Apple's next CEO, John Ternus, has yet to reveal his strategic plans—but a notable shift in the company's financial policy, announced just before he officially takes the reins, suggests a significant acquisition may be on the horizon.
As the iPhone maker prepares to roll out its long-awaited artificial intelligence features later this year, a sudden change in its financial strategy indicates that the company could soon pursue a large-scale acquisition.
Apple is not typically known for being an early adopter of new technologies or for making splashy, high-priced acquisitions. While other major tech firms have raced to invest hundreds of billions in capital expenditures, Apple has largely remained on the sidelines, returning cash to shareholders through stock buybacks and dividends.
However, Apple may soon join the fray. During its second-quarter earnings call on Thursday, Apple announced it would abandon its long-standing goal of maintaining a net cash neutral position.
Back in 2018, Apple began reducing its massive cash reserves with the aim of keeping cash and debt levels roughly equal. The company now says it will evaluate these metrics separately going forward. Chief Financial Officer Kevin Parekh stated that this decision will help Apple "make better economic decisions on how to optimally use our debt and cash mix to support the business."
"With the new CEO coming in, we believe this leadership transition signals future acquisitions, which is a comforting message for investors," said Wedbush analyst Dan Ives via email.
Charles Reinhart, Chief Investment Officer at Johnson Investment Committee, noted that large tech companies have been more aggressively using their balance sheets to fund AI capital expenditures by reducing cash levels and taking on debt. "Apple is clearly aware of this context," Reinhart said.
"We are also seeing tangible signs that AI demand is impacting Apple's business, including unusually strong demand for products like the Mac mini and Mac Studio, which are increasingly used for AI and agent workloads," Reinhart added. He believes this likely influenced Apple's decision to drop its net cash neutral target.
Apple has been increasing its internal AI investments, as evidenced by a 23.7% year-over-year increase in operating costs, with R&D expenses rising by 33.6%. However, the new cash management strategy could open the door for growth through acquisitions.
"This is a functional change, and they are signaling something—we can only speculate," said Ben Bajarin, CEO and Principal Analyst at Creative Strategies, in a post on X. "More capex, M&A, something beyond Apple's historical norm is about to happen."
Investors dissatisfied with Apple's perceived slow progress in AI have long speculated that the company might eventually turn to aggressive acquisitions. Concerns persist that Apple could fall behind in AI innovation, with some arguing that funding a business transformation is a more effective use of cash than stock buybacks and dividend payments.
Apple's upcoming major overhaul of Siri, which will be powered by Alphabet's Gemini AI model, has become another point of contention. In a January report, Richard Windsor, founder of Radio Free Mobile, wrote that Apple must develop or acquire its own AI capabilities rather than relying on Alphabet.
The partnership with Gemini is only one part of Apple's AI strategy. The company is also developing its own internal foundational model to support on-device AI features. CEO Tim Cook stated on Thursday that balancing these two initiatives will require increased investment.
Rumors of a potential acquisition have circulated for months. Last year, media reports indicated that Apple was internally discussing a possible acquisition of AI startup Perplexity. Known for its agent solutions, Perplexity was mentioned during yesterday's earnings call. Parekh said, "With Apple silicon and its powerful unified memory architecture, leading AI developers like Perplexity are choosing Mac as their platform of choice to build enterprise-grade AI assistants, power autonomous agents, and enhance productivity."
Wedbush's Ives suggested that Apple's M&A strategy "will likely include companies in the AI space, and Perplexity is a potential candidate in our view."
Apple already announced a surprising acquisition earlier this year, purchasing the mysterious AI audio startup Q.ai. While the purchase price was not disclosed, media reports valued the deal at $2 billion—which would make it Apple's second-largest acquisition ever, behind the $3 billion purchase of Beats Electronics in 2014.
Many of Apple's other acquisitions have been "tuck-in" deals, with the company often not even disclosing the names of the smaller firms it acquires.
During an earnings call last July, Cook stated that Apple had, at that point, "acquired about seven companies this year."
"These companies are from various fields, not all focused on AI," he said. "You could think of it as acquiring a company every few weeks."
Apple did not immediately respond to a request for comment.
Bank of America analyst Wamsi Mohan wrote in a report on Friday that Apple's cash strategy has left the company "structurally under-levered from a financial perspective," meaning it has the capacity to take on more debt to support this investment cycle. However, Mohan believes that as Apple continues its hybrid AI strategy, its spending will still remain lower than that of other cloud hyperscale peers.
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