Apple's incoming CEO draws a line on AI as 3 rivals chase $37B run rate

John Ternus becomes Apple CEO on Sept. 1 with a product-first AI philosophy that sets him apart from Microsoft, Google and Meta.

Apple's incoming CEO drew a line on AI, telling Tom's Guide that technology serves the product, not the reverse, as rivals chase AI revenue in the tens of billions.

"We never think about shipping a technology. We always think about, 'How can we leverage technology to ship amazing products and features and experiences for our users?' So that's how we think about AI," John Ternus, then Apple's senior vice president of hardware engineering and now incoming chief executive, said in the April interview.

The contrast with peers is stark. Microsoft's AI business surpassed an annual revenue run rate of $37 billion, up 123% year-over-year, CEO Satya Nadella told investors. Alphabet's Google Cloud revenue grew 63% with backlog nearly doubling to more than $460 billion, CEO Sundar Pichai said. Meta CEO Mark Zuckerberg told shareholders his company is "on track to deliver personal superintelligence to billions of people."

The market is not rewarding the loudest voices. Microsoft shares are down 21% year-to-date, Meta off 14%, and Alphabet, up 16% YTD, has slipped 8% in the past month. Apple, by contrast, has gained 9% this year and 52% over the past 12 months, suggesting investors may already be pricing in a premium for restraint.

The Financial Foundation for Restraint

Ternus inherits a cash machine. Apple's March quarter delivered revenue of $111.18 billion, up 17% year-over-year, with diluted earnings per share of $2.01 against a $1.94 consensus — the eighth consecutive quarterly beat. Services hit an all-time record at $30.98 billion, and iPhone revenue reached $56.99 billion on what outgoing CEO Tim Cook called "extraordinary demand for the iPhone 17 lineup." The board authorized a new $100 billion buyback and raised the dividend 4% to $0.27 per share.

That financial firepower funds Ternus's ability to say no. Apple does not need a token-priced cloud business to justify its valuation. The company trades with 48 analysts covering it: 7 rate it Strong Buy, 23 say Buy, 15 Hold, 1 Sell and 2 Strong Sell.

Where Restraint Carries Risk

The strategy is not without cost. Apple Intelligence launched in 2024 to criticism, and the promised Siri upgrade has been delayed until iOS 27, expected in late 2026 or early 2027 — making it Ternus's first real test. Investors have grown tired of AI promises and want tangible progress, and the stock dipped after an underwhelming WWDC where AI features remained limited in key markets.

Meanwhile, Apple faces a separate cost pressure. Cook has warned that a global shortage of memory and storage chips — driven by AI data center buildout — is pushing component costs higher. TechInsights estimates Apple would need to add $270 to the next iPhone Pro to maintain profit margins. The iPhone 17 Pro starts at $1,099. Apple already paid a $250 million settlement earlier this year to end a false advertising lawsuit after failing to deliver promised AI features.

Ternus's wager is that shipping the right feature beats shipping the loudest one. The Sept. 1 handoff puts that bet on the clock. Apple shares, trading at roughly 28 times forward earnings, reflect investor confidence that the product-first approach will eventually pay off — but the market's patience has limits.

This article is for informational purposes only and does not constitute investment advice.