Alphabet reports fourth-quarter earnings Wednesday, with analysts focused on Google's Gemini AI partnership with Apple rather than expected 15% revenue growth.
The earnings call marks the first time Alphabet leadership addresses shareholders since Apple announced in January that it selected Google's Gemini to power its Siri overhaul this year. Wall Street expects Google to report a 15% year-over-year revenue increase, but analysts told CNBC the Siri-Gemini deal will dominate investor questions.
Apple's decision to choose Google over OpenAI and other AI startups represents a defensive win for the search giant, according to analysts. The partnership gives Google access to Apple's 2.5 billion active devices, providing critical mass for Gemini's deployment even if Google doesn't receive specific user data.
"They'll have critical mass, and even if they're not going to get consumer information, maybe they'll be able to see what queries are being asked, which could help Google train its AI models," said Gil Luria, managing director at technology research firm D.A. Davidson.
The multiyear partnership will leverage Google's Gemini and cloud technology for future Apple foundational models. A joint statement said Apple determined Google's AI technology "provides the most capable foundation for Apple Foundation Models" and expressed excitement about "innovative new experiences" Gemini will unlock for Apple users.
Apple CEO Tim Cook discussed the partnership last week during Apple's quarterly earnings call. Cook said the Gemini-powered Siri will be personalized for users but won't know users' "Gmail and stuff like that." He added that Siri will "know a lot" and Apple plans to share more details when the updated assistant launches.
The companies said Apple Intelligence features will continue to run on Apple devices and the iPhone maker's private cloud. This includes Siri, Apple's AI writing tools, and Genmoji, the company's emoji creation feature.
Reports have suggested Apple may pay Google a significant annual fee for the arrangement, though neither company has confirmed financial terms. The partnership extends a longstanding relationship where Google pays Apple billions annually to remain the default search engine on Apple devices.
A Gemini-powered version of Siri could launch as soon as February, according to a January Bloomberg report. The report also indicated Apple will lean on Google's infrastructure for AI features later this year, representing a departure from Apple's typical reliance on its encrypted cloud infrastructure.
If Apple broadly adopts Google's compute infrastructure for its AI overhaul, that would represent an even larger win for Google, analysts said. The move raises questions about how much Google plans to scale its chip business, particularly its Ironwood tensor processing units which have gained notable customers including Meta and Anthropic.
"Apple using its silicon would give it more scale," said Michael Nathanson, co-founder of equity research firm Moffett Nathanson, referring to Google's hardware.
The Apple deal "underscores Google's core AI advantages led by Gemini, its growing compute infrastructure and hardware," wrote Citi research analysts in a recent note.
Apple currently maintains a partnership with OpenAI for ChatGPT integration with Siri and Apple Intelligence. Under that arrangement, Siri hands off complicated queries to ChatGPT. It remains unclear how the Google partnership will affect the existing OpenAI integration.
"There was a real concern on Wall Street that Apple would run into the arms of OpenAI or Perplexity," Nathanson said. "That's not really gonna happen now."
The Google-Apple search arrangement has faced regulatory scrutiny over competition concerns, but the companies' partnership has continued. Analysts view the AI partnership as a natural extension of the companies' longstanding collaboration.
"We're bringing intelligence to more of what people love, and we're integrating it across the operating system in a personal and private way," Cook told analysts last week.
The earnings call Wednesday will provide the first opportunity for Alphabet executives to detail how the Apple partnership fits into Google's broader AI strategy and what financial impact it might have on future quarters.
