In the news today, Apple said this morning that it has acquired Q.AI, an Israeli startup working on AI technology for audio.
Yeah, Apple didn't disclose the terms. The Financial Times reported it was worth nearly two billion. So, pretty meaningful deal. Apple is not known for, you know, really paying up on a lot of different M&A that they're kind of folding into their road map. We had Mark Gurman on yesterday talking about how Apple uses M&A effectively to accelerate the road map. According to Reuters, Apple did not say how it will use Q.AI's technology, but said the startup has worked on new applications of machine learning to help devices understand whispered speech and to enhance audio in challenging environments. Q.AI last year filed a patent to use facial skin micro movements to detect words mouthed or spoken. This is, we've seen a couple startups that are, you know, doing like the whisper. It's like telepathy almost. It tracks your mouth movements. So you can just then it like will track what you're saying. Really, really crazy.
So facial skin micro movements will be used to identify a person and assess their emotions, heart rate, respiration rate and other indicators. Very sci-fi. The founders, Javad Meisel founded three-dimensional sensing firm PrimeSense and sold it to Apple in 2013. Absolute dogs. They're doing, they call it double kill. The PrimeSense deal eventually helped Apple move away from fingerprint sensors on its iPhone and toward facial recognition technology.
Interesting pop quiz for Tyler. Why does Apple acquire companies?
I mean, why questions are usually pretty open.
Okay, good answer. But Mark Gurman told us why does Apple acquire companies? To accelerate the road map. Yes. And it's funny because I asked him like, why are we going to hear Tim Cook say that? And he was like, 'Oh, because earnings.' But we're basically hearing him say it today with this surprise acquisition. That's obviously the line from Apple. And it makes sense. This is something that is uniquely acceleratable because of the Apple hardware ecosystem. They can deploy this through AirPods. They can deploy this through the phones just like they did with Face ID. If you have that technology and you're like, 'Oh, well, in order to log into your computer with your face, you're going to need a third-party device that you plug into USB-C.' Like, no one's going to do that. But yes, I've been very bullish on this. I was thinking back then that, you know, people get their wisdom teeth out. This is very weird in cyberpunk, but if you got your wisdom teeth out, you could potentially like create like add a port for storing a microphone.
Any of these? I should have got that.
Yeah, exactly. Because a lot of people get them out and then you could just put a port there and you could insert basically the tip of an AirPod. Very, very small device that you would charge and then you put it in and then when you're whispering you can just hear it can only hear that and it goes dictation straight to your phone. I was wondering about the quality of whisper transcription these days. Like if I just open up Whisper on the ChatGPT app, put my phone in my pocket and just talk, can it just hear through my pants pocket and just dictate perfectly now? Because like AI is so good at transcription that it can be really muffled like you can have music playing in the background and talk to Whisper. Yeah. It just won't mess up. So, there is a world where you don't actually need like a separate pin. You just have something anywhere on your body and it knows, okay, this is what John sounds like. Let's kill all the background noise. Let's kill all the other people talking. Let's isolate that with AI. Like, it seems pretty good for that.
One more thing on this Q.AI acquisition. They're using, going back to their patent, using facial scan micro movements to assess emotions, heart rate, respiration rate, and other indicators. You could imagine a world in the future where you have Apple smart glasses that effectively have like health monitoring. It's tracking respiration, heart rate, all these different things and just basically integrating the features you're getting from the Apple Watch today.
I wonder what it's really unlocking that the watch can't do. There's always the question when you pitch a new device, it's like, well, your phone does have a camera on it. So, you're not... This is like the smart glasses aren't the first.
Yeah, but it's a new device, but it's a Lindy form factor, right? Like this is something we've talked about in the past. It's like the new hardware that's taken off is an existing form factor. It's like headphones. Yes. Eyewear. You have watches, right? Creating these pendant things. So far hasn't hit. Right.
Yeah. It's fair. I just think like on the heart rate issue specifically, there was an app before the Apple Watch existed where you could put your finger over the camera of the iPhone and it would use the light, the flashlight, which was right next to the camera to light up your finger. So your finger would turn red and then it would take the sensor data from the camera and measure the pulses of the red and give you your heart rate just from touching your camera. It's pretty cool. Like it was completely outside of the Apple ecosystem, just an app that you could download or pay for. And so the phone can take your heart rate. The watch can take your heart rate. If you give me glasses and you say those glasses can also take your heart rate, I'm like, I got enough heart rate measurement. I can also just go like this and estimate it. Like there's a bunch of ways to know that your heart rate's spiking. Maybe tracking it in different, but it feels like they need to go farther and the real opportunity is something more around audio interfaces, link it to Siri, have more ways to triangulate what the person's trying to say, what they're saying in a noisy environment, whether they're trying to be quiet and you still want to isolate what they're saying, having it back and forth, reducing latency. All of those things are very critical to success in that category.
Let's go earnings. Microsoft. So Microsoft shares have taken a dive as data center spending overshadows earnings surge. Let's give some numbers here. So Microsoft's Q4 revenue was 81.3 billion which was higher than the consensus estimate of 80.23 billion. So they're making money. There's no lack of demand for Microsoft services. Q3 2025 revenue was 77.1 billion up almost 5% and year-over-year growth was 17%. But the stock sold off by 12% and Microsoft is now just a tiny little $3.15 trillion company. Not bad. Yeah. I mean people have been excited about the OpenAI investment which did show up in earnings. So Microsoft owns 27% of OpenAI's new for-profit entity. That value was actually reflected in Microsoft's earnings. And of course, more importantly, the GPT models are truly frontier. Like we've seen it again and again. There's like this horse race over this model's better at this thing, this model is better today. But it's just very clear that OpenAI is on the frontier and in the conversation for pretty much every application possible. And so you can just imagine you take GPT 5.2 Pro, you vend that into knowledge work pipelines for Microsoft users. That sounds really useful. They aren't behind on coding. We've heard great stories about how Codex is a great model. Maybe it's a little slow. Maybe they need to speed it up, but people are having a lot of luck with Codex. And so you can imagine that Microsoft is capable of integrating Codex into all sorts of different pieces of the Microsoft empire to create agentic workflows. And then they also have a deal with Anthropic. They also made an investment. So they are multi-model, multi-platform. But the problem is that Microsoft seems to be constrained on the data center side. Limited availability of artificial intelligence hardware is affecting how quickly Microsoft's cloud business can grow and it's capping Azure's revenue potential.
Not good. They need to take another trip to Abilene. They need to build more data centers. Maybe it's just a data center capacity issue. What's next? Is it going to be an energy bottleneck? Is it going to be a chip bottleneck? These are stories that we're tracking.
Obviously, it's amazing that Microsoft owns such a big slug of OpenAI. That's great. But the challenge is so much of their backlog is OpenAI and they're actually getting less credit for that. Right? In the same way that Oracle had gotten punished for it, now it's Microsoft's chance to actually get punished. Microsoft, if you actually zoom out a little bit and just look at the last six months, down 17% in the last 6 months and down 4% over the last year. So it's funny like in a year where it feels like the last year Satya and Microsoft have just been on this insane run, they've fully, you know, roundtripped.
