Upgrade - 575: I Love to Accelerate a Roadmap

Episode Date: August 4, 2025

from relay this is upgrade episode 575 today's show is brought to you by Squarespace delete me and Oracle my name is Mike Hurley and I'm joined by Jason snow hi Jason snow hi Mike Hurley it's good to be here. Oh Jason. It's a summer of fun. Come on, be more happy. It's a summer of fun. Summer of fun! And we get to do your favorite thing today. Jingles.

We just did a little... Yeah, it's true we have those. I was just doing a little ear like, oh hi Jason. Hey, it's my buddy Mike. It's my pal Mike. We're just talking. We're just chatting. We would like to thank friend of the show, podcaster Lex Friedman. not the Fridman. Other one. The other one for making our jingles.

Lex made our jingles last year. We love these jingles so much, we want to use them again, as well as being a wonderful podcaster and friend. Lex also makes wonderful word games over at Lex.Games, which we recommend people go and check those out as a thank you for Lex making these wonderful jingles for us. It is the money time.

So we're talking about Apple's earnings today. That's why we're doing it because we always play the jingle. Yeah. And yesterday we were like, why don't we just break out all the jingles? So Jason, why don't you take it away? Oh, yes, we have we have our first jingle. Okay. I'm not supposed to introduce the jingles.

They're just supposed to happen magically. But I just I'm a little rusty here Okay, a little rusty As the jingle says it is in fact time for snow talk And I have a question here from Bruce who wants to know Jason on the Apple results YouTube video that you and Dan made last Week you were drinking what appeared to be tea with no dairy. Was that green tea, regular orange Pico tea? If it was the latter, do you drink regular tea without milk? I had to look up orange Pico because it's apparently a kind of tea that is

labeled on the box of like Lipton tea or something in America. I, the tea I drink does not have that as a descriptor. I don't know. I'm not a tea expert to say what the difference is between these different ways of making tea. But the, the answer is on the six dollars video, I think I was, I think it was a Darjeeling, but usually I am drinking an English breakfast. And although when I started drinking tea, it was as a honey delivery mechanism. Uh, today it, I have no honey in it. It's just black.

There's no dairy. My wife has milk in her tea, but I don't. That's the answer. You drink like English breakfast tea without milk. Or honey, yes, correct. Wow, that is pretty hardcore. I don't think a lot of people do that. Like, I mean, I like Earl Grey,

which I drink with no milk, um, which is the way to drink Earl Grey. Uh, but I don't often hear of people drinking kind of just like English breakfast tea black. So that's pretty cool. You're a tea fan, big tea fan. Well, that wasn't, that was an easy way to cut some sugar out of my diet was the, the honey. And I thought I could do that. I can probably just will myself to not have honey with the tea and it turns out I can and I did and so I don't have honey in my tea anymore. You'll have to see it. If you'd like to see a quote if you'd like to ask a question and see a question be answered if you watch this on YouTube you can go to upgradefeedback.com

and you can send in your question just like Bruce did Just drink some tea Should just follow up Yeah, let's do it. We don't you know have a jingle for this, but the prompt did so up. Oh, there it is Thank you so much You put this in here there. There is a paramount plus sonic logo There is a paramount plus song that will go so memorable that I forgot that it existed The challenge here is some like Disney Plus song that will go so memorable that I forgot that it existed. The challenge here is some... Disney Plus plays you the song when you launch the app, but most of them it's just a pre-roll.

And Paramount Plus doesn't do it, but it does a pre-roll, and I just forgot. So here it is. Whoa, that's dramatic at the end there. It's got an orchestra hit at the end, which I really admire. And it has actually kind of a melody. I think this is actually a pretty decent thing because it's not just a, maybe this is why I didn't think of it. It's not just a gaseous cloud with like a throb in the middle of it, which so many of

these things are. So I don't know. Hang on a second. Hang on a second. Right? Where it's like... A gaseous cloud with a throb in the middle of it. That's how we describe these sonic logo. That's how I decided to describe it there.

Yeah. Because there's this like... thing. And then there's like a bong or a woo or whatever it is, just some kind of thing in the middle. Let's move on Jason's now. Do do do do do. Yeah. All right.

Anyway, I had to give some audio followup on that one. So I am happy that I did it. Gosh, those horns are aggressive. I know. I love everything about them. About the aggressive horns. Apple has officially filed their response to the US Department of Justice's lawsuit against their claim that the company is a monopoly power in smartphones. They kind of have five points, and I think these are the five points that the DO is a monopoly power in smartphones. They kind of have five points,

and I think these are the five points that the DOJ made, and Apple have made kind of five points of their own. I wanna kind of just summarize their points, because there's like very legally. So they say that super apps do exist on the app store. So that's not a bad thing that they block super apps. A lot of the discourse when this got filed was people pointing out that some of these arguments seemed strange because it seems like Apple either never outlawed them or had

recently stopped outlawing them. And so that's, it's very funny here that most of, I mean, Apple's responding in a way that I think a lot of us did, which is it felt like that that the DOJ is filing was a little bit out of time In that they had done these five things four of which they hadn't Weren't doing anymore If they had ever done them, but yeah There was something like that. But for example this one with the super apps thing Apple made a guideline change a month later that would allow them. So

the DOJ suit was filed in March of 2024. And then in April of 2024, Apple allowed for mini games and mini apps. And mini apps. Yeah, but I think also, if I recall correctly, there were also a couple examples in other countries where there were super apps that were actually in the

app store. Yes. Like in Singapore, I want to say. Oh, they're like in Asia, like everywhere, like WeChat, LINE. Super apps. They exist, but it's one of these things is like they exist, but technically breaking the guidelines. Technically not allowed, but they have to be there because you can't not have LINE.

So then Apple changed the guidelines, which is a theme of, because the next one is- It is a recurring theme. They say that they do, in fact, allow game streaming apps, but they didn't at the time. They didn't. But they have since. They say that third party messaging apps are widely available and Apple is not degrading them.

Yeah, that was always kind of a dumb one. Yeah, that one doesn't make any sense. They say that third party smartwatches do have access to data, especially when paired with a companion app, and that they can share some functionality that Apple has developed and they are continuing to expand features to make this work better. This is the one where they're kind of full of it. They want to put up their strongest argument, but I think Eric Pebble did the best job on like listing off all the ways that the Pebble was not going to work on the iPhone like it works on Android. And that's because Apple withholds all these things that the Apple watch can do that other smartwatches cannot do. And this isn't just

smartwatches either, right? It's like a whole category of wearable devices. Fitness trackers and yeah all sorts of stuff that don't have the same access that the Apple product does. The MetaRay bands, like they work way better on Android than they do on the iPhone. In fact Apple's response here, so you summarized it as they are continuing to expand the features. I read this as yeah but we got some of it and we're working on it. Yeah. Like that was sort of what they're saying. We're working on it. I'm working on it here. So yeah. Yeah. They also say that they are not holding back digital wallet and tap to pay functionality from the NFC chip. And again, they're like five months later had a press release. So here's my question. If the Department of Justice sues you over something and then you change your behavior,

change a bunch of things. I mean, we don't, I mean, I guess you probably gonna have to get the lawyers in here, but because it's like if I stole a bunch of stuff and then and then then, and then I was also going to call, and no, and then I just gave it back. I still committed the crime, right? My, my, my feeling here is that what is that there are two things on the line, right? There's there's financial penalties for behavior and there's, um, uh, demand to change behavior. And I feel like what Apple's doing here is saying,

we've changed our behavior. So these changes aren't relevant. And I think what they're arguing is, we don't need to be forced by the court to change our behavior because we changed our behavior. And we'll see how that plays. But I do think the other part of this is, Apple could be fined for their previous behavior, right? There could be a fine

based on their previous behavior, but their behavior has changed so that that isn't, you know, maybe it isn't as severe or whatever, or maybe they get fined, but they don't. And if this leads to a settlement, I mean, Apple's argument here is very much like, we don't tell us what to do because we're already doing everything. And then then you know, maybe they write them a check and then they're done We'll see but I I think I think this this response it's Apple, right? and and there were I saw some hilarious analysis where people are like there's a paragraph where the DOJ has listed facts about Apple like literally Apple makes these products and The Apple responses,

Apple denies all allegations about this. It's like you deny statements of fact about your company, bananas. So good for you lawyers. But I think that it is telling, isn't it, that as we thought at the time, and certainly in the subsequent months, that Apple was already moving in this direction with a lot of stuff that the DOJ was alleging, because of pressure,

often from other groups in other parts of the world. And so like, yeah, but you're right. The question here is, is this enough? Is getting sued and Apple going, oh, no, sorry, we fixed it. We're working on it. Is that enough or not? I wonder. I don't really know. Obviously, I have no idea. I don't really know where this case is going to end up. I do want, here's my conspiracy theory for you here.

I love conspiracy theories when it comes to this kind of stuff. So from here, this case moves to discovery. And discovery has been really damaging for tech companies right in the last little while. I wonder if they made some of these changes because they know as soon as it gets to discovery phase, it's all going to start to fall apart. Like that there is conversations where they're like, by all means we can never open the NFC because it will destroy the benefit of Apple pay. And so they're like, Oh, this is going to be busted open. So we should change this.

We also don't know. Like this is the department of justice. It's not the department of justice that filed the claim, right? It's, it's, it's the Trump department of justice. And is there a great appetite to beat Apple up, beat a great American company up? Oh, it was the previous administration, right? Is what you're saying over. Yeah.

Over something like this, or, or does this lead to a settlement of some sort? I don't know. I don't know how they're feeling about this. I'm gonna have money for the library, we'll take care of it. That's all it takes. Yeah. President Trump has announced that the US will impose a 25% tariff on goods from India. Who knows, right? Like with the tariff stuff, it's just like, you never really know. You know, Mike, Mike, last Thursday, because we're going to talk about Apple results in a little

bit, last Thursday, Apple kept talking about, well, like, we're going to offer some guidance, but this is only if things don't change. And I woke up the next morning to headlines about how things have changed. So yeah, who knows? Who knows? The reason we mention this is because this is now

like a running question of where and how iPhones will be made. Because the US government would love it if iPhones were made in America. They would love to bend the laws of physics and reality to make that happen. It's not going to happen. So there's a bunch of terrorists in China. And so Apple were like, Hey, we're going to make our iPhones in India. And now no one, I guess nobody knows where they're going to be made.

I will say I was reading about this. I was wondering like, what is the effect? And then went to see if anybody had made any statements. And the best that I could come up with was there was a Reuters report where they were talking with like some analysts were talking to them about what potentially might happen. And they say, I want to read this quote. Despite the tariffs, manufacturing iPhones in India would continue to remain cost competitive for expenses lower than when Apple began production there eight years ago,

narrowing the cost gap with China. And Sarva in the discord posted a link to a story that points out that they exempted a bunch of categories from tariffs at some point and that that but like, this is the thing is like, so does that exemption continue even though there's now a tariff? Because there's all this kind of complexity about like what's getting tariffed and what's not. And it's a whole thing.

And Apple, we'll get to it in a little bit, but like this is starting to hit Apple and Apple is talking about it. And they are careful to talk about it in a really kind of neutral way of their headwinds, right? Like, it's like, I don't know where they came from. They just blew in off the ocean, and we gotta deal with them, right?

And that's, which is probably the smartest way to deal with that when you're talking publicly about tariff stuff. But it's starting to affect things. I mean, I know a lot of the Nintendo stuff is made in Vietnam, and they just raised the price of all the Nintendo hardware It not to switch to pricing for the Nintendo switch to system remains unchanged the accessories went up again That's the second time and all the other Nintendo stuff every other Nintendo thing has gone up in value. So so that's interesting

All right. Well, so it's so it's everything but everything else. And we'll see how it goes. It's a good point about they got that exemption, right? But that exemption was always felt like a fun now exemption. Right? It was like, oh. Yeah, who knows? It could be undone at any time.

And if it gets undone, there's now a 25% tariff potentially on goods from India. So the reporting that I'd read still said that the previous said that like the, the previous iPhones, like the iPhones currently on sale between, I think like March and May, basically what came from India for America. It's gonna be interesting to see, cause I mean, there was also that reporting a while ago, right? If like they were struggling to make newer products because all of the

engineers from China were being recalled to China from India, from the Foxconn factory. So like, I don't even it would be intriguing to like where do the iPhone where does the iPhone 17 for US customers actually end up coming from? That's going to question. And in the world will there be there won't be another okay so I have a question for you the with the earnings stuff because it always works on a little bit of a delay. The iPhone earnings, is that the next report or the one after? Almost not at all. Okay.

Almost not at all. There will be, there will be a couple of weeks of iPhone sales, probably in the next quarter. They will be able to characterize and forecast how iPhone sales are going, because they will, they will actually announce that in what, November. So they will have like six weeks of sales data, but the numbers themselves will only contain a couple weeks of sales data. So they'll be able to characterize it, but you won't necessarily see it in the charts

as a huge change until the holiday quarter. So if there was a tariff impact on the iPhone 17, they would communicate that in the next results call? They might. Would it be the expectation? They might. They might. Okay. Wait and see.

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Our thanks to Squarespace for their support of this show and all of Relay. Money, money, money, money, who has all the money? Money, money, money, money, who has all the money? Money, money, money, money, who has all the money? Money, money, money, money, who has all the money? It's Apple. They do in fact have all the money. In fact they got themselves in Q3 2025, $94 billion of revenue.

Have they done a hundred? Has that happened before? On that quarter? No, on holiday quarters, absolutely. On holiday quarters? Yeah. Yeah, I'd forgotten about that. Yeah, what Dan Moran was observing that I thought was a really great when we did this video on Thursday night after the results, it's on YouTube, people can watch it and watch me drink tea without milk, is when your boring quarters are 94, 95 billion, this was 94, which is a record for the third fiscal quarter, we are perilously close to Apple routinely, boringly having hundred billion dollar quarters. Right, just the

average, like the regular average quarter. And just the average, like the regular, regular average quarter. Yep. And just, just to compare, like a couple of years ago, it was 81. Right? And this is the, it's this creeping up, I wrote about this on Six Colors, is like the ratchet that like, when you're not noticing, because they're small amounts, but Apple's so huge now that even small percentage increases all add up and the business just gets bigger and bigger and bigger and it has more room to spread because it's so huge and it's got so many users who are like iPhone users, and they always say this every quarter,

it's like half of Apple Watch buyers were new to the Apple Watch. It's like, well, that seems bananas, but also you have to keep in mind the vast number of iPhone users out there. And most of them probably haven't bought an Apple Watch. And it's a natural place for them to go. Or they had a huge boost in Mac sales in China and I thought well that's another consequence of you sell a lot of iPhones in China and then people need to buy a computer and they're like well I love my iPhone I'm gonna get an Apple computer too and they get a Mac. So I think you see like when they talk about their install base being an all-time high like this is one

of the ways that Apple just kind of keeps increasing its revenue and just growing in a way that is not dramatic, but it just keeps growing because there are so in most, in most product categories, there's plenty of room for Apple to sell more products, right? Like there are plenty of iPhone users who don't have Apple watches and don't have Macs, for example. And then, yes, there are also plenty of smartphone users who don't have Apple watches and don't have Macs, for example. And then, yes, there are also plenty of smartphone users who don't have iPhones, so that's an opportunity for them too. But there's lots of room around the margins for them to just

keep picking up selling an additional product to people who only have an iPhone or something like that. And that is like what you're saying there is something can be think of a thing, which is obviously painfully clear, but it's just like fascinating when you think of it in these terms that Dan has put forward of like every iPhone customer will buy another iPhone. Right? Right. And so you're slowly bringing more people in. Yes. But then you just keep selling more and more iPhones forever and ever and ever. Like you just keep selling them. I can know it's such an obvious point. Like when you put it so clearly of like, why do they keep making so much money? Well, it's because they bring in more customers and then those people will

buy more iPhones and you just keep getting bigger and bigger and bigger forever. And a certain percentage of people who have an iPhone will eventually buy an Apple Watch. Yes. To the point, and the numbers are so large, the numbers are so large of iPhone buyers that they can toss off a figure like half the Apple Watches we sold last quarter were to people who had never bought an Apple Watch before. Ten years on, they're still finding an enormous number of Apple Watch buyers who are only coming to the Apple Watch now. You know, and that's an iPhone accessory, so they have to be iPhone users. Or you'd be really sad. I mean, I guess you could always buy one, but it would suck.

Yeah, it would be. It would be not so good. So, um, so I just think that that has something about Apple scale in it, that there are so many people. If you, if you did the math of like how many people out there are iPhone users who haven't bought an Apple Watch yet, it would be an enormous amount. This is what I always say about the Mac, like I love the Mac, but you have to understand that if you look at the scale, there are like, the majority of iPhone users don't have a Mac,

because they can't. There are way more iPhones than Macs in use, right? Like you can't, it doesn't work that way and so yeah, it's it's a It's just interesting to see so and that was just where my thoughts went when Dan pointed out like wow This is a routine quarter. There was almost a hundred billion. It's like yeah Of like the growth and how it grows faster and faster So I think part of the reporting here was that iCAPA was sharing,

they've produced their three billionth iPhone. It was like a news beat that was, I think, around the earnings, right? And I've got a quote from Alison Johnson's piece on this on The Verge. The iPhone, the original, was introduced in 2007, and the company reached one billion iPhones sold nine years later in 2016.

Getting to two billion took five years. From there, it's been four years to sell another billion. So it just keeps increasing. So in theory, they get to 4 billion iPhones in three years from now, and 5 billion iPhones in two years, right? It's just exponentially growing. Infinite iPhones.

Yeah. Yeah. Yeah. I mean, this is the thing, because even if, I mean, there's some reduction because the cycle has lengthened, but you also have growth. And as long as you have growth and you have renewal of the existing install base and they're mostly happy and they're mostly buying new iPhones, then it just keeps accelerating. And so, yeah, they announced on the analyst call that they produced their 3 billionth iPhone, which Dan and I were speculating during our video, what happened to the 3 billionth iPhone?

Do they intercept it? Or does it go out? And I thought Willy Wonka-like, maybe there's a golden ticket inside, and you get to come to Cupertino and buy your own lunch at Cafe Max or something like that I don't know but as we'll get to in a in a in a further segment on this episode there was like an all-hands the next day at Apple and Tim Cook had the three billionth iPhone oh that's a good tidbit so they

intercepted it do you reckon that that that iPhone is now kept? Like essentially Apple have bought that iPhone and like they're not actually gonna ship that to a customer. I mean, my understanding is that at the all hands, he said, what do you think we should do with it? Okay. Can't wait to see what we do with it.

It belongs in a museum. I guess so. I guess so. Do you remember, I just came up on the, on a quizzes on connected recently like you saying, what did they do when Apple used to get to like the billion song on iTunes, they give like a $10,000 gift card away. Right. Maybe they should do that. Maybe they should put a $10,000 gift card in that and put it in a museum. It's like we did it, but no one ever gets it. No one, no one gets it, but they intercepted it and I think that's really interesting. We'll take that. We dubbed this

one the three billionth. Sorry. We're keeping it. So the revenue for the quarter was $94 billion, which is up 10% year over year, which is quite a big jump. We'll get into why it's a good reason for this, I think. The iPhone is $44.6 billion up 13% year over year. The Mac was $8 billion up 15% year over year. So this is the reason, right? iPhone and Mac, and it was mentioned that a lot of this was, what do they call it, pulled forward? Because people were worried about tariffs.

Pulled forward, pulled ahead. Yeah, so in starting in April, Apple stores got busy because people started buying. And so there's a feeling that there's an accelerated cycle caused by tariffs for fear that Apple is going to raise its prices, which hasn't happened. But there's that feeling that in the U S in iPhone and Mac, they saw extra sales that would have otherwise happened later because

people are like, Oh, well, maybe I should buy a new computer now. And I heard that from, you know, I've heard that just anecdotally from people in my life where they're like, oh yeah, maybe I should just get one now. I'm thinking about it. And that's really what happens is like, you hear about the tariffs and you're like, oh, prices may be going up.

And you're like, eh, I've been putting off, I've been pondering whether I should buy a new laptop in the next year. Maybe I should just pull the trigger now. And some percentage, you know, 10% or something, I think they said of their sales were like that. So yeah. This would have been slightly less dramatic, but I think it would have still been more or less what it was. I don't think it's a, I think maybe from the back, if the pull forward only happened in the US. Well, they specifically,

they specifically said it was only in the US. I wonder because I mean not to the same level, but I just wonder if people here in that stuff. Are people in the UK worried? I mean, no where else is affected by US tariffs? It's the US. You say that. You say that. You're correct, but I don't think it's necessarily

how people think. Like their news is just full up of people telling them that tariffs are gonna be on their products. And I'm not really sure that under is fully understood I could be completely wrong I'm just pulling this out. Apple specifically said they they saw Mac and iPhone in in the US. Oh I don't doubt that. The iPad did not get this six point six billion dollars down eight percent year-over-year. Yeah tough compare as they say because they released new iPads last year in this quarter and they didn't this time. iPad Pro and what

the iPad, iPad maybe came out this time last year. When they have good quarters, do they call them easy compares or like favorable compares? Cause they always talk about the tough compare. No, they just say we killed it. They just say we killed it. We killed it. It's like, oh, what are we supposed to do, I can't choose when we release products. They just happen. I don't know. Well, I noticed this time that when Tim spoke at the very top of the call, he was like, crowing about the categories

that were up by a percentage. And then when when he gets to iPad, he just doesn't mention it. He just says, Oh, iPad made this revenue and it was great. And, and, and, and doesn't do the, doesn't say down. And then the Kevin Parak, the CFO follows him up and goes through the categories again in more detail. And he's the one who has to say it was down. That's that's iPad revenue was down 8% year over year due to a tough compare. Uh, he throws that all in there, but Tim is Mr. Good News. He's Mr. Happy News.

Wearable home and accessories is at $7.4 billion, down 9% year over year. Category that was rocketing for quite a while and has been in the doldrums for two and a half, three years now. What's going on? This is the Apple Watch category. And AirPods. But it's this is what I'm saying. This is the Apple Watch category. It's going on? This is the Apple watch category and AirPods. But it's this is what is what I'm saying is the Apple watch category. It's the vision pro category, but I think it's the AirPods category and that the AirPods Pro is the winning product in this category. And they haven't released a new version of the AirPods Pro in quite a while.

And let's you know, again, it's a composite category. This is a category that was called other before. So it is what it is. It's a whole bunch of stuff. It's accessories. They mentioned accessories revenue was a tough compare in part because the iPad came out last year. And you're like, wait, what?

But the answer is like Apple pencil, magic keyboard. There's so many accessories that go along with a new iPad and those don't fall in the iPad line, they fall in the wearables home accessories line. And so that makes it a tough compare too. But this is just this this category has gotten punched the last two or three years. And I think it's a combination of things. But I keep coming back to the AirPods like they are wildly successful. I feel like AirPods Pro 2 is the flagship of this entire category and where is AirPods Pro 3? Probably this fall. I think that will be really good for this category. But you know, it also once you have that

explosive growth and you get up to 15 billion in a quarter, you know, I think it's hard to sustain that, right? It's hard to sustain that and so there's just a little bit of a letdown happening here. Yeah, the AirPods Pro 2 were released in September of 2022. And the product category has been down from, actually it went up 10% for that quarter and then it's been down since. And then it's been down ever since. Yeah.

Yeah, we'll see. I mean, some of it is probably inflation of Apple Watch sales and all sorts of other things. I don't doubt that this is a complicated category, but it also is a category that had a huge amount of growth and looked like it was going to be a big growth potential category for Apple. And instead, it looks like it found its level or overshot its level a little bit in its comeback. I think my guess is what happened was that was the popularity of AirPods taking off. Right. And now it's there. And now it's there. And so it just goes up and down now depending on...

It reminds me of the iPad in a way, right? Where like the iPad initially saw so much growth and then it stopped. And I think AirPods could be a similar thing where like they had a real moment and now they're just a product that people have. And it's not like gonna find a bunch more new people all of a sudden. The truth about product cycles outside the context of a Wall Street analyst is,

like the iPad, everybody was like, Oh boy, this is going to be huge because there was this huge initial interest, right? But you know, that's not how reality works. It actually, it found its audience. They sold all of them and then they all kept their iPads for five years. And so it looked like there was this initial surge and then it fell off a cliff and was dead. That's not actually what happened. What happened is everybody who wanted an iPad bought one and then they didn't need a new iPad for five years. Because the iPad has proved to be a pretty reliable business for Apple, but that can

get washed out in the excitement where people are like, oh my God, it's growing so fast. We got to invest in Apple now. And then, oh no, the year over year is down. We've got to get out. It's a flop. And like that is, all that is true, but I think it misses the point sometimes of what's going on in a product category.

I think you're right. And services is at 27.4 billion up quite a substantial 13% year over year. Yep. Who knows why? Right? Like who knows? Severance? Right, like, who knows? Severance?

No, probably not, right? No, it's, I mean, look, it's, services has been up double digits, low double digits, every quarter for the last, what, two years. There was, before that, there was a period of enormous growth and then a year where it was single digit growth mostly because they, I think, tough compare as they would say, because you follow exponential growth with not exponential growth and it looks bad, even though that's not necessarily

that, but like yeah for two years now, they have tuned the, the services engine where, you know, I guess the average for the last two years, it's probably like 12 or 13% growth year over year per quarter. It's, it's pretty amazing. And they haven't, they haven't even been down sequentially in like three years in one quarter. Like they just, it number goes up, like they say forever. Yeah. like three years in one quarter. Like they just, it number goes up, like they say. Forever. Yeah. There's some interesting stuff,

interesting quotes from the earnings call. Thank you to Jason and doing service to the entire blogosphere by transcribing the call. CFO Kevin Parak says, as we move into the September quarter, I'd like to review our outlook. Importantly, the color we're providing assumes that the global tariff rates, policies and application remain in effect as of this call.

The global macroeconomic outlook does not worsen from today and the current revenue share agreement with Google continues. That last part is the important part. I bet. Yeah. Cause I can imagine there is some element, some version of this that always occurs, right? Which is like a similar thing of like, Oh, we're going to see what those trade winds are doing and you know, for X and all that stuff.

Yep. Yep. They, they talk about a lot of that stuff, right? The, the, the, the financial headwinds and how they face them in various ways. But that last item of like, oh yeah, you know, y'all know about that rev share deal with Google, right? We don't stop talking about it. So you must know about it. Like you understand, you get it, right? But they're always talking about it. But I don't think they've ever called it out in a call before as a real serious threat to their revenue. But it is. And it is, it is because that's an enormous amount of money and it's all profit.

Yep. Which means it's not just a hit to your revenue, it's a hit to your margins, it's a hit to your profit. It's a big deal. Now, you know, totally separate conversation, but I believe that it doesn't go to zero if something like this happens, but it certainly would be a tumultuous moment and Apple would have to scramble to replace some of that revenue.

I mean, this says it all. Tariffs are an issue and the global macroeconomic outlook is an issue and what happens with Google is an issue and these are these are the big threats that Apple sees in terms of their forecast for the next quarter. I mean we just spent a few minutes talking about the reliability and you're saying Apple tuning the services segment so that it keeps throwing out these low double-digit numbers. I mean, this is where the Google thing hits

and how much of an impact is it? Do we see a decline? Do we see it get cut in half? Like there is going to be an impact. I agree with what you're saying, they will find a way to fill it, but I don't think that's gonna be an immediate thing that they're able to do.

No, it's gonna take time and it's probably not gonna measure up I think those things are both true. And so, you know like that that is going to be If this happens this that will be a very dramatic earnings call Because you know, we said it sir is sir services is like this is the What the stock market loves to see it's the infinite growth segment which look I mean oh I think in time we've maybe lost track services is 29% of Apple's revenue now yes like it was small at first so it's essentially 30% and the iPhone is

just over 45 yeah it's a huge it's a huge portion of the iPhone is just over 45. Yeah, it's a huge portion of what they do. Although I will say the good thing about growing services is that the percentage of Google referral money that's part of the services line is much less than it used to be. Maybe. But still, I think so. I don't think that the Google search revenue has grown at the pace of the category. My gut feeling is that it's probably shown some growth.

And it may even be static or down now, but that Apple has built so much around it in terms of other services revenue. The other thing I wanted to say about this and I did mention this on the YouTube stream with Dan, just as a little shorthand here, there are people out there who talk about services revenue and they say like Apple's becoming a services company. And I have a chart that I started a year ago, which is one of these quarters, Apple's going to make more profit from services than hardware. Yeah.

And I think it's interesting, but that could be, you could read in too much into that and say, oh, Apple's just a services company now. But that's not what the services line is. But I'm gonna state this as clearly as I can. The services line is a way for Apple to make additional revenue from its existing customers. The services line doesn't way for Apple to make additional revenue from its existing customers. The services line doesn't exist without the iPhone.

The services line is at least half iPhone-based revenue, if not much more, because half of the revenue is the iPhone. Apple's customers are primarily iPhone. And as a result, the services line is about Apple taking a hardware product that you buy and then you use for one, two, three, four, five years. And then on top of it, selling you with a margin, with a, you know, whatever, 30, 40% margin. And then on top of that, getting another $100 a year out of you at 95% margin. That's what the services is. So services, the right way to think about services is services is making more money at a higher profit margin from hardware customers because, you know, every now and

then I see somebody who kind of gets untethered and thinks Apple services business is not, not tethered to their hardware and it's not true. It is incremental high profit revenue being generated so that instead of selling somebody a $900 iPhone every three years and saying they're worth $300 a year to us, suddenly they're worth $500 a year to you or $400 or $600. And the last one or two or $300 of that is much more profitable than the phone. And so that's what services is. Yeah, like the services requires a healthy app store, which requires investment in the

iPhone. Yeah, it requires a healthy app store. It requires upselling AppleCare, which they just added a new AppleCare product that is more like this. It is. It is. It is selling iCloud storage. It is selling services like fitness and news and TV plus music. It is. And music. It's all of those things. And it's the Google search revenue. Sure. It's that too. But it's a lot of other stuff too. I just, you know, just keep in mind, like it's built on the back of primarily the iPhone. And so, you know, in a, I'm sure some analyst has done this, but like you could make an estimate of where, what the composition of Apple's install base is in terms of, do they have an iPhone only? Do they have an iPhone? And like, and what are they paying in terms of services? You could probably, somebody could probably do

this as a research project. So I leave it out there for one of those analysts, one of those financial analysts who's just waiting three months to be on a call again. I'm sure somebody could estimate what portion of that revenue could be allocated to iPhone, iPad, Mac. And I mean, I'm pretty sure they could do that. And the answer would be that the iPhone would seem even larger than it is Good point. I have a few quotes from Tim Cook talking about AI in response to some of the questions from the analysts on the call

First up we're significantly growing our investment. We did during the June quarter. We will again in the September quarter I'm not putting specific numbers behind that at this point, but you can probably tell in the guidance that things are moving up. We're also reallocating a fair number of people to focus on AI features within the company. We have a great team and we're putting all of our energy behind it. And then it continues,

we've acquired around seven companies this year and those companies from all walks of life, not all AI oriented. We're very open to M&A, mergers and acquisitions that accelerates our roadmap. We are not stuck on a certain size company, although the ones that we have acquired thus far this year are small in nature.

Basically we ask, but basically ask ourselves whether a company can help us accelerate a roadmap. Yeah, I love to accelerate a roadmap. You take a roadmap and you throw it. You can go fast. The metaphor is, I love to accelerate a roadmap. You take a roadmap and you throw it. The metaphor is, I mean, there was comment in the in the member discord about tough compares like you know, you could your head will explode if you try to parse this kind of language. You just kind of have to translate it for humans. It just it is it is just means whatever it means.

Accelerator roadmap. And I love it. Actually the person who asked that question said accelerate your roadmap. And then Tim picked it right up because they're speaking the same language. Anyway. Yes, good point.

I will accelerate my roadmap. So what is Tim saying here? Well, one thing is it's talking, he's trying to set a narrative about how Apple is doing AI investment. So they're like, they're increasing their investment in R&D. In the current quarter, and then in the past quarter, and in the current quarter, things are moving up in terms of the R&D

budget, he says, we're also reallocating our people to focus on AI features. So we're doing that. And then somebody says, What about M&A? What about buying companies? And Tim is almost a little offended because he's like, Look, we've already bought seven companies this year. He actually said, I think you didn't quote. He's like, we buy a company every several weeks, right? Like we're on it. We're buying companies all the time. You guys don't talk about it, but we're buying companies. We are. This is not what people are asking about. But what he says here, and I think this is, I think this is true. And I think this is,

I think this is true and I think this is both spin and narrative building and true, which is, he wants to explain how Apple buys companies and why Apple buys companies. And I think this is really good. This is one of those rare little moments where you figure this is how Apple behaves from observation and then you see them kind of phrase it in a certain way in a call where you're like, see there, there it is. They're saying what we observe. And so what he said is, we, sorry, for using these terms again, but we're open to M&A that accelerates our roadmap. We ask ourselves whether a company can help us accelerate a roadmap. So what does this mean? I'll translate it now into human. Apple wants to buy a company that helps further its plans. And I think that's important because what Apple doesn't like to do is buy a company that has its own plans and then make those its plans. Apple, and you could say this right or wrong for AI, the way I think it cuts both ways here But what Apple is the way Apple looks at buying companies is will that company take us where we want to go? Not we don't know where to go. Let's buy this company and they'll take tell us where to go

That is not what Apple does so I think that's worth thinking of the next time you hear about Apple buying a company because most of the acquisitions Apple does Are very much like oh we need to do this thing. There's a company that does this thing. Let's just buy them. And now they are doing that thing for us and not, oh, I don't know what we're going to do next. Let's just buy a company and they'll tell us what to do. That's just not how they approach it. But they do buy companies. And he is also saying here, it doesn't have to be a small company company I think that Apple wants to make that clear that occasionally they will spend a huge sum sum of money on a big company But mostly they don't

And I think he's trying to reassure them that if they want to buy an AI company an AI company that is Going to take Apple where it feels it needs to go Strategically, they'll do it and I think that's what Wall Street wants to hear, honestly, but I think he wanted to put it in a context of like how Apple approaches that thing, which is, you know, we will do what we need to do to further our goals and, you know, leaving all the accelerated roadmaps out of it.

I think that's what they're always trying to do. I do think they're on the hunt for AI companies though. I think so. I think in talking about this in this way, to me, I agree with what you're saying, but to talk about it in this way, even referencing like accelerating a roadmap, what roadmap, you know, and so I think that they're trying to signify that they are on the lookout and they will buy. But I would say this, never say never. This is like, so the baseball trade deadline was last week too. And everybody's like, everybody's already got this amazing trade that they're going

to do where a big star is going to come to their team and a blockbuster and most of the trades are boring. And I want to say that it's a little like this too, which is everybody's going to talk about what if Apple buys company you've heard of and maybe they will like, like Tim Cook said, you know, it, it could happen. But I would say the most likely scenario is that Apple will buy AI companies you haven't heard of that are startups that are

doing interesting things with interesting talent that is fitting with what Apple wants to do. And I don't know enough about this space to know who those people are either. But like I would say if there are, if there are companies that are building interesting models, efficient models, models that really want run well on, um, on phone hardware and PC hardware that don't need, you know, that are more efficient or that they had a breakthrough in terms of efficiency. Those are things Apple's going to be interested in. But in my, you know, my guess is that

there are a bunch of AI startups out there. Will that please Wall Street and will that solve some of Apple's real problems with brain that please Wall Street? And will that solve some of Apple's real problems with brain drain and with strategy? I don't know, right? Like, and they could, if they really want to go buy, you know, if they're for sale, buy a big company you've heard of, maybe they'll do that too. But I would say best guess is they will continue to buy companies you've never heard of, but that maybe somebody who's been focused on AI will be like, oh that's I see what they're doing there, that's smart. And that's because that's

generally their playbook, not roadmap, playbook is... Accelerate the playbook? You can accelerate the playbook by buying smaller companies, you know, and so yeah, we'll see. But I mean, he feels the pressure, right? Cook feels the pressure. He has to say something like that out loud. It's because people are asking, everyone is asking, are you going to buy AI stuff? And the two together is like, look, we're working on AI stuff. We're spending more money on R&D. We're retasking our people. And sure, we buy companies all the time. And if it fits with what we're doing, we will look at it, because that's what we do. And he's trying to reassure investors that that's what Apple is doing with their AI strategy. And, you know, take it for what it's worth. I mean, I'm just telling you what they're saying. You can believe them or not. Like they're not lying, but they're spinning for the street. They want to say we're on it.

And you can decide if you think they're actually properly on it or not. But I think that's what they're trying to get across here. This episode is brought to you by Delete Me. Delete Me makes it easy, quick and safe to remove your personal data online at a time when surveillance and data breaches are common enough to make everybody vulnerable. The sad truth is data brokers can make a profit off your data because data is a commodity. Your name, contact information, social security number, home address, and more can be compiled by data brokers and sold online, which is an uncomfortable thought.

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Our thanks to Delete Me for the sounds of upgrades, summer of fun. Mark Gurman reported on the aforementioned in this episode, one hour all hands meeting that Apple held last week. Apparently a meeting of this type is rare to have like a big all hands for such a long period of time. It included a bunch of executives. I have information here about stuff that Tim and Craig Federighi said. So a couple of quotes for you. Tim said that the AI revolution, this is quoting Mark Gurman. So there's some quotes, some like some of Mark Gurman's color on this. So Tim said that the AI revolution is as big or bigger as the

internet, smartphones, cloud computing and apps. Apple must do this. Apple will do this. This is sort of ours to grab, we will make the investment to do it. All right, now, I want to I want to stop you there just to say, he's talking to Apple. He's talking to everybody at Apple. And so we all can debate where the AI revolution slots and is it over hyped and all those things. And again, my standard is it is overhyped and also huge. Both of those things are true. I'm in the middle on this. I think that it's I think it's big. But I think that also there are a lot of people trying to make a bubble and you know, get a lot of investment and cash out and I think there's a lot of hype. But I still think it's huge. However, none of that matters. This is a pep talk. This is a pep talk where Apple's CEO is telling all Apple employees that he thinks that this is as big or bigger as any of the other tech product cycles that have happened, and that Apple has to be on it because this is an opportunity for Apple and that Apple has to do it. And I mean, say what you will about how Apple has

handled AI stuff up to now, but like for Apple to succeed doing AI stuff, there needs to be organizational alignment about it. And that means the CEO has to come to the employees and say, Hey, this is huge and it matters and we're going to take this right. Like we're going to do it. If he doesn't do that, if he pooh-poos it, then that's a different story. But like if you're,

if you're going for it, you've got to, you've got to get the employees all worked up about it. I completely agree with what you're saying. I will add to it though, that nobody, no effective internal communications team creates a presentation like this today internal communications team creates a presentation like this today without knowing it will get out. So he is speaking of course to Apple, but he's also speaking to people that pay attention. He's also speaking to Bloomberg readers and he knows it. He knows it because if they wanted to get this out there different, I mean, if they wanted to be secret, they wouldn't put it in the hands.

You know, like, I'm sure Mark Gurman got 70 versions of this call all recorded. Tim spoke about how Apple is rarely first to a market. So he spoke about the iPod spoke about the iPhones, right? These are products that we were late to the market for MP3 players. We were late to the market for smartphones, but they end up excelling. He said in these instances that Apple invented the modern products and feels that they will do the same for AI. I don't know what that means realistically, but I do like the sentiment. Like I like the sentiment, right? Like if you believe you're going to do this, like

if Apple believes that they have, because it isn't what they're shipping, I'll tell you that, right? Like it's not. So if they believe that they are on the path to doing like the good version of AI quote unquote, right? Like I am really intrigued to see what they think that is. Yeah. And the, I think there's a couple things that went on right, it is a pep talk. If, and so you want to give people hope. You want to say like, what do I have to offer at Apple?

Maybe, you know, if ChatGPT did this already, if opening, I was already on it, like what, Google's on it, what do I even have to offer here? Maybe I should go somewhere else and make a difference. And Tim Cook is like, no, we're going to do what Apple does, which is we're going to come in with our special skills, and we're going to redefine this. And that's the thing that I think as the CEO, you need to say, and you're trying to rev up your people.

And we've talked a lot about like, what is the unique Apple spin on some of this AI stuff. And I keep coming back to the idea that Apple makes products that people use, and that those products run software, including other people's software and Apple's software. And like if Apple can productize AI in a lot of different ways, where it changes features of apps and they get Siri up and running with a proper AI framework and they build a thing that uses AI technology, but in a really integrated way,

there's a huge opportunity for them and also work with partners. So like there's a path forward here, but if you're doing a pep talk, you have to, this is what you have to say. It is something where it's like, like hearing you say that, it's like it's disappointing in a way,

like that Apple intelligence shipped in the way that it did. Cause I remember we were talking like this before, right? Like before WWDC last year, where it was like, oh, they're going to come in and they're going to be late to this, but they're going to do the Apple thing. And they didn't. They failed. Well, they had the attitude of doing it, but their models couldn't back it up. Yeah.

And we have more about that in a minute, but yes. Yeah, that's why every time Apple talks about, Bloomberg and German report about people leaving the, like he's literally reporting one at a time as people leave the foundation model team. And on the one hand, brain drain is real and scary. On the other hand, every time he says, oh, the foundation model team lost another member,

I'm like, again, just from the outside, what is the fund foundation model team done for anybody? I just I'm sorry. But like the embarrassment of Apple intelligence in a lot of ways was the fact that the models weren't good. They were way behind. Now maybe this makes it worse. But like that's part of the challenge here is that they got to make it they got to make

it better. And shipping Apple intelligence also keep in mind, the thing that was the most Apple of all those Announcements is the one they didn't ship Yeah, which is using your personal information and parsing it and having that all happen on device and all that and they couldn't get it To work and they couldn't ship it. Let's talk about that. Maybe in the coming year, right? We've got a bit more information about that and we'll go back to Tim. So Craig Federighi spent some time in this presentation Talking about the personalized Siri project. So at WWDC, they were talking about like having these two paths, right? That they could have

gone down and they took one path and it was the wrong path. And that was kind of like the only information that they were giving. And he was giving a version of that story to a bunch of outlets. Well, now they've actually giving, they've given a little bit more about what that was. So this wrong path that they went down was trying to build two architectures for Siri that worked side by side, one for standard tasks like setting reminders, and one for LLM based tasks, and that they would operate simultaneously on your device and that the system would work out what you needed. And like this is a thing, like, this is actually

a problem with a lot of the assistants on devices. My understanding is Gemini on Android is really bad and can't set timers, so they have to also have Google Assistant still to do that kind of thing. And you operate with them slightly differently from each other. So the Apple were like, oh, we're going to fix this by having two

different systems that operate together, but it seems like it failed. Now, they have been working on something that is fully integrated, and this is a quote from Craig. The work we've done on this end-to-end revamp of Siri has given us the results we needed. This has put us in a position to not just deliver what we announced, but to deliver a much bigger upgrade than we envisioned. There is no project people are taking more seriously." And he also goes on to give a big shout out to Mike Rockwell, basically saying, this man saved this essentially. Yeah. Great. I mean, great. I hope so. I like them saying, and this goes back to the consequences of Apple Intelligence stuff not shipping, is that as we've all noted, all they really

announced at WWDC is stuff that's in the betas. And it seems very much that the only announced stuff that they were ready to ship, which means that what we're probably going to have over the course of next year is new announcements of features that will go in the OSs in midstream, but that we don't know about now because they weren't willing to promise them until they were further along. And so this suggestion, a much bigger upgrade than we've envisioned, who knows when that will come and if it will work out, but it's possible the next spring they will have an OS update that will have more than just that more personalized Siri that they talked about, but maybe that's Siri entirely getting replaced. Who knows?

But I like, I mean, again, proof is in the pudding, but I do like them saying at least that they're taking it seriously, that Mike Rockwell is on it, and they feel like they've got, like has given us the results we needed is a pretty big statement, right? It's like literally it works. their AI investment here as well. So we were referencing that they were talking about it in the earnings call. So Tim said that Apple has hired 12,000 people in the last year, 40% of these people in research and development roles, with the implication, I guess, that they are AI majority?

Mostly AI, yeah. But like, they don't say that, but you kind of guess, right? Well they're not gonna break it out but you know I assume that there's lots of R&D going on in all sorts of areas in terms of hardware and stuff like that too but they want the implication is that they have hired a lot of people and that AI is a top priority in R&D so therefore you can do the math but they're not going to tell you.

And also, Tim urged employees to use AI more in the work that they are doing. This is a quote from Tim, all of us are using AI in a significant way already, and we must use it as a company as well. To not do so would be to be left behind, and we can't do that. But I wonder what AI a lot of people inside of Apple can actually truly use, like from a security perspective, right? Like, can you just... I don't know. Well, they, I mean, they've got the, they've got all the stuff, like for developers, they've got all the Xcode stuff, which is shipping and that, and that is, that is safe

as far as they're concerned. So I think, look, again, it's a pep talk. I think what he's saying is, I mean, honestly, don't be afraid of this. And honestly, what got them into this was poo-pooing AI and being like, no, no, no, no. That's the big story. Not for me. And it's like, no, you need to use it and understand it.

That doesn't mean, I know there are people out there who really hate AI who are gonna say, this is really gross, apples being gross and I don and understand it. That doesn't mean I know there are people out there who really hate AI who are going to say, this is really gross. Apple's apples being gross and I don't like it. I'm like, well, it's a pep talk. And I would also say, one of the important things if you're going to be a technologist and you're going to be doing this stuff is to try this stuff and understand where it's good, where it's bad, be knowledgeable about it. It's a little bit like saying, I don't read, but I write novels. It's like, what are you doing? You're gonna not do a good job of being a writer if you don't read, because you need to understand what writing is and how it works and what's going you know you need to be a person who understands your subject matter and if you're a technology person at apple if you say oh i don't just i

just don't do ai stuff you are failing it doesn't mean you have to love it it doesn't mean you have to embrace it in everything but it means you need to understand it and understand where it works well, and where it doesn't work well and where it might go and how that relates to your products that you're working on that is important. So it is a pep talk, but I think that that's what he's going to hear is he's not saying, hey, from now on all Apple icons should be generated by AI. He's not saying that but he's saying, not only can AI lead to productivity boosts in some cases where it can in some cases, but also you need to understand it. So going back to Mark Gurman, uh, there is more information about something else. This is kind of, that's what kind of wraps up the, uh, speaking, speaking of Mike Rockwell taking over Siri and doing amazing things, what ever happened to Robbie Walker, who was the guy who was in charge of Siri?

So, Mark Gurman is reporting that Apple is building a new Answers, Knowledge and Information, aka I-Team, to create their own World Knowledge LLM for the iPhone. World Knowledge would essentially be competing with what they have ChatGPT doing. So, answering questions essentially This team is being run by Robbie Walker who previously worked in the gym Andrea Robbie was the executive who held that leaked meeting in May about the delayed Siri features That's that was you know, we're trying to go to Hawaii, but we never got there. Yeah, that's not where it's still in the ocean Quote from my government while still in the early stages,

this team is building what it calls an answer engine, a system capable of crawling the web to respond to general knowledge questions. A standalone app is currently under exploration alongside new backend infrastructure meant to power search engine capabilities in Siri, Spotlight, and Safari. Yeah, I mean, they should have this.

They shouldn't be relying on another company to do this. Absolutely, 100%. Like they can, but they shouldn't try. They shouldn't accept that. They should be trying to do their own thing. I agree. There should be a choice. The customer should be able to choose. I mean, they should also be able to choose for more than just open AI, which is the thing that should have happened by now, but seems not to have. Not yet. But the default should be Apple. The default should not be Chachapi-T. Sure. Yeah. Apple should be able to do this themselves.

And they don't, I think it's the classic thing, which is like, there should be a default that, that is not charging you or whatever. There should be a default that that is provided by Apple. Yeah. And then ideally there should be options if you have a preferred provider to choose the preferred provider But the default should be good and by Apple I would say maybe a European regulator would disagree but I think that part of Apple's whole model is that they have built something for their users in their software and then You know what you really want is to let people use something else if they want to

Not that Apple can't make one So I think this is yeah and bottom line, right? We talked about the foundation models and people leaving that group and that they kind of let Apple Intelligence down last cycle The fact is I think Apple Needs to be building good models, right? Like they've got to be building good ML models that That's the name of the game right now in so many different product categories. So they need to be on it.

It feels like, especially from that all hands meeting, it kind of feels like they've woken up to this now. Oh yeah. Right? And that like, they also want, they do want the world to know that. Like, I agree. We're on now. The question is, like, how did they, how does it differ from last summer when they did the

Apple intelligence announcement and they said, Hey, we're on it because they really needed to because they felt enormous pressure. My feeling is that they tried to smile through it last summer. They were trying to just swing their arms around and say that they had this and they had the best system ever. Yeah, and they couldn't deliver. They just weren't ready. And now, and I would say, it's a little like, remember, remember when iPhone sales slowed down? And we got all the all that

information from Apple retail about how like, this is simplifying it. Basically like Apple retail realized it needed to make an effort to sell the iPhone. Yeah, deals, deals, deals. They had spent years just like iPhones are in boxes here And would you like one and that's it and then they're like, oh and and which is brilliant If you create a hit product and you don't have to do and make any effort to sell it Awesome, but then the sales slowed and they're like, oh we need to make an effort to sell iPhones for the first time. Well This feels a little like that to me where Apple was like, hey, it's Apple, we're doing it, it's going to be great. And now it feels like, no, we need to make an effort.

We need, we need, we need to try. It turns out we can't just be Apple and solve this. We have to task the whole company. And this is not quite a Bill Gates, you know, we're going to make all of Microsoft into, you know, internet focus. But it's, it's in that direction of Tim Cook saying, no, AI is super important to this company and we need to focus on it and, and we need to pay attention. And I just, there's some level of understanding of the size of the challenge that I feel. I'm not saying that people didn't feel it last year, but I feel

emanating from the company now Versus last year and so in a way I would say like last year was about making a big play While not being able to back it up just to say you were in the game and This year is the realization that they couldn't back it up and they need to start. And that's good. I mean, can't say anything, you know, about where this will lead and whether it will be enough and whether they will execute right. But I would say all of this is a sign of these are things that Apple absolutely needs to do if they're going to do this right

Don't know if they will but like this seems to me to be on the right path This episode is brought to you by Oracle in business They say you can have better cheaper or faster, but you only get to pick two But what if you could have all three at the same time? you only get to pick two. But what if you could have all three at the same time? That's exactly what Coheer, Thompson Reuters, and Specialized Bikes have, since they upgraded to the next generation of the cloud,

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lower latency and higher bandwidth versus other clouds. This is the cloud built for AI and all your biggest workloads. Right now, with zero commitment, try OCI for free. Head to oracle.com slash upgrade. That's oracle.com slash upgrade. A thanks to Oracle for their support of this show and Relay. Just ask a brain and you'll get what you need. Just ask a brain. Gets longer every time I listen to it. Yeah, yeah, yeah. Maybe he added an extra verse and just didn't tell anyone.

Amazing. The fly was just green. Thank you again to Lex Friedman for providing these incredible jingles for us to use during the summer of fun, which I think now will be an annual tradition because they're just too good not to use. So good. Thomas writes in and says, Mike always talks about the photos watch face. When I try to use the watch face, the people list as a subset of the people on my phone. How many photos do you sync to the watch? How do you set what set what photos to sync? Then how do you configure the watch face itself to get more photos? All right. so there's a bunch of stuff going on here because this is a complicated system,

which shouldn't be as complicated as it is. I was complaining about this a little bit after my baby was born. So there's a couple of different things that the Photos Watch Face does. First off, you can just choose a bunch of photos of your own and just load them on there. You just choose what photos you want to have and they'll just shuffle through them. This is not what I do. I choose the shuffle like the actual photo shuffle. You can go into the photos watch face and you can choose photos or you can choose shuffle right and that's what I just what I do right so I want it to shuffle between them and I choose between photos of my wife and my child and their options that I have. However for some reason which is completely unknown to me the people that you see are options that I have. However, for some reason, which is completely unknown to me,

the people that you see are people that have been identified in the Photos app, but it's not everyone. And it seems like a completely random system at times as to which people it shows you that you can choose from. Like it took weeks and weeks of me having hundreds of photos of my daughter before she would show up as an option and then further weeks until after she actually

showed up as an option that I would actually get photos of her on my watch face. So I can't speak exactly to the list that you're getting, but that's what you're getting. So you're going in, you're saying, oh, I want to have these two people. Then what happens is your watch loads new images every day. They're random. The amount is random too. Some days

I get 10 photos of just my wife. Some days I get six photos and they're mixed. Some days I get three photos and they're just in my child I don't know what the logic is for how this is decided. I don't know if charging has got anything to do with it Maybe it's just loading them on when the watch is charging. I don't know I'd also don't know what time it does this but every day I have a new set of images that are chosen from those two people So that's what I recommend doing. Go to photos, watch face, choose shuffle. You can choose between people or places or cities and you'll get new photos

every day. And my recommendation, if you're having trouble with that is photos is really weird about when it updates, like the people that it lists. So you could also go into photos and look there at the photo shuffle for lock screens and see if you can, you know, even if you're just browsing around, it may kick it into life because it's unclear. Like I had this happen where like it took a week before it provided me with the people

who I had starred as my people. It's like, why would you not prioritize those? I don't know if they fix some of that stuff by now, but sometimes it just takes time for that to do that. At least, I haven't tried iOS 26, but in iOS 18, it was a problem as of even a couple of months ago. I hope they fixed it.

Writes in and says, it was actually like, there's like 25 A's, this person is in our Discord, but I only read five, that was fivea's. My 79 year old dad has an aging Windows laptop, which is crashing frequently. I've finally convinced him that a MacBook Air would be good because he wants all of his iPhone stuff to sync. And this has been a constant pain point and I'm tired of doing Windows tech support. My question is, should we wait until Mac OS 26 is released so he starts learning Mac OS for the latest redesign or should I get him the laptop

now and we cross that bridge when we get to it? Just get the laptop now. First off you don't actually have to update to 26 right away and it'll be fine and also having used Mac OS 26 for the summer it's not that different. It's slightly, looks slightly different summer, it's not that different. It looks slightly different, but it's mostly not that different. I wouldn't want to- The conventions are the same, right? Yeah, it's pretty much, yeah,

new coat of paint in some places, but it works the same. This is why I say people are worried about upgrading to Tahoe because they've heard all these horror stories about liquid glass. It's like, it's perfectly functional. Even if you don't like the look of some stuff, it all works just fine. So I'd say go now. Yeah. Michael writes in and says, recently Jason mentioned a shortcut that

automatically converts HEEK images on his desktop to JPEG. This is absolutely brilliant. Could you share the steps please, Jason? How did you make this shortcut? It is, let's see. I mean, in Tahoe, so before, I think I was doing something slightly different, but shortcut, I'm gonna do an audio shortcut here. This is very exciting.

So it's two steps. I guess technically it's three steps. So it's you're taking input. When you run this in Tahoe, you would actually just say, you know, if file type is image or file extension is geek, whatever, the next step is convert that item to jpg. And the next step is convert that item to JPEG and the next step is save it to wherever this is, desktop, screenshots, wherever you save it, and then the next one is and then delete it. That's it and then it just does it. And that's very convenient. You're setting an automation, right? Yeah, so it's

on my desktop folder or in my downloads folder It's like if this triggers and it's an image in this format save a jpeg out of it and then delete it Right, and then it just runs and it's very It's it's great. I mean, this is one of those and and these are the Understandable shortcuts in a lot of ways right where it's like it's not that many steps. You don't have to set a lot of variables It's really just like take this image and if you do it without the automation and just have it be not that many steps. You don't have to set a lot of variables. It's really just like, take this image. And if you do it without the automation and just have it be something that runs from Hazel or something like that, it's even easier because it's literally just take the input,

turn it into a JPEG, save it, and then delete the file at the input, then you're done. And Andrew writes in and says, I know I've asked this before, but with the iPhone 17 around the corner, for UK iPhone users who are currently using physical SIM cards, should we now be switching to eSIMs? I am happy with the EE physical SIM in my iPhone 16 Pro Max, but when I upgraded to the 17 Pro Max, will I have no choice but to switch?

And if so, should I do it now or hold on until I have to? Well, okay, part one is we don't know, right? Like we don't know that there will be eSims only. My assumption is it's going to happen at some point and I've said this last time, I think to Andrew writing in, you should absolutely do this rather than having to stick a little thing into the side of your phone and move a piece of plastic around. eSIMs work so great. It's gotten even better over the years. Like I had this problem in years past when they started doing the eSIMs because I get my iPhone when I'm out in the States because that's when they launch them always out there for St Jude. And then I like couldn't move my

SIM over anymore and because it moved to eSIM. And I would have to wait until I got home and could connect to my network, my home cell provider EE, to do the transfer. But last year, it did the transfer without needing to do that. So Apple has improved the process somehow, where it's actually just, it's not even needing to connect to EE anymore. But it's so simple that you, you know, you go, you can do it all in the app, right? I'm assuming that other cell carriers are the same and you can say, I want to

just transfer my SIM to an eSIM and it goes, yeah, great, no problem. And then your SIM card is essentially dead and then you just move around from phone to phone each year and you do it as part of the setup process. I really recommend this to people. And also I will tell you, if Apple does it, like it removes the SIM card from your location, you will be happier having set it up before new iPhone day.

I'll tell you that, right? Like going through the kit. Cause when I originally did it, eSIMs are very new in the UK and not a lot of people had them because you didn't need them. So it was a bit of a pain to do my initial setup, but I just did one recently. I have, have an old SIM and I was moving it to my Google Pixel Fold and I did it via an eSIM and it was incredibly easy to do.

Like EE has made the process easier because it's happening more and more. People are doing it more and more. So I recommend it. I think you should do it. At some point Apple is going to remove this. I would expect. But even if they don't, it's an easier life and then you don't have to be dealing with SIM card ejection tools anymore, which is just like a great world to be in. Yeah. I don't regret it and the transfers are easy So simple it's very easy because I have to review a bunch of phones, right? So I have to do transferring of service and it's fine. It's very they we live in that world now If you'd like to send in a question for us to answer in future episodes of the show

It's really easy to do that. Go to upgradefeedback.com. You can also send in your follow up and questions there. Thank you to our members and supporters of Upgrade Plus. You go to getupgradeplus.com. This time I want to actually answer a question that came from an Upgrade Plusian in Upgrade Plus. The question, I'm going to read the question Jason, but people are going to have to sign up to get the answer. How about that? How about that? That's like, I'm like the rest. This is like the rest is history. Like plugging. Yeah, that's right. The question was from Matthias who asks, I have upgrade plus.

So I don't hear your ads, but from the intros, it seems that you have more advertisers. Is this just a coincidence or is the ad crisis over crisis? If you would like to get the answer to that question, go to Get Upgrade Plus and you can sign up and you'll also be supporting the show and getting ad-free longer episodes every week. You can find us on YouTube by searching for upgrade podcasts if you'd like to watch.

This episode is probably good to watch, at least in parts, to see how me and Jason dance to the jingles because- Don't get your hopes up. I know that we are. I mean, there's movement. There's at least movement. So I would like to thank our sponsors for this week.

The fine folk over at Oracle, Delete Me, and Squarespace. Once again, for the final time, thank you to Lex Friedman for providing these jingles. Go to lex.games and check out Lex's games. We'll be back next week. Thank you for listening. Until then, say goodbye, Jesusnow. Goodbye Mike Harley.