artificial intelligence

An Office Hours question asked by Roger S., June 9, 2026.

Q: Beyond selling more capable hardware — phones, Macs, iPads — is there real monetization in all of this AI?

Absolutely. They gave us an architecture: it’s about intent, about orchestration, about routing a request through multiple models and input types, and then deciding whether it goes through an app or back to Siri. Where’s the money? My answer is: follow the compute.

If this works on-device, the user is happy buying the device, with the memory it needs, and Apple bundles all of that into the purchase price. Developers still sell their apps, but they’re not selling extra compute. But if a result requires heavy computation in the cloud, through an app, then trace it: who sends you the bill? That invoice comes from somewhere. If it’s a developer or a model supplier, it isn’t free — they’ll ask you to subscribe to get the answer, priced as a fixed fee or variable. Apple gets its usual commission, thirty percent or fifteen, somewhere in between.ssss

If Siri depends on services that don’t go through an app, then Siri charges back through iCloud for the compute. So all they’ve really done is take the exact same business model — Services with subscriptions — and either fold compute into existing subscriptions or add new ones. Apple gets the same distribution commission it always has. Nothing changes. In fact, the absence of any commentary from Apple about new economics is, to me, a tacit acknowledgment that nothing different is needed.

That means the App Store, and if anything economically interesting happens, you’ll see another kink in its trajectory — the way we saw a kink when subscriptions became dominant. To users, it’s invisible. Maybe the monthly services bill rises ten percent; maybe they add a couple of subscriptions and drop one. It all reflects in Services, at a 72%+ gross margin, with a hardware uptick alongside. I reckon it’s a ten-year cycle before half of the Apple base are AI active daily, paying something for it. Developers will just see more of the same, only bigger.

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

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From 335 to 350 and 330 to 360

TD Cowen analyst Krish Sankar assigned a Buy rating to Apple yesterday and set a price target of $350.00. The company’s shares closed yesterday at $301.54.

Source: The Globe and Mail via Analyst: Krish Sankar

Separately, Morgan Stanley analyst Eric Woodring also weighed in, maintaining an outperform (buy) rating on the stock while increasing his base price target to $360 and his bull target to $440, or 51% potential upside. He said this event "has the chance to reframe Apple as an AI winner."

NB: New average is $305. Published targets: 34. Analysts following: 41

Recording and transcript of the June 9, 2026 Asymco One Office Hours, recorded the day after Apple's WWDC 2026 keynote. Horace Dediu shares his impressions of the event and takes questions from Asymco One subscribers.

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One Foundation Model runs on Nvidia GPUs hosted in Google’s cloud and some Google proprietary model data used to refine Apple's Models.

Apple has shared new details about the technology behind its latest Apple Intelligence platform, explaining how its new Apple Foundation Models (AFM) work and clarifying the company's relationship with Google. During a post-WWDC technical discussion, Apple executives said the company does not use Google’s Gemini models, Google Search, or Google Assistant infrastructure to power Siri or Apple Intelligence

Craig Federighi, Apple’s Senior Vice President of Software Engineering:

“Of course, we don’t have the Gemini app as our app. In fact, none of that client code is part of how we run on iOS. For these models, we use none of the models that Google deploy to their customers, nor do we use the infrastructure and means by which they deploy models to their customers. And then, when it comes to the knowledge base, we of course don’t use Google Search or anything like that as the foundation of our system. So I hope that’s clear. The amount of the Google Assistant we use is none.”

Source: The Mac Observer

NB: Apple introduced five foundation models.

• AFM Core (used for expressive voices and invitation capabilities on device)
• AFM Core Advanced (on device)
• AFM Cloud
• AFM Cloud Image image generation and editing tools, including spatial reframing
• AFM Cloud Pro complex reasoning and agentic actions; Nvidia GPUs hosted in Google’s cloud

These models are custom-built for Apple Silicon, trained using proprietary data, and refined using outputs from Gemini frontier models. The company emphasized that there is no direct use of Gemini itself.

You don't have to choose.

In the grand debate on the future of computing, we've been led to believe that there was a choice coming, a new interface to replace the touch UI interface that emerged in 2007.

One camp believed that the future was ambient or intent computing where conversations and minimal interactions would replace taps and swipes and staring at screens. Apps would disappear as well as almost all visual interfaces. Devices would be not much more than microphones and perhaps earbuds. The initial instance was Amazon Alexa but more recently the quixotic Humane and rumors of a OpenAI pendant or tchotchke that linked us to the great mind in the cloud without messy screens.

The other camp dove into virtual reality so that everything we see is generated by computing. The world itself would be re-painted by the machine and every photon hitting our retinas would be computed and every move we make, every breath we take would be tracked as forms of input.

These are opposite ends of a spectrum: from minimal or almost no interaction to full immersion at the exclusion of passivity. From seeing nothing to seeing everything and from barely hinting intent to monitoring every muscle moved.

The passive computing seemed to be winning. The VR or Visual Computing was not catching on. Device sales are not great and prices too high. Worst of all, devices are too onerous for mass consumption. In terms of wearables, eyes were losing while ears were winning.

However lost in the WWDC news tornado was the updates of VisionOS 27. The list of updates is long and quite esoteric but it's clear that there was a lot of work involved in expanding the power of Visual Computing especially in the creation of new apps and content. Also all AI advances are being applied to VisionOS and even adapted in clever ways: Siri AI can be activated by just looking at the glowing orb that embodies it in the spatial world.

Clearly Apple is not deprecating Spatial Computing. It's a remarkable creation and those of us who use it find it irresistible and irreplaceable.

What the update clarifies most of all is that there isn't an evolutionary branching in the future of computing. The touch UI did not immediately obviate the need for traditional personal computing interfaces. The smartphone brought computing to more people and more contexts but keyboard and pointer computing cannot be fully replaced by touch. We have a situation where there is co-existence between touch and non-touch computing. Indeed we also have sensor computing in the form of Apple Watch and AirPods. Perhaps there were will also be Apple spectacles to expand the compute real estate on the body.

Intent computing will probably reside primarily with our phones and wearables but Spatial Computing will strengthen their position alongside keyboard computing. Spatial was always a "high commitment" interface. To use it you strapped in, settled down and became acclimated. Then you became productive. A session was going to last at least 20 minutes, perhaps even a few hours.

Intent computing is a few seconds of use. Perhaps a few seconds strung out in multiple sessions but it was far more "glance" computing than "sit down" computing.

So why not have all forms of computing?

As the diagram on the coral of life shows, evolution results in a multitude of "form factors". Some do become extinct (see the scroll wheel iPod or the stylus PDA.) But most survive and coexist.

Spatial Computing is extraordinarily powerful. It will evolve and it will probably become the highest utility for those who create.

AI sales are booming. AI FCF not so much. So what new cash flows does Apple Intelligence unlock?

Apple's release of a new framework for AI at WWDC26, centered mainly on new layers in the device/OS which process intent to either on-device or world models and couple it to experiences which are system-wide, including apps.

This is how the data and the inferences flow but what about the cash?

I am writing without a full picture in mind, and perhaps one does not yet exist, but my assumption for at least three years has been that the value of AI will split between the creation of (frontier) models and their distribution. Apple chose to focus on local models, license or partner for frontiers and stitch together the means for distributing both.

That is until on-device will be good enough to perhaps bring all models in-house.

But distribution is always where it's at. So how do the new announcements affect this?

Let's follow the money. The costs of inference will be partly borne by Apple for what they keep in private cloud but mainly by apps and hence subscriptions which will include marginally increasing compute costs. This will lead to increasing or new subscription pricing and the usual commissions for App Store distribution.

The fact that this is all implied rather than explicitly stated should be seen as a tacit acknowledgment that the Services business will not change much, if at all. It will perhaps benefit from an uplift if the new AI-powered apps are very popular.[1] This new AI might create more demand or expand existing demand. That will all depend on the innovations developers come up with.

But the elephant in the monetization conference room is hardware. AI demands a huge step-function increase in computing resources--both compute and storage and integrated memory. The minimum requirements are already leaving two to three year old hardware behind.[2]

Again, if AI is compelling enough, users will need to upgrade. Not just their phones but the Macs, iPads, Vision Pros, Watches, probably AirPods too. Then there is Home which is seeing foreshadows of a significant AI enabled upgrade. This means HomePods but also probably new devices altogether. Rumors of spectacles coming are par for the course. Health will also be revolutionized.

This idea that AI is monetized through hardware should hardly be a surprise…

1. Services has a lot of headroom for growth as non-consumption is still pretty competitive
2. But don't worry, adoption curves being what they are, and regional/political obstructionism will imply a decade or more before perhaps half the install base is using Apple Intelligence with some frequency.

Don't confuse efficiency and effectiveness

Apple has cumulatively shipped over 450 million Apple Intelligence-capable iPhones till Q1 2026.

Apple has the largest number of smartphones with consumers which are capable of GenAI as compared to any other brand.

At WWDC ‘26, Apple needs to deliver a revamped Siri showcasing practical use cases, making a strong statement.

Although iPhone sales remain strong, competition is already moving ahead in terms of AI, and Apple must be ready to follow since Agentic AI has the potential to redefine the smartphone industry.

Source: Counterpoint Research

NB: Words like "needs", "must", "follow" contrast with minimal evidence of demand.

Effectiveness is a number. Efficiency is a ratio. No bank has ever accepted a ratio as a deposit. Counterpoint continues: "Although the lack of a more fully AI-featured Siri…

How to measure helping others

Apple isn't measured by revenue or profit, at least not primarily. The measure is always satisfied customers. The application of services, software and computing hardware to improve lives has always been the modus vivendi and the resulting customer creation has always been the metric of success. Revenues and profits follow customer creation in a 1:1 relationship.

WWDC seems to attract attention as a catharsis for product and strategy announcements but it was never intended to be this. It's about developers (the D in WWDC) and what matters to them: APIs, operating system updates, languages, SDK, and other tooling. It's also a chance to reveal the economic value proposition for those developers who are following their part of the $2 trillion ecosystem.

And so the measure of WWDC should be how developers are created and satisfied. The products, which come later, are important but what matters more is developer opportunity, productivity and satisfaction.

So here is what I'm looking forward to:

• New developer opportunity with AI. This is via easier integrations, more choices perhaps in terms of back ends and possible hooks into different parts of the ecosystem. To wit: Swift extensions, *Kit extensions with hooks to smart home, exercise/fitness, accessibility.
• New developer productivity tools: How is AI going to improve the toolchain for developers.
• New developer business models: how agents can be built and integrated into privacy and safety that only Apple can guarantee.

As Apple has shown with accessibility improvements (foreshadowing!), AI can be used to make people's lives better especially those who cannot perform due to disability. AI can lift those "below the median" in terms of many forms of ability: below median communications, below median health and below median mobility. Those with more limited ability can be "enhanced" into at least median ability. By definition, half of humans are below the median so helping them is as useful as helping those above the median.

This is in contrast to the narrative that AI makes supermen. The opportunity is not mainly about taking over high ability tasks and forcing human effort to be displaced. it's much more about making the less able become more abled. (Characteristic of GenAI output is the "averageness" of it. For those of exceptional ability it feels worse/erroneous and irritates. For those of less ability it's empowering. AI pushes toward the median, both from below and above.)

Below the median here does not necessarily mean below the median income or wealth. Ability is not always correlated with income. There are many Apple customers and potential Apple customers who can use help. I surely can use help in many areas of life.

WWDC is about the scaffolding upon which these grand problems can be solved. Scaffolding is not pretty to look at and most look away in disappointment if that's all that is revealed. But no matter how well regarded, no great building has ever been built without scaffolding.

Asymco Bulletin is a digest of all the work we have published for the week ending June 7, 2026.

Coming Up: Post-WWDC Office Hours

Office Hours Live Q&A, Tuesday June 9, 2026
Day after Apple WWDC'26 Keynote

Join us for our June 2026 Office Hours the day after WWDC'26 for a look into Apple's announcements, implications, and insights, and our live Q&A.

To sign up, and for the latest live event information, visit: asymco.com/live. →

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Research

42% of Apple Analysts rate it a Hold or Sell

Apple has compounded net income at 26.6%, revenue at 21.5%, and share price at 27.7% for two decades, thus doubling every three years. Yet despite this, 21 of 49 analysts rate it Hold or Sell, with another 5 having no opinion. Extraordinary claims require extraordinary evidence yet assuming the Apple flywheel is about to grind to a halt is still a majority opinion. →

The Apple Ecosystem Approaches $2 Trillion

The App Store ecosystem facilitated $1.4 trillion in 2025. Add Apple's direct sales and the Apple Ecosystem comes to $1.8 trillion; add browsing, social, and messaging activity and the Apple Economy reaches roughly $3 trillion. Seen another way, at a $4.57 trillion market cap, Apple is valued at only 2.5 times its ecosystem and 1.5 times its economic footprint. These third-party dependencies are a measure of platform resilience and a carefully worded caution to regulators about the downside of interfering with it. →

How not to over serve; The machinery of vanity

Part 4 of the Asahi Shimbun interview turns to the spec trap. Apple maintains improvement but is selective: it ignores refresh rates beyond what the eye can see, and invests instead in features nobody asked for, like Face ID and AirPods. The phone became a machinery of vanity because the supply of cameras created demand for image editing, not the other way around. Christensen thought Apple would be disrupted by the low end. The honest answer for why it isn't is: culture, held together by extreme diligence. →

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Nota Bene

Morgan Stanley reiterates $330 price target with bull-case $440 → Morgan Stanley reiterated $330 with a $440 bull case if WWDC unlocks an AI re-rating. Apple does not respond to market fads, and a multiple above 40 is almost never experienced. Disappointment after WWDC is nearly guaranteed because it has always been a software and tools show. →

Citi reiterated a Buy rating and a $315 price target → Citi reiterated its Buy and $315 target ahead of WWDC, expecting a revamped Siri to make Apple an edge AI winner. Edge AI is inevitable, but it was also inevitable two years ago. The target is already priced in, making the AI story a non-starter. →

Q4 PC shipments are expected to fall 20% year-over-year, 11.3% for the full year → IDC now sees PC shipments falling 11.3% for 2026 and 20% in Q4, with no recovery in volumes until after 2030. The MacBook Neo is the only thing keeping the broader notebook forecast from being worse. This is a multi-year opportunity for Apple that may reset PC market share dynamics permanently. →

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Another 10% do not provide a rating.

Over the past 20(!) years, Apple net income has grown at a compounded annual growth (CAGR) of 26.6%, Revenue growth has compounded at 21.5% and share price has compounded at at 27.7%. That means the company has been doubling at least every 3 years for more than 20 years.

The graph below shows share price and yearly earnings (and multiples of those earnings) since 2006. Note the vertical scale is logarithmic. The Price line has been growing at 27% or doubling every 2.6 years. The exercise of predicting the share price based on extrapolation is left to the reader.

In spite of this, data shows that 21 out of 49 analysts who follow Apple have the equivalent of a "Hold" or "Sell". An additional 5 follow it but have no opinion.

It takes significant courage to predict a reversal of a 20 year trend. That a majority of analysis implicitly or explicitly believe Apple is on the precipice of failure may come as a surprise given the recent rise in price and optimism around AI. The graph shows the percent of Hold/Sell/Underperform/no opinion has been rising.

The graph below shows the targets published recently.

The targets are sorted by rating and then value. The "Buy" rated are encapsulated, the rest have all the other ratings. The Red line is the average of all ratings. Some of the ratings and targets, especially the lowest, are out of date.

We will be discussing this and other Apple-related topics at our upcoming June Office Hours on Tuesday, June 9th, 2026 (day after the WWDC'26 keynote.) Sign up today!

AI or bust

Citi reiterated a Buy rating and a $315 price target on the stock in a research note. The nod of approval comes ahead of Apple’s week-long Worldwide Developers Conference, which begins June 8.

Analysts believe the headline at next week’s conference will be Apple’s long-overdue revamp of its digital assistant, Siri. Citi expects a new Siri app to resemble something like OpenAI’s ChatGPT chatbot while also serving as an AI assistant across applications on Apple’s operating systems.

“Siri will handle multi-step requests, understand personal data, analyze on-screen content, generate emails or messages using both web and device context, and surface rich card-based results for everything from news to calendar data, while also completing actions across apps and shortcuts,” predicted Citi analyst Atif Malik.

Apple will pair that overhaul with deeper AI integration across its Mac, iPad, and iPhone operating systems, Citi said. Examples could include more AI features in writing, search, and photo editing.

“Edge AI has not yet taken off, but its long-term potential is substantial as consumers and enterprises increasingly prioritize low-latency, privacy-preserving, and cost-efficient AI experiences over cloud dependence,” Malik wrote. “We believe a meaningfully upgraded Siri will be a key to unlock the potential.”

Strong demand for the Mac Mini, which can run AI agents like OpenClaw, shows how edge AI is already spurring more hardware sales. Extend that demand across phones and tablets, and Apple could be an edge AI winner.

Source: Yahoo Finance

NB: In other news, Apple Plans iPhone Bill Splitting Shares up 2.95% reaching the $315 target…