Alphabet (GOOGL) is poised to report its fourth-quarter earnings, and while Wall Street anticipates a solid 15% year-over-year revenue increase, the real focus for investors will be on the burgeoning partnership with Apple (AAPL) to integrate Google’s Gemini AI technology into Siri. This strategic alliance, announced in January, marks a significant endorsement for Gemini and represents a potentially transformative move for both tech giants.
The upcoming earnings call will be the first opportunity for Alphabet’s leadership to publicly address shareholders since Apple confirmed its selection of Gemini to power a substantial overhaul of its virtual assistant. The sheer scale of Apple’s ecosystem, boasting 2.5 billion active devices, presents an unparalleled opportunity for Google. Even without direct access to granular user data, the insights gleaned from aggregate query patterns could be invaluable for refining and training Google’s AI models.
“This partnership provides critical mass for Gemini,” noted Gil Luria, managing director at D.A. Davidson. “While they may not receive individual consumer data, observing the types of queries users are making could significantly aid Google in the ongoing development and optimization of its AI capabilities.”
Details surrounding the multiyear agreement remain somewhat sparse, though it’s understood that Apple will leverage Google’s Gemini and cloud infrastructure for its forthcoming foundational AI models. A joint statement from both companies highlighted Apple’s determination that “Google’s AI technology provides the most capable foundation for Apple Foundation Models,” expressing excitement about the “innovative new experiences” Gemini is expected to unlock for Apple users. These advancements will be integrated into Apple’s “Apple Intelligence” suite, which encompasses Siri, AI-driven writing tools, and the Genmoji feature.
During a recent interview, Apple CEO Tim Cook elaborated on the partnership, stating that the Gemini-powered Siri would offer personalized user experiences. He clarified, however, that it would not access sensitive user data such as Gmail content. Cook hinted at further details to come with the official release of the updated Siri.
While official terms are yet to be confirmed, reports suggest an annual payment from Apple to Google in the vicinity of $1 billion. This marks a continuation of a long-standing and lucrative relationship, with Google having served as the default search engine on Apple devices since the iPhone’s inception. That arrangement, estimated to be worth around $20 billion annually to Apple, faced scrutiny during a 2024 antitrust trial regarding Google’s search monopoly, but ultimately received judicial approval.
“The historical search partnership between Google and Apple was foundational for both companies, and this new AI deal appears to be building upon that strong relationship,” Luria observed.
Further insights from a January Bloomberg report suggest that a Gemini-enhanced Siri could debut as early as February, with Apple potentially utilizing Google’s infrastructure for broader AI features later in the year. This would signify a notable shift for Apple, which typically relies on its own encrypted cloud infrastructure. Such a move would be a substantial win for Google, potentially granting them broader access to user interaction data and reinforcing the strategic importance of their cloud services.
“We are embedding intelligence into the features users already love, integrating it personally and privately across the operating system,” Cook remarked recently, underscoring Apple’s commitment to a user-centric approach.
The extent to which Apple might integrate Google’s compute infrastructure for its AI initiatives could represent an even greater victory for Google. This also brings to the forefront the strategic importance of Google’s chip development, particularly its Tensor Processing Units (TPUs), as noted by Michael Nathanson, co-founder of Moffett Nathanson.
“Apple’s adoption of Google’s silicon would provide significant scale,” Nathanson commented, referencing Google’s Ironwood TPUs, which have already attracted notable clients like Meta and Anthropic. Google attributes revenue from these silicon services to its cloud division.
Analysts at Citi Research view the Apple deal as a significant validation of Google’s core AI strengths, specifically highlighting Gemini, its expanding compute infrastructure, and hardware capabilities.
The decision by Apple to choose Google over rivals like OpenAI is being interpreted as a significant defensive win for Google in the competitive AI landscape. While Apple also maintains a partnership with OpenAI for ChatGPT integration within Siri and Apple Intelligence, where Siri can offload complex queries to ChatGPT, the full implications of the Google deal on this existing arrangement remain to be seen.
“There was considerable apprehension on Wall Street that Apple might gravitate towards OpenAI or emerging players like Perplexity AI,” Nathanson stated. “This agreement with Google likely mitigates those concerns.”
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