Q&A

Asked by Dave Emery

Q: If you had to choose only between expanding gross margins or gross revenue, which one would you choose?

Always top line, always. There's the only thing that matters. The ultimate measure is the customer. But the next best thing you have is the customer's purchase. You want to maximize the number of customers, and you want to maximize their satisfaction, and if you do that, then you will get good top-line revenue. Then, if you manage your house well, then you do so at a margin, at a good margin. But nothing matters more than getting as many happy customers as you can get. The creation of the customer is the purpose of the firm.

We didn't get an update on the 2.5 billion actives, but we do get that once a year, unfortunately, no faster than that. We don't get an update on subscriptions either. Maybe, again, if I were to appeal to John, it's give us more data. I know he's an engineer. He knows the value of numbers. But the data that's given to us is out of a mountain of data that Apple has. We're getting a couple of crumbs. And they're chosen carefully. And I think the reason they've chosen to tell us these things is because they're saying that's what they think matters, and we should also probably keep an eye on these things. And that's all I did with Active Devices.

You got to keep an eye on this. Measure the firm accordingly. It just so happens to be the old adage from Deming that the value of the firm equals this. I don't know if Apple believes that, but they do tell us these numbers, and that seems to be what they measure themselves by.

This was one of the questions asked by the participants in Asymco's May 2026 Office Hours live Q&A sessions, open to Asymco One subscribers.

See also: May 2026 Office Hours

Asked by Jay Goldberg

Q: Do you think Apple will start investing heavily in AI data centers?

There's rumors and actually statements from Apple saying that they're working on a server chip. Google has a server chip. Amazon's got a server chip. These are effectively aimed at Nvidia. And if you can make something, you tend to do it. Now, of course, there's some protection — Nvidia's got other special sauce, but their margin is everybody's opportunity. They have a huge margin. And everybody's writing huge checks. As I say, hyperscalers are just handing over their entire cash flows to Nvidia. And that means their shareholders' entire wealth is being handed off to Nvidia shareholders. So there's a transfer of wealth happening right now. Presumably, because we're going to get some benefit later, but if that's happening and people are irritated by it, they're going to find a way to do what Nvidia does.

And Apple, of course, can and will do that. Now, whether that'll get deployed at the edge or in Apple's own cloud — because they probably also don't want to write checks to Nvidia, and they'll say, well, we can do it, and we won't necessarily sell them, like Google wants to. They'll probably just use them themselves. And that's something certainly they're capable of.

The question I was always asking is how many are we talking about? Because if it's in the tens of millions, or even single-digit millions — for Apple, single digits. Is it worth it to develop your own designs? There's a limit to how many you can deploy. And probably you're going to have to replace them every so often, so there's a question about how much it costs to keep on the treadmill.

But it is an interesting question, and I think everybody's capable of doing what Nvidia's doing. But it's about execution, timing, delays. Look at what happened with the Qualcomm chip — how long it took Apple to finally deploy the communications chip relative to the amount of grief it had to deal with. First, of course, it moved out of Intel. It moved out of Qualcomm now, and now the question is, is it going to move out of the server supplier chain? And that's a complex decision. But again, Apple's not doing it because they want to be in that business. It's more that they want to avoid dependency.

This was one of the questions asked by the participants in Asymco's May 2026 Office Hours live Q&A sessions, open to Asymco One subscribers.

See also: May 2026 Office Hours

Office Hours question asked by Frederich H. on May 1, 2026.

Q: Any thoughts on the breakdown of R&D, with that big jump?

It's hard to tell. I do think they're buying — that does include some hardware. A lot of hardware. I think they're building quite a bit of capacity in order to implement their versions of AI. They're not for deployment, but they're for testing and experimenting. They're hiring people as well, obviously that's included. But I do think it used to be they bought equipment for testing — I don't know, radio frequencies, and testing the iPhones, and semiconductors, and testing a lot of things like that. But I do think probably there's a lot more spending now on the stuff that feeds AI. It's not on the level that a hyperscaler's doing, because they're building it for scale, and Apple's maybe building it for testing.

We're talking about here, look, $11 billion in R&D, that's in one quarter. So that goes out to about $40 billion a year.

Mostly, I think this is people, but there is some equipment involved. It's just maybe different ways of capitalizing it, because capital equipment is a complex story.

It seems like a big jump, but it's only $2 billion more compared to the prior period. It's recurring though. And the reason that this stays steady and keeps growing is because people are on the payroll. And so if there's more and more people, that's paid every period — the reason, by the way, you see SG&A being seasonal is because there's temporary people in the stores. That involves people who are hired for the holidays in the Apple stores. So that's where you see some less than steady. But engineering people are more steady. But if there's a spike, there might be something going on where there was some equipment involved.

See also R&D Acceleration section of Apple 2026 FQ2 Presentation.

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Editor's Note: This is a lightly-edited revision of a question asked by participants in Asymco's May 2026 Office Hours live Q&A sessions, open to Asymco One subscribers.

An Office Hours question asked by Fred S., May 1, 2026

Q: Ever since Johny Srouji started talking about Apple Silicon and the power consumption for the performance and the unified memory, and now we've seen the Mac mini surge, I just wonder about high-end computing. The whole area of where that Mac architecture may go beyond its success as an individual consumer computing product. From all the high-end workloads that might be coming their way.

The story of Apple is one of personal computing. It's not a story of servers, it's not a story of clouds, it's not a story of centralized computing. They've tried once or twice to make a server product, and they abandoned it. They've even abandoned the high-end Pro product, and created the almost-as-fast Studio product.

Now, that does not mean they're shying away from high-power computing. They're just saying, we're going to put that high-power computing in a desktop, or in the laptop, or even in the phone. Everyone who's grown up throughout the personal computer era can remember Moore's Law, and how exponential growth has driven computation to levels that seemed impossible just a few years earlier. We've hit some slowdowns, but fundamentally, the potential exists.

And by the way, it's not even a classic computational CPU problem. We're dealing with AI. We're mostly dealing with high bandwidth, large data, and we're dealing with simple calculations on it in parallel, which means the architecture is much more around large matrix computations. This is why Nvidia came from graphics. Graphics was the same problem — a graphics accelerator is a matrix problem. And so is machine learning. So different variations of these have come in as a sort of a parallel to the CPU, the general computation problem.

The idea Apple has is that they're going to catch up with whatever is done on the server, they're going to do it on the device. You can call it Edge, you can call it personal — the old term was personal computing.

I may be naive, but I think we'll get very powerful desktop computers that can do what is essentially AI, but for the individual. The other aspect here is that Apple is a consumer company, not a B2B company — it's a B2C. They want to bring that power to as many people as possible. And they're certainly delivering hundreds of millions of computers a year. Nvidia's making tens of millions of computers a year. Apple is capable of doing orders of magnitude more.

So I think they're going to affect the disruption in AI. It's not going to be that there's no profit in AI, it'll be that it'll be done with Edge more, especially as it doesn't have to be a world model — it can be a personal model. If you want to look up something globally, you can use the cloud, but if you want to deal with tasks in your world, you're going to work with Apple computers.

It may take years to get there. But in the meantime, I don't think a centralized service — these OpenAI, or Anthropic, or Microsoft, who are trying to make us a singular superintelligence — is necessary for everyone. It'll be a good reference, but it's not how you want to handle your personal information. So I think that's what the future is, and I think Apple's very much planning for it.

It sounds cliche, but when Apple started, it was IBM that dominated computing. And IBM was about centralized computing, and their thesis was everything we now call "the cloud" — but it was all in one big computer that served the entire organization, whether that organization is a government or a big company. And then we went to mini computers, then we went to desktop computers, then we went to portable computers.

Then, fast forward 25 years and we had Google. Well, now central computing is the internet. In the internet, everything needs to be indexed to be able to be found. So they created an index in the cloud. And then a lot of companies moved that computing they used to have locally into the cloud, as a shared resource from Amazon, AWS, and others, and that became cloud compute. Even now, those are the drivers for growth for Microsoft and Amazon and Google.

The AI part of that is tiny — there's revenue from AI, but there's a lot of revenue from cloud. That still is valuable. But that's not a job for consumers. You do some things in the cloud — you store things, you search, you communicate in messages and so on. But most of the data that matters to you will get also indexed locally, so you can pull up your photos, pull up these things, and it'll be a blend of the two.

So that's where Apple lives, and I don't see anything fundamentally changing about this, because computation tends to commoditize. Software tends to be replicated. Algorithms tend to be replicated. In fact, even the AIs we have today were all because people publish papers, and one company invents it, another implements it, as was the case with the transformer. As far as I understand, it was Google who actually wrote the paper on it.

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Editor's Note: This was one of the questions asked by the participants in Asymco's May 2026 Office Hours live Q&A sessions, open to Asymco One subscribers.

An Office Hours question by J.P. answered on May 3, 2026.

Q: With the ascension of John Ternus becoming the new CEO -- will it lower the criticism from the perennial Apple haters and critics?

No, no, of course not. Of course not, come on. You should know better than this. If anything, it'll amplify.

I wrote a piece about this. Titled, "John Ternus will have left big shoes to fill." This is his epitaph. This would be when, in 2040, he'll retire, and this is the article that will get written then. And the criticisms he will have faced will be the same.

We mustn't forget that when Steve was around and was the CEO, the amount of abuse he got was worse, in my opinion, than what Tim got. The criticisms of his incompetence, of his lack of ethics, morals, and overall bad decision-making were legend. I think he was accused of criminal behavior, even.

So we tend to forgive and give peace to the deceased. But while they're alive they will be skewered. I think John will be as criticized as any [Apple] CEO. And you can use your imagination for the reasons and all the failures and all the bad, all the things he'll miss, all the things he'll do wrong, all the incompetence. That he doesn't know how to run anything. It's time for a change. Inevitable.

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Editor's Note: This is a lightly-edited question by an Asymco One participant answered during our May 2026 Office Hours live Q&A sessions.