Apple Trails in AI Race, But Is Making a Bundle

 

 

“Apple is on pace to surpass $1 billion of artificial-intelligence revenue this year, a tidy sum that demonstrates Apple's important AI advantage even as the tech giant struggles to deliver an AI strategy of its own.

 

Apple's Siri chatbot is still dumb by modern AI standards. But what Apple does have that the other AI players don't is a dominant position in making devices.

 

However fancy OpenAI, Google, Anthropic and xAI make their chatbots, iPhones are still a primary way to deliver them to consumers.

 

And that means they typically pay the App Store tax, about 30% of subscription fees in the first year, and 15% per year thereafter, though rates vary by country.

 

 Generative AI apps paid Apple nearly $900 million in App Store fees in 2025, according to analysis firm AppMagic.

 

Three-fourths of the revenue Apple rakes in from GenAI apps in its App Store comes from ChatGPT, according to AppMagic. XAI's Grok is next at about 5%. Apple's revenue from GenAI apps rose from about $35 million in January 2025 to a high of $101 million in August. Sales have fallen from their peak, partly because ChatGPT downloads have declined, according to the data.

 

As a proportion of Apple's total sales, $1 billion is small. Yet GenAI apps are a growth driver for Apple's services business, which investors have focused on in recent years since it has grown faster than device sales and boasts higher profit margins.

 

The company's dominant share at the top of the smartphone market affords it another luxury: time to get its own AI strategy right.

 

Apple's AI plan runs counter to strategies of competitors who are spending hundreds of billions of dollars on chips and data centers to build frontier large language models.

 

Apple is spending a fraction of that, aiming instead to use all the personal information that people store on their iPhones together with chips the tech company designs itself to power an on-device AI strategy.

 

That strategy could prove a winner if, as some AI researchers have suggested, access to user data and strong user privacy makes on-device AI the dominant way that consumers access the technology.

 

Apple investors want to see progress from Apple's own AI strategy, said Charles Rinehart, chief investment officer of Johnson Asset Management, an Apple shareholder. He adds that, unlike rivals, Apple doesn't have a cloud business to sell excess compute if it overspends on AI data centers.

 

"If they can act as a toll road for providers of AI, then they'll probably end up looking good long-term for not having the big capex overhang," he said.

 

Apps can reduce fees they pay Apple by requiring users to sign up for subscriptions on their own websites instead of in the App Store, though not in every market, and not all are pushing this option.

 

ChatGPT offers users the ability to buy a subscription via its website, but doesn't offer any incentive, such as a discount, for selecting that option, according to Wall Street Journal tests.

 

Apple has struggled for years to update Siri, contributing to the departure announcement of its top AI executive, John Giannandrea, last year. Siri is built on old technology. The digital assistant completes basic tasks such as setting an alarm but can't remember a conversation. Above all, Siri can't do deep research or create content like ChatGPT and other modern chatbots.

 

Apple and Google in January announced that Gemini will power a new version of Siri coming this year.

 

OpenAI wants to take control of its own destiny by developing devices. The company acquired a hardware startup co-founded by former top designers from Apple, including Jony Ive. Others have left Apple to join the effort.

 

Elon Musk has flirted with making a smartphone in the past, the Journal has reported, though he posted on the social-media platform X in February that "we are not developing a phone."

 

Google makes the other dominant smartphone operating system, Android, and builds its own Pixel smartphones that include AI features that Apple can't yet match. But those features haven't proven powerful enough to convince iPhone users to make a switch.

 

For its part, OpenAI might find that it is harder to take market share from the iPhone and replicate a device ecosystem than it is for Apple to deliver competent AI. Indeed, OpenAI has tried to build its own app strategy, yet the apps on the company's platform aren't very useful compared with smartphone apps.” [1]

 

1. Apple Trails in AI Race, But Is Making a Bundle. Winkler, Rolfe; Rattner, Nate.  Wall Street Journal, Eastern edition; New York, N.Y.. 19 Mar 2026: A1.