Tech giant Apple reported record revenue from its services businesses, which include payments and iCloud, and is going knee-deep in its generative AI foray. 

“We set an all-time revenue record in services with $23.9 billion, up 14% year over year,” Chief Executive Tim Cook said during the company’s second- earnings call May 2. The quarter ended March 31.

Apple sees continued growth in the “services business as we continued to see increased customer engagement with our ecosystem,” Chief Financial Officer Luca Maestri said during the call. 

The company is expanding Apple Pay services to emerging markets, where the company sees growth opportunities, Maestri said. 

In the past year: 

• Apple introduced Tap to Pay in the United Kingdom in July 2023, in partnership with NatWest and Revolut; 
• JPMorgan launched a Tap to Pay feature in August 2023 to make iPhones point-of-sale terminals; and 
• Apple joined forces with Brazilian fintech CloudWalk in September 2023 to allow customers to turn their iPhones into terminals to initiate and accept payments. 

Cupertino, Calif.-based Apple expects its services segment to grow as it plans to integrate AI capabilities into its offerings, Cook said. 

THE BIG PICTURE: Apple, which joins tech companies Amazon, Google, IBM and Microsoft in developing generative AI products and features, reported that the company is well positioned to capitalize on the tech. 

“We are making significant investments, and we’re looking forward to sharing some very exciting things with our customers soon,” Cook said.  

The company has spent more than $100 billion on research and development in the past five years and expects its capital expenditure to rise in 2024 as it develops gen AI features and products, Maestri said. 

Apple will look to share costs of developing AI with vendors, an approach similar to what the company took when developing its cloud infrastructure, Maestri said. 

BY THE NUMBERS: In Q2, Apple reported: 

• Operating income of $27.9 billion, down 1.4% YoY;  
• Net income of $23.6 billion, down 2% YoY; and  
• Total operating expenses of $14.4 billion, up 5% YoY. 

WHAT THEY ARE SAYING: Apple is developing silicon-based chips to focus on “integrating hardware, software and services to fully monetize the gen AI opportunity,” according to a Bank of America Securities report. 

The company can generate higher revenue by integrating gen AI in its new generation iPhones in fiscal 2025, the report stated. 

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