By Jason Snell

February 1, 2024 6:35 PM PT

Tim Cook teases AI, but won’t pick favorites

Apple’s fiscal first quarter of 2024 is in the books, and now we know it was the company’s second-largest and most profitable of all time. It also showed year-over-year growth for the first time in a few quarters, undoubtedly warming the money-green hearts of financial analysts everywhere.

As usual, I generated some charts and listened in on the analyst call. Here are a few quick things I felt it was worth highlighting.

AI insecurity

As has been clear on the last few analyst calls, Apple is feeling a bit defensive about being left behind in the world of artificial intelligence and machine learning. While Apple has invested in AI and ML in numerous ways- the neural engine, ML features in various apps, and the OS itself- it doesn’t have a generative AI product or a large language model, the two kinds of AI that have captured the world’s imagination.

That is why, during his prepared statement on Thursday’s call, Apple CEO Tim Cook went out of his way to discuss future Apple software developments!

As we look ahead, we will continue to invest in… technologies that will shape the future. That includes artificial intelligence, where we continue to spend a tremendous amount of time and effort, and we’re excited to share the details of our ongoing work in that space later this year.

Not a product announcement, not even a feature announcement—but a tangible promise that Apple’s going to announce some big AI features later this year. (As Bloomberg’s Mark Gurman has reported, Apple’s OS updates at WWDC this summer are expected to feature heaps of new AI features.)

Responding to a question later on in the call, Cook played it again:

In terms of generative AI… we have a lot of work going on internally, as I’ve alluded to before. Our M.O., if you will, has always been to do work and then talk about work and not to get out in front of ourselves. And so we’re going to hold that to this as well. But we’ve got some things that we’re incredibly excited about that we’ll be talking about later this year.

Cook seems to acknowledge that he’s a bit out of his comfort zone in teasing anything, but clearly, he feels the need to do a little of that when it comes to AI. I think he’s right- it’s a signal that Apple knows what people are interested in and that it’s got something coming.

Tim Cook loves all his kids equally

Analyst Wamsi Mohan of Bank of America asked Cook a question that I thought was pretty sharp: Could Apple’s CEO liken the company’s expectations for the early days of the Vision Pro to any of the company’s other product lines? In other words, is this an iPhone-like thing, or an Apple Watch, or an iPad? Analysts are all about trying to figure out what the future will hold. Why not ask Tim Cook?

Tim wouldn’t have it, of course:

You know, each product has its own journey, and so I wouldn’t want to compare it to any one in particular. I would just say we couldn’t be more excited internally…. And so we’ll see and report the results of it in the wearables category that you’re familiar with.

“Each product has its own journey.” They should put that on a T-shirt.

Products that are solid

The iPhone, which accounted for nearly 60 percent of Apple’s overall revenue in the launch quarter of the iPhone 15, managed to show a little growth, improving 6% versus the year-ago quarter. That’s not exactly a rocketing growth spurt, but it’s the second-best iPhone quarter ever and a sign that the iPhone business probably has more (slow) growth in it. Given how big a part of Apple’s overall business the product is, it really is the case that as the iPhone goes, so goes Apple.

The Mac also did pretty well! It was only up 1% year over year, but four of its last six quarters have featured double-digit negative growth numbers. When you stare at the overall Mac revenue chart, though, things look pretty solid. Yes, the Mac went through a couple of years of huge growth, but it seems to be coming back to a new, higher floor of around $7 or $8 billion per quarter. Apple reported that the overall number of active Macs reached another all-time high. Not bad for a 40-year-old.

Products that are not so solid

The iPad had a quarter that actually looked okay sequentially- it was larger than the three quarters that preceded it. The problem is that the iPad is usually a seasonal product that does well in the holiday quarter, and this year’s holiday quarter was 25 percent lower. Ouch. On the other hand, Apple sold $7 billion worth of iPads, none of which were released in 2023. For a stale product line, maybe that’s not so bad?

Apple’s Wearables, Home, and Accessories category seems like it’s stuck in a hole. Once the category that piled up enormous growth, it was down 11% year over year, and that was the sixth down quarter in the last seven. It’s also two straight holiday quarters of revenue regression in a very seasonal category. Apple tried to put a brave face on it, but between AirPods and HomePods and Apple Watch, nothing is moving the needle. This is a category that needs some attention.

Oh, but you’re saying, step aside! Here comes Vision Pro! And, well, sure. But let me get this ripped-open envelope and a pencil and do some quick math. Let’s say Apple sells 150,000 Vision Pros this quarter at an average selling price of $3750. That’s $560 million, more or less. That’s a great start, but it’s a drop in the bucket of the $12 billion that the category did last quarter. Vision Pro may end up being a big part of this category, but in the short term, it’ll need to be compelling upgrades to Apple Watch and AirPods Pro, and maybe something—anything—interesting in the home category.

The quintessentially Apple moment

I know that most of this stuff is scripted, and in fact, on Thursday, it even sounded like Tim Cook’s opening statement was pre-recorded?! But still, these calls are an opportunity for Apple executives to express themselves in ways that might not fit as well in a press release. And this bit from Cook struck me:

We are announcing these results on the eve of what is sure to be an historic day as we enter the era of spatial computing. Starting tomorrow, Apple Vision Pro, the most advanced personal electronics device ever, will be available in Apple stores… Apple Vision Pro is a revolutionary device built on decades of Apple innovation, and it’s years ahead of anything else. Apple Vision Pro has a groundbreaking new input system and thousands of innovations, and it will unlock incredible experiences for users and developers that are simply not possible on any other device….

We can’t wait for people to experience the magic for themselves…. Moments like these are what we live for at Apple. They are why we do what we do. They’re why we’re so unflinchingly dedicated to groundbreaking innovation and why we’re so focused on pushing technology to its limits as we work to enrich the lives of our users.

That’s the Apple brand promise, and the attitude of a whole lot of people who work at Apple, in a nutshell.

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