history. Sales in Greater China rose 28 percent to $20.5 billion, outpacing all other regions. Services revenue hit an all-time high of $31 billion. The company authorized $100 billion in new share buybacks. And the stock barely moved as the market learned that Apple’s best quarters come with a caveat. This time, Cook told analysts that “significantly higher storage costs” would begin to weigh on margins in the June quarter, and the impact would accelerate through the rest of the year. The best quarter in Apple’s history came with a reminder that the next quarter will be more expensive to produce.

A strategy that shouldn’t work

Apple’s results challenge the prevailing logic of the AI ​​era. While Meta raised its 2026 capex guidance to $145 billion, Amazon to $200 billion and Alphabet to $190 billion, Apple’s total capex remains a fraction of those numbers. The company has not built its own large language model. It hasn’t built a fleet of AI data centers. It didn’t hire 10,000 GPU engineers or engage in bidding wars for computing power. Instead, Apple chose to collaborate with OpenAI and Google by integrating its own AI models into its devices Apple Intelligencethe company’s AI framework, which redirects tasks to run on-device whenever possible and to cloud-based models from partners when needed. Cook described the approach as AI on Thursday’s earnings call.respects user privacy” and “not a stand-alone feature, but an essential and intuitive part of our devices.” The placement is intentional. Apple AI is not sold as a product. It sells devices that use artificial intelligence developed by companies that spend hundreds of billions of dollars developing models that Apple doesn’t have to build.

Financial results show that the strategy is working. Apple gets the consumer benefits of the AI ​​wave, improved photo editing, smarter search, more capable Siri, improved app recommendations, without paying the infrastructure costs that squeeze the margins of its peers. The iPhone 17’s record demand is partly due to the Apple Intelligence features bundled with the device, which cost Apple a license fee, not a data center. The MacBook NeoThe $599 laptop, Cook said, has seen “casual” demand, setting a record for new Mac buyers by packing the A18 Pro chip, the same processor found in the iPhone 16 Pro, into a fanless design aimed at students and budget-conscious consumers. The Neo is already sold out by April, and Apple has doubled production orders to 10 million units. In response, Intel launched an entirely new line of processors. Apple’s competitive advantage in AI isn’t AI itself. It’s the integration of other companies’ artificial intelligence into hardware that Apple designs, manufactures and sells at prices its competitors can’t match.

Delivery

This was Apple’s first earnings call on April 20 John TernusCook, the company’s longtime chief of staff, will assume the role of CEO on Sept. 1, transitioning to executive director. Ternus spoke briefly to financial analysts for the first time and promised “financial discipline” and referring to the product roadmap it describes “The most exciting part of my career at Apple is creating products and services.” Cook used the challenge to praise his successor, saying, “I know he will push us to go further than we thought possible.” The voice was gracious and scripted. The item was a signal: Ternus is a hardware manager who inherited a company whose next chapter depends on software and services.

The challenge Ternus faces is whether Apple’s partnership-based AI strategy can survive the next phase of the technology’s development. Apple bets on Ternus It comes at a time when competitors are building custom AI systems that are increasingly integrated into their hardware and service ecosystems. Google’s Gemini models power Search, Android, Workspace and Cloud. Meta’s Muse Spark is built into Facebook, Instagram, WhatsApp and Ray-Ban glasses. Microsoft’s Copilot has touched Windows, Office and Azure. Each of these companies controls the complete stack, from model to interface. Apple controls the interface but relies on partners for the model, meaning its AI capabilities are ultimately limited by what OpenAI and Google are willing to provide, and at what cost. Cook’s Apple Intelligence update, which promises AI will be more deeply integrated into Siri later this year, shows the company knows this addiction needs to evolve. Whether Ternus will build, buy or continue to borrow remains a crucial strategic question of his tenure.

Others

Apple wasn’t the only company reporting on Thursday. In the first quarter, Reddit’s annual revenue increased 69 percent to $663 million, and advertising revenue increased 74 percent to $625 million. The platform reported 126.8 million daily active users, up 17% globally, and CEO Steve Huffman reported that 200 million people in the US, more than half of the country’s population, visit Reddit every week. Huffman said data licensing deals with OpenAI and Google, which pays Reddit for access to the company’s conversations to train its AI models, are valuable, but will become even more important as the rest of the internet “optimizes for AI.” His argument is that Reddit’s human-generated conversations are a scarce resource in a world increasingly inundated with AI-generated content. “At the end of the day, there is no artificial intelligence without actual intelligence,” Huffman told analysts. It’s a line that reads like clever branding, but also captures a real dynamic: As AI models improve, the training data that makes them work becomes more valuable, and Reddit sits on one of the largest repositories of authentic human discourse on the web.

Roblox, on the other hand, demonstrated what happens when a platform’s growth collides with its commitments. The gaming company reported a 39 percent increase in revenue to $1.4 billion in the first quarter, and a 35 percent increase in daily active users to $132 million. But its implementation of mandatory age verificationIt was introduced in response to allegations by attorneys general in eight US states that child safety violations slowed the acquisition of new users and reduced communication between unverified accounts. Chief Executive Officer David Baszucki told investors that “growth moderated due to larger-than-expected headwinds from our age review,” and the company cut its full-year revenue guidance, sending shares down 20 percent in after-hours trading. Roblox has yet to post a profitable quarter since going public in 2021. The age-verification experience is a glimpse of what every platform that caters to young users will face as regulators around the world impose stricter requirements: doing the right thing about child safety is expensive, slows growth, and the market penalizes you for it before the regulatory alternative, which will hurt you.