Apple Services Revenue Led by Google Search Default

Apple services revenue reached an all-time high of $26.6 billion, with double-digit growth in both developed and emerging markets, according to the firm’s latest quarterly financial report. By way of comparison, iPhone revenue was just shy of $47 billion.

Overall, services revenue is about 25 percent of Apple total revenue, while iPhone sales are about half of Apple total revenue. 

Estimated Apple Services Revenue Sources (FY 2024)
Source	Estimated Revenue ($B)	Percentage of Services Revenue
Google Search Deal	20–26.3	20–27%
App Store	22	22%
Apple Music	10	10%
iCloud	10	10%
Apple Pay	3	3%
AppleCare	2.5	2.50%
Apple TV, Other Subscriptions	3	3%

Most observers would agree that services revenue is important for Apple to smooth out revenue trends, as subscription revenue is predictable and recurring, compared to one-time hardware purchases.  

Services also tend to have significantly-higher profit margins. While iPhones have healthy gross margins (typically 30 percent to 40 percent), services can exceed 70 percent margins. Services revenue growth rates also are higher than device revenue, while services create more ecosystem lock-in for Apple as well. 

Meta Quantifies AI Monetization

Though we might still note that artificial intelligence benefits often are somewhat indirect or hard to measure, Meta joins the ranks of firms pointing to financial benefits from AI. 

“AI is transforming everything we do,” said Meta CEO Mark Zuckerberg. Specifically, he sees “improved advertising, more engaging experiences, business engaging experiences, business messaging, Meta AI and AI devices” as opportunities.

“In just the last quarter, we are testing a new ads recommendation model for Reels, which has already increased conversion rates by five percent, and we're seeing 30 percent more advertisers are using AI creative tools in the last quarter as well,” he noted. 

“In the last six months, improvements to our recommendation systems have led to a seven percent increase in time spent on Facebook, a six percent increase on Instagram, and 35 percent on Threads,” Zuckerberg added. 

So even if the impact is somewhat indirect, Meta's advertising revenue, which constitutes the vast majority of its total revenue, continues to benefit significantly from AI-driven enhancements. In the first quarter of 2025, Meta reported revenue of $42.31 billion, a 16 percent year-over-year increase, with advertising revenue estimated at around $40.57 billion. 

That does not necessarily mean all the upside was because of AI, but AI-powered tools, such as the Advantage+ marketing service, have improved ad targeting and relevance, leading to a 70 percent growth in Advantage+ adoption. That might be said to have driven higher ad impressions and an 11 percent increase in average price per ad. 

Likewise, AI-driven content recommendation systems have increased user retention and engagement, with an eight-percent increase on Facebook and a six-percent growth  on Instagram. 

While Meta AI is not yet a significant revenue driver, Zuckerberg has talked about plans to monetize it in the future, potentially through ads or a premium subscription model. 

Meta’s commentary complements that of Alphabet, which in its latest quarterly financial report talked about AI  monetization as well.

Amazon, Alphabet, Meta, Microsoft Capex is 3.5% of Global Total

In one sense, capital investment in data centers and artificial intelligence by Amazon, Alphabet, Meta and Microsoft represents only about 3.5 percent of total global capex in any given year. On the other hand, that level of investment is quite high, compared even to traditionally capital-intensive industries including electrical utilities, communication service providers and energy. 

But what might be notable is that the 3.5 percent global share of capex is generated by just four firms. 

Company/Industry	2025 Capex (USD)	Main Investment Focus	Notes
Amazon	$100 billion	AI, data centers, cloud infrastructure	Driven by generative AI and AWS expansion1.
Microsoft	$80 billion	AI, data centers, cloud infrastructure	Major push for AI-enabled data centers and U.S. infrastructure4.
Alphabet (Google)	$75 billion	AI, servers, data centers, networking	Focus on technical infrastructure for AI2.
Meta (Facebook)	$65 billion	AI, data centers, computing infrastructure	Largest capex ever for Meta, focused on AI3.
All Global Industries	$9 trillion	Infrastructure, manufacturing, utilities, transport, etc.	Includes capital projects across 49 largest economies5.

Of course, it matters what products, in what industries, are used for the comparison. “Energy” might be as “low” as $115 billion by some estimates, while other analyses encompassing all parts of the energy value chain might conclude that the industry spends as much as $500 billion to $600 billion annually. 

source: Refinitive, Seeking Alpha 

Sector/Company	2025 Capex (USD)	Notes
Amazon	$100 billion	AI, cloud, logistics, data centers
Microsoft	$80 billion	AI, cloud, U.S. infrastructure
Alphabet (Google)	$75 billion	AI, data centers, technical infrastructure
Meta	$65 billion	AI, data centers, computing infrastructure
Combined Big Tech	$320 billion
Oil & Gas (Global)	$500–600 billion	Exploration, production, refining
Automotive (Global)	$150–200 billion	Manufacturing, R&D, EV transition
Telecom (Global)	$300–350 billion	Networks, 5G, fiber
Utilities (Global)	$700–800 billion	Power generation, grid, renewables
Semiconductors (Global)	$200 billion	Fabs, equipment, R&D
All Industries	$9 trillion	Infrastructure, manufacturing

The point might be that digital infrastructure capex now rivals that of other forms of infrastructure.

What Will DoJ Require of Google?

Google is now in the “remedies” phase of an antitrust lawsuit filed by the U.S. Department of Justice, as Google has been found to be a monopolist in the search market. 

So what matters now are the remedies. DoJ has been floating remedies including

• Prohibiting Google's exclusive default search agreements, such as the multibillion-dollar deal with Apple to be the default search engine on Safari

• Forcing Google to divest its Chrome browser

• Requiring Google to share certain search data with competitors to level the playing field. ​

A final ruling on the remedies is expected by August 2025. ​An important issue is the relevance of past remedies imposed on Microsoft in the past. Basically, the case challenged Microsoft's bundling of its Internet Explorer web browser with the Windows operating system. The case culminated in a 2002 settlement that focused on behavioral remedies.

Key behavioral remedies included:

• API disclosure to third-party developers

• OEM flexibility, allowing original equipment manufacturers to install non-Microsoft middleware (Netscape Navigator)

• Set non-Microsoft middleware as defaults (a different default browser)

• Remove or hide access to Microsoft's middleware

Also, Microsoft was required to license Windows on uniform terms, meaning it could not provide preferential treatment to partners that agreed to exclude competitors.

If Google tries to follow Microsoft's playbook by arguing for behavioral remedies only, it is likely to  face a more skeptical reception than Microsoft did in the early 2000s. Regulators today are more likely to argue that behavioral remedies alone will not work.

In particular, the divesting of the Chrome browser has been proposed. That could have implications for artificial intelligence apps for several reasons, including the role played by the Chrome browser in driving traffic to Google’s important search engine. 

Losing the Chrome browser would likely require Google to do more cross-platform deals. 

For AI assistants, search provides real-time information beyond training data cutoffs, allowing answers including current information. Search also allows models to retrieve specific information on demand. Integrated search also helps models overcome hallucination issues by verifying facts. 

Search might also be a platform for creating new “super apps” that offer many functions within a single application. 

So the actual remedies will matter. 

Alphabet Suggests AI is Being Monetized, Already

Most observers want to know how  AI contributes to revenue growth at Alphabet and other firms, and the most-recent earnings report issued by Alphabet on April 25, 2025. So what might we conclude, based on that call?

Clearly, Alphabet management positioned AI features as central to Alphabet’s revenue and profit growth.  In the key search business(AI Overviews and Circle to Search), management pointed to significant ad revenue driven by increased engagement, with “stable” monetization. That is presumably meant to reassure investors that monetization, even if indirect, is not cannibalizing traditional search. 

Likewise, the Gemini language model, which powers both consumer and enterprise products, boosts Cloud and Workspace product adoption.

Obviously Waymo leverages AI for operational efficiency but is not a material revenue source, yet. 

The takeaway might be that AI monetization, especially for AI Overviews and Circle-to-Search, already is happening, even if indirectly, and does not cannibalize the core advertising business, which has been a concern analysts and investors have noted. 

Gemini’s enterprise applications likewise are said to be driving Google Cloud revenues. 

AI Overviews, powered by Gemini might have contributed to  double-digit revenue growth in search, with first quarter 2025 Search revenue reaching $50.7 billion, up 9.8 percent year-over-year. 

Ads integrated into AI Overviews are monetizing at roughly the same rate as traditional Search ads, Google indicated, suggesting no cannibalization of revenue.

In Google Cloud, Gemini powers the Vertex AI platform, which saw a five-fold  year-over-year increase in customers in the fourth quarter of  2024 and a 20-fold growth over the full year. Google Cloud’s $12.26 billion revenue in the first quarter of 2025 shows revenues up 28 percent  year-over-year). 

As often seems to be the case, AI monetization is largely indirect, contributing to the growth or profitability of other products using AI. 

Will AI Bring New Business Models?

One of the surprising internet developments has been the creation of new business models for technology firms, ranging from Alphabet and Meta to Apple. The most surprising development is ad-supported technology driven by content operations. 

Ad revenues are a major driver of revenues for Google, YouTube, Meta and even Amazon, for example. 

source: EMarketer, Seeking Alpha 

And one might dare to expect that at least one or two new models could develop with artificial intelligence as well, beyond subscriptions, pay-per-use, application programming interface licensing or insight-based monetization.

Indirect models likely also will be prevalent, as AI is expected to be used by most applications and processes, eventually. So indirect forms of revenue (customer acquisition, retention, profit margins, market share) might be the upside in many cases.

Should a major new business model emerge, we are likely to be taken largely by surprise.