MW Apple just gave a subtle clue that a splashy AI acquisition may be in the cards
By Christine Ji
Apple is officially retiring its net-cash-neutral target, and some suspect the iPhone maker is preparing for a major acquisition to close the gap in the AI race
Apple is currently pursuing a hybrid AI strategy that involves developing internal models while also partnering with Google's Gemini.
Apple's next CEO isn't sharing his strategy just yet - but the company just made one notable change before he's even started on the job.
As the iPhone maker prepares to launch its long-awaited artificial-intelligence features later this year, a sudden shift in its financial strategy suggests the company may end up making a big purchase soon.
Apple $(AAPL)$ isn't exactly know for being the first to jump on a new technology or open its wallet in pursuit of flashy acquisitions. While other Big Tech peers have raced to spend hundreds of billions of dollars on capital expenditures, Apple has been on the sidelines - returning money to shareholders through stock buybacks and dividends.
The company could get in the game soon, however. On its second-quarter earnings call Thursday, Apple shared that it would be abandoning its longstanding target of achieving a net-cash-neutral position.
Back in 2018, the company started winnowing down its massive cash pile with the goal of maintaining equivalent cash and debt levels, but Apple said it will evaluate the two metrics separately going forward. The decision will help it "make more optimal economic decisions around how we best utilize our debt and cash portfolios to support the business," CFO Kevan Parekh said.
"We believe the changing of the guard at Apple with a new CEO hints at acquisitions going forward, which is a relief for investors to hear," Wedbush analyst Dan Ives told MarketWatch over email.
Read: Apple will soon deliver billions more in cash to investors. Here's how it stacks up to the rest of Big Tech.
Big Tech companies have been using their balance sheets more aggressively by lowering cash levels and taking on debt to fund AI capital expenditures, Charles Rinehart, chief investment officer at Johnson Investment Council, told MarketWatch over email. "Apple is clearly aware of that backdrop," Rinehart said.
"We're also seeing tangible signs that AI demand is impacting Apple's business, including notably strong demand for products like the Mac mini and Mac Studio, which are increasingly being used for AI and agentic workloads," Rinehart added. This likely influenced Apple's decision to drop the net-cash-neutral goal, he believes.
Apple has been ramping up its internal AI investments, as seen through its 23.7% jump in operating costs relative to a year before. Within that, research-and-development costs have risen 33.6%. But Apple's new cash-management strategy could open the door to inorganic growth through an acquisition.
"This is a functional change, and they are signaling something we can only speculate," Ben Bajarin, CEO and principal analyst at Creative Strategies, posted on X. "More capex spend, M&A, something is coming that is out of historical norms for [Apple]."
Investors displeased with Apple's slow AI momentum have long speculated that it could finally become acquisitive. The worry is that the company will fall behind on AI innovation, and some think funding a business transformation would be a better use of cash than buying back stock and paying dividends.
Apple's upcoming Siri overhaul will be powered by Google's $(GOOGL)$ $(GOOG)$ Gemini AI model, which has been another source of contention. In a January note, Radio Free Mobile founder Richard Windsor wrote that it would be "imperative" for Apple to make or buy its own AI instead of relying on Google.
The Gemini partnership is one part of Apple's AI strategy. The company is simultaneously developing its own internal foundational models that can power on-device AI features. Balancing both initiatives will require a step-up in investment, Apple CEO Tim Cook shared on Thursday.
See more: Apple has an AI problem - and a Google partnership could actually make things worse
Rumors of a potential acquisition have been swirling for months. Last year, Bloomberg reported that Apple was holding internal talks to purchase the AI startup Perplexity. Perplexity, known for its agentic solutions, received a shoutout on the earnings call yesterday. "With Apple silicon and its powerful unified memory architecture, leading AI developers like Perplexity are choosing Mac as their preferred platform to build enterprise-grade AI assistants that power autonomous agents and boost workplace productivity," Parekh said.
Wedbush's Ives said that Apple's M&A strategy "would likely include AI names, and Perplexity would be a possible candidate in our view."
The company already announced a surprising acquisition earlier this year, purchasing the secretive AI audio startup Q.ai. While no purchase price was disclosed, the Financial Times reported that the deal was valued at $2 billion - which would make it the second-largest acquisition in Apple's history, after its $3 billion purchase of Beats Electronics in 2014.
Apple did not immediately respond to a MarketWatch request for comment.
Apple's cash strategy has led the company to be "structurally underlevered from a financial standpoint," meaning that it can afford to take on more debt to support this investment cycle, Bank of America analyst Wamsi Mohan wrote in a Friday note. Still, Mohan believes Apple's spending will remain below that of its hyperscaler peers as the company continues to pursue a hybrid AI strategy.
See more: Apple turns 50. Here's how it can shake its midlife crisis.
-Christine Ji
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May 01, 2026 15:35 ET (19:35 GMT)
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