Apple's “F1” success doesn't make up for AI stumbling

Apple made two major launches last month. They couldn't be any more different.

First, Apple revealed some of the artificial intelligence advances it has been working on over the past year when it released its annual developer conference WWDC to applause that muted the developer version of its operating system. Then, at the end of the month, Apple hit the red carpet as its first true blockbuster film, “F1,” debuting over $155 million on its first weekend, and ardent reviews.

“F1” was Apple's victory lap, highlighting its long-term outlook, its service business growth and its ability to capitalize on culture, but Wall Street's response to the company's AI announcement at WWDC suggests there are some issues under the hood.

“F1” was shown at its best by Apple. Especially the ability to invest in new long-term projects. When Apple TV+ was released in 2019, it only had a handful of original shows and one film, a beloved film festival called “Hala,” and didn't even share the box office revenue.

Despite being an Apple TV+ Amortized as an expensive side project, Apple has long stuck to its plans and expanded its staff and operations in Culver City, California. This allowed the company to build Hollywood connections and build a proven record of entertainment, particularly for television shows. Now, Apple's originals can lead the box office on summer weekends, the major season of blockbuster films.

The success of “F1” also highlights Apple's key marketing machines and the ability to bring famous talents to leadership. Apple pulled out all stops to sell movies, including using its wallet app to send push notifications with discounts on movie tickets. To promote “F1,” Cook appeared at the Apple Store in New York with movie star Brad Pitt and posted a video with real F1 racer Lewis Hamilton, one of the film's producers.

Apple Services chief Eddy Cue said in a recent interview that Apple needs to make money from its film business in order to “continue to do great things,” but “F1” isn't just the company's final results.

Apple's Hollywood production is perhaps the most prominent face of the company's services business, and is a profit engine that has been a favorite of investors since iPhone makers began to emphasize the division in 2016.

The film also includes fees related to payments, iCloud subscriptions, magazine bundles, Apple music, game bundles, warranty, digital payments and advertising sales. Plus, even the biggest box office revenue would be small on Apple's scale. The company averages more than $1 billion in sales every day.

However, the film is the only service component that will allow celebrities like Pitt and George Clooney to appear next to the Apple logo, and the success of “F1” means that Apple can do bigger popcorn movies in the future.

“There's nothing to breed successes like current successes or encourage future investments,” said Paul Dergarabedian, senior media analyst at ComScore.

But if “F1” is a sign that Apple's services business is fully throttling, the company's AI struggle is the “check engine” light that won't turn off.

At WWDC last month, Wall Street had heard about plans for Apple Intelligence, an AI feature that it first revealed in 2024. This was the key tenet of the company's hardware products, Apple Intelligence, which was plagued by delays and overwhelming functionality.

Apple spent most of its WWDC on smaller machine learning capabilities, but it didn't reveal what investors and consumers wanted more and more. This is a sophisticated Siri that allows you to have fluid conversations and get things done, such as restaurant reservations. Openai's Chatgpt era, Anthropic's Claude and Google's Gemini, the expectations of AI assistants among consumers have grown beyond “Ciri, what's the weather?”

The company previewed a significant improvement in SIRI in the summer of 2024, but earlier this year, these features were delayed in 2026. WWDC did not offer any SIRI updates that have been improved beyond Apple's “continuing” features for “next year.” Some observers reduced their expectations for Apple's AI after the meeting.

“Current expectations for Apple Intelligence are too high to kickstart the super upgrade cycle.

Siri should be an example of how Apple's ability to improve products and projects over the long term is difficult to compete.

When he first debuted on the iPhone in 2011, he defeated almost every other voice assistant. Fourteen years later, Siri remains essentially the same one-off, rigid, question-and-answer system, even after the invention of sophisticated voice bots of recent inventions, based on generative AI technology that can hold conversations.

Apple's strongest rivals, including Android Parent Google, have done more to integrate more sophisticated AI assistants into their devices than Apple. Furthermore, Google doesn't have the same reflections as Apple, where data collection and cloud processing is focused on privacy.

Some analysts say they believe the company's lack of competitive AI capabilities will take Apple several years before it appears in device sales, given the company's large installation base and high customer loyalty. However, Apple cannot lap before re-entering the race. The previous design, Guru Jony Ive, is currently working on new hardware using Openai, adding to the pressure of the Cupertino.

“The three-year problem within the investment period is that Android competes first,” Laura Martin, senior internet analyst at Needham, told CNBC this week.

The success of Apple's services on projects like “F1” is an example of what a company can do when setting clear goals in public and running in extended time frames.

AI strategies could use similar long-term plans, as customers and investors wonder when Apple will fully adopt the technology that has captivated Silicon Valley.

Wall Street's unease over Apple's AI struggle was evident in contrast to its own basic model after Bloomberg reported that Apple was considering replacing Siri's engine with artificial or Openai technology.

This move would contradict one of Apple's most important strategies in the Cook era if it happened. Apple should not purchase from suppliers.

Using external technology is to admit that the Apple Foundation model is not yet sufficient for what they want to do with Siri.

“They're even more behind, so they need to recharge their generative AI efforts,” Martin said. “They can't do that internally.”

According to Bloomberg, Apple may pay billions of dollars to use Anthropic's AI software Report. If Apple pays for AI, it's a reversal from current service transactions, like the search deal with Alphabet, where Cupertino Company is paid $20 billion a year to push iPhone traffic to Google search.

The company refused to review the report and declined to comment, but Wall Street welcomed the report, and Apple's share shared Rose.

According to Openai CEO Sam Altman, the AI ​​world of Silicon Valley allows you to sign the kind of engineer bonus that can develop new models.

“I can't see Apple doing that,” Martin said.

Earlier this week, Meta CEO Mark Zuckerberg sent out a note bragging about hiring 11 AI experts from companies such as Openai, Anthropic and Google's Deepmind. It came after Zuckerberg hired Scale AI CEO Alexandr Wang to lead the new AI division as part of a $14.3 billion deal.

Meta is not the company that spends hundreds of millions of millions on AI celebrities in buildings. Google spent a lot of money hiring the founder of Chariture.ai. Microsoft acquired the AI ​​leader by signing a deal with Fluffect, and Amazon hired Adept's executive team in bulk with the AI ​​roster.

Meanwhile, Apple has not announced the adoption of major AI in recent years. Cook rubs his pit and shoulders, but the actual lace could be passing by the apple.

clock: Jefferies upgrades Apple to “hold”