|
At one point during Apple's earnings call yesterday, an analyst joked that he wasn't going to ask a question about China, to which Tim Cook laughed – at that point, "China" had been mentioned 18 times on the call. That joke was the 19th. He then went on to ask a question which brought up China. 20. Apple CFO Luca Maestri answered the question totally not about China by bringing up China twice more. Amazingly though, China wasn't the focus point of the call – or the press release about the earnings. That was "Services". It's the lone consistent bright spot for Apple these days in an age of stagnant iPhone sales. Apple's services business got 30 mentions by my count on the call. And it's probably the last earnings before talk of AI consumes everything and anything. It was brought up a "mere" 21 times yesterday. And that's before Apple has officially announced any major AI initiatives. Once WWDCAIAIAIAI hits in a few weeks, I suspect it's going to make "5G, 5G, 5G, 5G, 5G" look quaint. Apple, like all companies, is clearly excited about the technology. But at least part of this is obviously driven by Wall Street, which wants to hear an AI narrative before they reward Apple in the same way that they have with Microsoft. Below was one of the more interesting back-and-forths related to the above on the call yesterday (via the brilliant transcript by Jason Snell of Six Colors): Mike Ng, Goldman Sachs: Great. Thank you, and I wanted to ask about, you know, as Apple leans more into AI and generative AI, should we expect any changes to the historical CapEx cadence that we’ve seen in the last few years of about 10 to 11 billion dollars per year, or any changes to how we may have historically thought about the split between tooling, data center, and facilities?
Maestri: Yeah, we are all obviously very excited about the opportunity with GenAI. We obviously are pushing very hard on innovation on every front, and we’ve been doing that for many many years. Just during the last five years we spent more than a hundred billion dollars in research and development. As you know, on the CapEx front, we have a bit of a hybrid model where we make some of the investments ourselves, in other cases we share them with our suppliers and partners on the manufacturing side, we purchase some of the tools and manufacturing equipment. In some other cases, our suppliers make the investment. And we do something similar on the data center side, we have our own data center capacity and then we use capacity from third parties. It’s a model that has worked well for us historically, and we plan to continue along the same lines going forward. This is Maestri saying that Apple won't need to spend as much on CapEx because they're not planning to build out and train LLMs exclusively on their own servers as many of their peers have. This echos Apple's cloud strategy in general, which has included using their own servers mixed with those from Amazon and others. But reading a little more between these lines, it also may suggest that Apple, as rumored, plans to outsource some of their AI work to partners in their own clouds, while Apple itself focuses most of their AI work to what they can do on-device. Obviously, this will shift over time depending how things evolve with AI, but it will be interesting to see what Wall Street thinks about this hybrid approach. I suspect they'll like it – if not now, at the point when they decide that all this AI build-out spend has been excessive. Much as the ramp in content spend by the streaming players was rewarded at first before it was used against them. Of course, Meta already got hit by this concern last week. But that's in part because Mark Zuckerberg explicitly said he doesn't believe AI will add to Meta's bottom line for a long time. The other players are saying it's already helping that line, while being a bit vague in terms of just how much. Apple will likely also walk a line in between these two extremes. And that's probably a good position to be in, for now. Certainly better than the one they're in with the Vision Pro right now... 🌍 Sent from London, England
Briefly...Bill Gates Never Left – This report by Ashley Stewart would seem to have quite a few details about just how involved Gates has been since he "left" the company. Notably, with everything AI related, including, of course OpenAI. Some pretty bold claims that while Satya Nadella and Kevin Scott get the credit, Gates has been the one behind-the-curtain as the Wizard of Oz. Regardless, he does deserve credit for calling the AI "Agents" movement early. 🤓 We Can Have a Different Web – Nice essay by Molly White that recalls the web of yesteryear that we all loved and how it has "gone corporate" with age and growth. But everything is still in place to take it back to that more innocent age – in fact, there's much better web technology to make it all happen now. But is there the will to run it back? 🕸️ LinkedIn is the Twitter/X Rival No One is Talking About – Sarah Perez makes the case that it's not Threads or Bluesky or Mastodon that has taken up the Twitter mantel, but LinkedIn. Yes, "can I add you to my professional network?" has seemingly become a key place for a lot of my graph as well. Perhaps that's just me getting older. Or perhaps its LinkedIn adding games. Or perhaps it's just an urge to go somewhere, anywhere, but Xitter. 🗄️ How Good is OpenAI’s Sora? – Cristina Criddle and Rory Griffiths spoke to a number of video professionals about the state of such art and how AI might upend what they do. Interesting perspectives, which actually seem more positive than negative, because there's a world in which such technology helps people do their jobs and creates new ones, while yes, altering some old ones. But it's easy to forget this really isn't about giant Hollywood productions (which, spoiler alert: will be fine, despite the FUD), it's small commercials, stock footage, etc. 🎥 The Rick Steves Guide to Life – I've long held a soft spot for the everyman travel guru. The Bizarro Bourdain. To the point where I may or may not have watched many livestreams of him drinking wine and talking travel during the pandemic. Wild times. Speaking of, Steves has had some in building his $120M a year business, as this nice profile by Natalie B. Compton highlights. 🗺️
🧿 The Inner Ring 🧿The following are the columns sent to paid Spyglass subscribers this week – sign up here for full access and future emails...
Quoteable..."It's very difficult to write science fiction when you're living in a science fiction world." -- James Cameron, on the challenges with making a new Terminator movie – which he's doing – in our current world of rising AI (and soon, robots).
Some Thoughts On...🏀 Amazon getting some NBA streaming rights 🇪🇺 The EU ruling the iPad is a "gatekeeper" device as well 🤖 Meta's latest AI foray need less 'A' and more 'I' 🥏 Jeff Bridges back for Tron 3 👨⚖️ Meta going after social media rip-off artists 📺 Roku becoming more of an advertising vessel 🎈 Airbnb's latest marketing magic 🎶 It's "Services, Services, Services, Services" for Apple, for now...
Quickly...- Dave & Busters is getting into gambling because everything that is around long enough gets into gambling. Fun theoreticals about Skee-Ball betting here...
- iOS 18 seems poised to make Calendar and Reminders actually work together. A true "finally" if true.
- Howard Schwab, who some may recall for the fun mid-2000s ESPN game show "Stump the Schwab", passed away at 63. I loved that show.
- Um, is Apple going to ban TikTok before the US government? In a vacuum, it sure seems like they would given the in-app payment circumvention here...
- Remember when people used to joke (and not joke) that Amazon would never make money. How does $10.4B in profit for the quarter sound? Funny?
- It sounds like the next Apple Watch Ultra will have "almost no" changes from the current Apple Watch Ultra. Which is weird because the current Apple Watch Ultra had almost no changes from the first Apple Watch Ultra.
- Major League Baseball promises to fix their weirdly see-through and sweat-highlighting new uniforms by 2025. No rush guys! The disaster seems to fall in Nike's lap. Great moments in complete and utter user-testing fail.
- The first image has been released from Francis Ford Coppola's Megalopolis. It's not much, but I just hope it's not as bad as is feared.
- Taylor Swift's "Tortured Poets Department" sold 1.9 million physical albums in its first week – of those, 859,000 were vinyl records – a new um, record. Just staggering numbers for any year but it's bonkers in 2024 when we all get the album pushed to us for "free" as we're already paying for it, via streaming.
- The (awesome) Delta emulator for running old school Nintendo games on your iPhone is coming to iPad next.
- While "real people" have been included in Fortnite forever, Clash of Clans gets its first in the form of Man City's Erling Haaland, who pinged the company as a die-hard player since he was a kid.
- San Francisco wants to become the new home of the Sundance Film Festival.
- Adults now routinely celebrate half birthdays, which is silly and I'm only sharing because mine was yesterday.
More Missives...
One Loooonnnng Microsoft Thing...If you haven't listened to Acquired's Microsoft episode yet, it's well worth your time. Yes, all four and half hours of it. It's just such a great way to learn/remember the history of the iconic tech company. Which is, of course, still the most valuable in the world. Thanks, AI!
|
