Apple Needs ‘Time’ to Upgrade Siri; Services Revenue Dampened by Cost Hikes

Apple CEO Tim Cook said Thursday (May 1) that the company needs “more time” to upgrade Siri’s artificial intelligence (AI) capabilities, as the AI assistant faces criticisms that it lags behind rivals such as Amazon’s Alexa and other voice-enabled AI chatbots.

“We need more time to complete our work on these features so they meet our high-quality bar,” Cook said during Apple’s earnings call with analysts. “We are making progress, and we look forward to getting these features into customers’ hands.”

When pressed by an analyst to specify reasons for the delay, Cook said that “There’s not a lot of other reasons. … It’s just taking a bit longer than we thought.”

Apple had faced criticism about the progress of Apple Intelligence — Apple’s AI initiative — which experienced snafus, including hallucinating news alert items. Siri, in particular, was criticized for lagging behind competing chatbots, despite being a pioneer as the first AI assistant embedded in a smartphone.

Siri co-designer Luc Julia has told PYMNTS that Apple’s obsession with perfection likely hindered Siri’s progress. Generative AI is famously hard to completely control because it hallucinates, said Julia, who is also the chief scientific officer of Renault.

However, Cook said that consumers appreciate Apple Intelligence. In the markets where the company launched the AI system, sales of the iPhone 16 family of smartphones were stronger year over year compared to markets that did not have Apple Intelligence, he said.

During the earnings call for its fiscal 2025 second quarter ended March 29, 2025, several analysts asked about the impact of tariffs to Apple’s top and bottom lines.

Cook said that Apple expects to see a $900 million increase in costs due to tariffs for its fiscal third quarter based on the current tariff policy.

“We estimate the impact, assuming that the current global tariff rates, policies and applications don’t change for the balance of the quarter, to be $900 million to our cost,” Cook said.

Cook said India is now the source of “most” iPhones sold in the U.S. He also said that “almost all” of Apple’s iPads, Macs and Apple Watches sold into the U.S. are sourced from Vietnam.

As for sales to the rest of the world, those Apple products would be sourced from China, Cook said.

The CEO also said Apple had been diversifying parts of its supply chain to mitigate the risk from relying too much on one country. Cook said he expects to continue this policy.

Shares of Apple fell 4% to $204.86 in after-hours trading.

Read more: Apple Aims to Mitigate Tariffs by Sourcing All US-Bound iPhones From India

A day earlier, a federal judge rebuked Apple, saying the company is in “willful violation” of a 2021 injunction stemming from the Epic Games lawsuit. The court had previously ordered Apple to let users pay App Store developers directly through a third-party link to avoid the 30% commission Apple charges developers.

Instead, the judge said, Apple assessed a 27% commission to app developers for external sales. Apple also put up pop-up screens warning consumers that paying outside the App Store might not be secure.

Judge Yvonne Gonzalez Rogers then ordered Apple to stop collecting commissions outside the App Store and stop sending these messages to consumers. The judge also asked the U.S. attorney in the Northern District of California to investigate Apple for criminal contempt.

Cook said he disagreed with the judge’s ruling. “We’ve complied with the court’s order and we’re going to appeal.”

However, Cook declined to comment on the Justice Department’s antitrust lawsuit against Google for its search monopoly, which would have a big impact on Apple’s services business. Google pays Apple a reported $20 billion a year to be Safari’s default search engine across iPhones, iPads and Macs.

Separately, Apple is also facing its own antitrust lawsuit, brought about by the Justice Department in March 2024, saying that it allegedly used its smartphone monopoly power to improve restrictive contractual terms on developers and withholding critical access points.

Meanwhile, the EU fined Apple and Meta last month for violating its Digital Markets Act. Apple allegedly prevented developers from giving consumers other options to pay for apps besides through the App Store.

In the quarter, Apple earned $24.78 billion, or $1.65 per share and up 8% from a year ago, on revenue of $95.4 billion, up 5%. Wall Street analysts expected Apple to earn $1.62 per share on $94.4 billion in revenue for the just concluded quarter, according to FactSet.

IPhone revenue was up 2% to $46.8 billion in the quarter, while Mac revenue rose 7% to $7.9 billion. IPad sales were up 15% to $6.4 billion. Wearables, home and accessories revenue fell 5% to $7.5 billion.

In the like quarter year ago, Apple reported net income of $23.6 billion, or $1.53 per share, on revenue of $90.75 billion.

The post Apple Needs ‘Time’ to Upgrade Siri; Services Revenue Dampened by Cost Hikes appeared first on PYMNTS.com.