Apple’s blowout Q1 results were a reminder of what makes the company so impressive—and why it’s floundering in AI | Fortune

It was a reminder of CEO Tim Prepare dinner’s unparalleled mastery of the controls that preserve the $3.8 trillion company buzzing.

However it was additionally a reminder of the challenges Apple faces, and the limits of the company’s management in a altering market. Apple proved as soon as once more that it might construct, ship, and promote {hardware} higher than anybody on the planet, particularly when provide chains are underneath strain. In relation to a imaginative and prescient for AI nonetheless, Apple, and Prepare dinner, had shockingly little to say.

Consequence: Regardless of the blowout quarter, Apple’s inventory floundered, gaining a scant 0.2% in after hours buying and selling.

Beginning with the good, Apple’s fiscal first quarter results were sterling. Income of $143.8 billion was up 16% year-over-year and effectively above the $138.5 billion anticipated by analysts. Web revenue elevated 16% to $42.1 billion, or $2.84 per share, versus the $2.67 per share anticipated by analysts. 

The celebrities of the report were iPhone gross sales, which elevated 23% year-on-year because of the new iPhone 17 mannequin, and Apple’s enterprise in Better China, which surged 38% to $25.5 billion. Site visitors in Apple’s retail shops in China were up by double-digit percentages from the prior yr, Prepare dinner mentioned, whereas gross sales of iPhones in China logged their greatest quarter ever.

The launch of the iPhone 17 household of telephones has clearly energized a enterprise that had began to sluggish. iPhone gross sales progress had averaged simply 4.2% over the earlier six quarters. However now so robust is the demand, Prepare dinner mentioned, that Apple is constrained in its capacity to get sufficient of the superior 3-nanometer chips that energy the telephones. 

Tim Prepare dinner, of course, is a grasp of provide chains. Earlier than changing Steve Jobs as CEO, Prepare dinner was Apple’s longtime chief working officer, overseeing the huge community of companions and suppliers that underpin Apple’s merchandise. That prowess was on show on Thursday, with Apple forecasting wholesome general gross sales progress of 13% to 16% for the present quarter, and robust gross revenue margins of 48% to 49% of income. 

One analyst on the earnings name proclaimed himself “shocked” by how robust Apple’s gross margins were anticipated to be. In any case, the analyst famous, the costs of the reminiscence chips used in Apple merchandise are presently via the roof, and provide is severely constrained, as a result of the chips are additionally in excessive demand for all the AI knowledge facilities being constructed.

Nonetheless a cipher on AI

At a time of market uncertainty, together with wildcards like tariffs, Prepare dinner and Co. make a robust case that the enterprise is in good palms. If solely the company’s plan for AI was as reassuring. 

Requested about the company’s current deal to accomplice with Google for AI capabilities in Siri, the timeline for return on funding in AI, and for different updates on its AI efforts, Apple executives served up canned non-answers. 

“We’re bringing intelligence to extra of what individuals love and we’re integrating it throughout the working system in a private and personal approach, and by doing so it creates nice worth,” Prepare dinner mentioned. 

What portion of Apple’s put in consumer base have telephones that may have sufficient horsepower to run the superior AI Siri due later this yr? We will’t inform you, however it’s “rising,” Apple CFO Kevan Parekh replied.

To make certain, tons of corporations are tight-lipped about product and technique plans. Google is known for dodging questions by reciting platitudes on its calls. The issue for Apple is that its AI efforts thus far have been full of embarrassing missteps and delays. The company promised superior AI options two years in the past, and has so far didn’t ship something of observe. The just lately introduced deal to make use of Google’s Gemini for the subsequent model of Siri was extensively considered as an admission of Apple’s struggles growing its personal AI fashions in home. 

Apple’s iPhone enterprise is on hearth once more, however it’s in no way clear what Apple may have when the hearth goes out.