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Apple forecast services revenue growth of 8% to 9% for the December quarter, below the 10% growth reported for September, citing licensing and foreign-exchange pressures. CEO John Ternus said customers who need more capacity for some server-based AI features will be able to buy expanded access, but Apple gave no price or launch date. The company also said Siri AI computing costs and higher memory expenses will weigh on margins.
Apple forecast services growth of 8% to 9% in the December quarter and said it expects costs from server-based Siri AI to add pressure, while CEO John Ternus outlined plans to sell expanded access to some AI features. The company did not disclose pricing or a release date for that access. The forecast follows 10% services growth in the September quarter and signals that the business faces near-term pressures even as Apple’s paid subscriptions and several services reached records.
Chief Financial Officer Kevan Parekh attributed the December-quarter services outlook primarily to sequential pressure from third-party licensing and foreign exchange. Services revenue rose 10% to $31.6 billion in the September quarter. Apple said video, cloud services, payments and advertising each reached revenue records, and subscriptions across its platforms exceeded 1.5 billion, growing at a double-digit rate.
During an analyst question about iCloud+ and Apple Intelligence, Ternus said some features relying on server-side models—including Siri AI and intelligent photo editing—would have usage limits. People needing greater capacity will be able to purchase expanded access in the future, he said. Apple did not say which subscription tiers or features would be covered, how much expanded access would cost, or when it would go on sale. Ternus described iCloud as having grown beyond storage, pointing to plans that bundle services such as Apple TV and Apple Arcade.
Parekh said requests to Siri would be handled both on devices and through Private Cloud Compute, with Apple still determining the eventual mix and computing needs. Server inference expenses will be recorded in services cost of sales. Apple also plans to defer part of hardware revenue to account for Siri AI as one of the services bundled with devices. Management expects the December quarter’s gross margin to be 45% to 46%, with higher memory costs accounting for most of the sequential decline and Siri AI rollout expenses adding pressure.
Other results varied across Apple’s hardware businesses. iPhone revenue rose 17% to $57.6 billion and Mac revenue increased 24% to $10.8 billion, while iPad revenue fell 10% and Wearables, Home and Accessories declined 8%. Revenue in Greater China rose 21% to $17.5 billion, driven mainly by iPhone and Mac, according to the company. Apple forecast total December-quarter revenue growth of 7% to 10%.
AI Access Meets Services Costs
The forecast puts two parts of Apple’s services strategy in focus: slower near-term growth and the cost of making more AI features available. Services have become a substantial source of recurring revenue, and the September quarter’s $31.6 billion result and more than 1.5 billion subscriptions show the scale of that business. A lower growth outlook does not mean services revenue is falling; Apple is forecasting continued growth, but at a slower rate than the latest reported quarter.
Charging for expanded AI capacity could give Apple a way to manage demand for features that require cloud processing and potentially recover some associated costs. However, Apple has not said whether paid access will be a separate purchase, part of an existing subscription or tied to particular devices. The financial effect is also not yet known. Investors will be watching how quickly AI use grows, how much processing shifts to Apple’s servers, and whether customers choose to pay for greater capacity.
The company’s gross-margin outlook adds another cost concern: memory prices and AI rollout expenses are expected to affect the December quarter. Apple shares fell about 4% in after-hours trading during the call, according to the report, after executives discussed services and margin forecasts. That move reflects the market’s immediate response, but it does not establish how the forecasts or AI plans will affect results over a longer period.
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From Siri Beta to Paid Capacity
Apple’s AI features are being introduced across a large installed base: the company reported more than 2.5 billion active devices. Siri AI launched in U.S. English beta in September and expanded in October to French, Japanese, Korean, Portuguese and Spanish. Apple says requests will be processed on devices or through Private Cloud Compute, but has not provided the expected share handled by each method.
Ternus described Siri as primarily request-based today, while saying its modern architecture gives Apple room to expand its capabilities over time. He said the company is focusing on security, privacy and user control over information that AI agents may access. The source report also described business uses of on-device AI: Gap is running loss-prevention AI on Mac mini computers in hundreds of stores, while Christie’s uses local models on Mac Studio for productivity tasks, including pricing estimates. Parekh said local processing in those examples avoids cloud token costs.
The December outlook also reflects pressures beyond AI. Parekh said App Store performance was similar to the prior year, despite double-digit growth in third-party paid subscriptions and more than one billion average weekly visitors. He cited mobile gaming weakness, changes to the App Store business model in some countries and a U.S. court ruling affecting transactions through external links. Apple expects gaming weakness to continue into December. Meanwhile, Chief Operating Officer Sabih Khan said memory availability would restrict Mac and iPad shipments during the quarter, while advanced-chip manufacturing constraints were easing.
““There are going to be some usage limits on features that rely on server-side models, which include Siri AI and intelligent photo editing, some other things like that.””
— Apple CEO John Ternus
Pricing, Demand and Cloud Load
Apple has not announced the price, launch date or purchase structure for expanded access to server-dependent AI features. It is also unclear which specific features will have usage caps, how high those limits will be, and whether customers will encounter them in existing iCloud+ plans or through a separate offer.
The company has not quantified how much Siri AI will add to services cost of sales, how many requests will use Private Cloud Compute, or how quickly that balance may change. Management said it is still working out the processing mix and computing requirements. The eventual number of people willing to pay for greater capacity is also unknown, so the revenue opportunity cannot yet be measured from the information provided.
Apple’s December-quarter figures are forecasts, not reported results. The services growth outlook includes the effects of licensing and currency movements, while the margin outlook reflects memory costs and AI expenses. The source report does not provide a breakdown of those factors’ individual financial contributions.
December Results Will Test Outlook
Apple’s next key financial milestone is its report on the December quarter, which will show whether revenue and gross margins fall within the company’s forecast ranges. Investors will also be able to compare actual services growth with the projected 8% to 9% and assess how licensing, foreign exchange and App Store conditions developed during the period.
On AI, the next concrete information would be an announcement of the expanded-access offer: its price, timing, eligible features and limits. Apple’s description of Siri processing suggests that future updates may also clarify how much work stays on devices and how much uses Private Cloud Compute. Until the company provides those details and reports costs or customer uptake, the financial impact of paid AI access remains unsettled.
Key Questions
What services growth did Apple forecast for the December quarter?
Apple CFO Kevan Parekh forecast 8% to 9% services growth for the December quarter. He cited sequential pressure primarily from third-party licensing and foreign exchange. Services revenue had risen 10% to $31.6 billion in the September quarter.
Will Apple charge for Siri AI?
Apple said customers who need greater capacity for some features that rely on server-side models will be able to buy expanded access in the future. The company did not announce a price or launch date, and it has not specified exactly which features or plans will be covered.
How could Siri AI affect Apple’s costs?
Apple said server inference expenses will be recorded in services cost of sales. Management also expects Siri AI rollout costs to contribute to margin pressure in the December quarter, alongside higher memory costs. Apple has not disclosed a separate dollar estimate for the AI expenses.
What did Apple report about subscriptions and services?
Services revenue reached $31.6 billion, up 10% in the September quarter. Apple said subscriptions across its platform exceeded 1.5 billion and grew at a double-digit rate; video, cloud services, payments and advertising each reached revenue records.
When will Apple’s AI pricing and costs become clearer?
Apple has not provided a date for announcing expanded-access pricing. Its December-quarter results will offer a first test of the current services and margin outlook, but the company has not said when it will report a detailed breakdown of Siri AI costs or paid-access demand.
Source: pymnts.com
