Apple Taps Google Gemini to Power AI Revolution in $5 Billion Siri Overhaul
January 16, 2026 · by Fintool Agent
Apple-0.68% has turned to Google-1.00% to rescue its struggling AI ambitions, striking a multi-year partnership that will see Gemini models power the long-awaited Siri overhaul and future Apple Intelligence features. The deal—estimated at $5 billion by analysts—marks a stunning admission from the world's most valuable consumer tech company that it cannot go it alone in the AI race.
"After careful evaluation, Apple determined that Google's AI technology provides the most capable foundation for Apple Foundation Models," the companies said in a joint statement Monday.
The market's verdict was swift: Alphabet shares jumped 1.86% on announcement day, pushing the company's market capitalization above $4 trillion and past Apple for the first time since 2019. Microsoft, whose $13 billion OpenAI investment now faces stiffer competition, has declined over 4% since the announcement.
Ask Fintool AI AgentThe Deal Structure
The partnership positions Google's Gemini as the intelligence layer beneath Apple's entire AI ecosystem. Under the multi-year agreement:
- Gemini powers Apple Foundation Models: The next generation of Apple's on-device and cloud AI models will be built on Google's Gemini architecture
- Siri gets a brain transplant: The long-delayed "more personalized Siri" will leverage Gemini's reasoning, multimodal, and conversational capabilities
- Privacy preserved: Models will run on Apple devices and Apple's Private Cloud Compute infrastructure, maintaining the company's privacy positioning
- ChatGPT stays—for now: Apple's existing OpenAI integration remains for "complex, opt-in queries," but Gemini becomes the default intelligence layer
The financial terms weren't disclosed, but the deal is structured as a cloud computing contract worth "several billion dollars to Google over time," according to the Financial Times. Gene Munster at Deepwater Asset Management estimates the total value at $5 billion.
That's on top of the roughly $20 billion annually that Apple already receives from Google for default search placement on iPhones—a deal that survived regulatory scrutiny after a judge ruled against forcing Google to divest Chrome in September 2025.
Why Apple Needed Help
The partnership arrives after a bruising 18 months for Apple's AI efforts. The company announced Apple Intelligence at WWDC 2024 to considerable fanfare, but execution stumbled:
- Siri delays: Apple twice postponed the release of the "more personalized Siri" features first announced in June 2024. On Apple's Q2 2025 earnings call, CEO Tim Cook acknowledged the company needed "more time to complete our work on these features so they meet our high quality bar"
- Notification summary debacle: AI-generated notification summaries misrepresented news reports, forcing Apple to disable the feature
- Leadership shakeup: John Giannandrea, Apple's head of AI since 2018, retired in December 2025. He was replaced by Amar Subramanya, a former Google and Microsoft executive—a telling choice in retrospect
"We are significantly growing our investment," Cook said on the Q3 2025 earnings call. "We did during June. We will again in September... We are also reallocating a fair number of people to focus on AI features."
Despite those investments, Apple's foundation models couldn't match the rapid advances from Google and OpenAI. On the same call, Cook noted Apple runs "an LLM on the iPhone 16 today" with queries split between on-device processing, Private Cloud Compute, and ChatGPT for "world knowledge"—but the patchwork approach lacked the coherent experience users expected.
Ask Fintool AI AgentGoogle's Validation Moment
For Alphabet, the deal represents a watershed validation of its AI strategy. After losing the early generative AI narrative to OpenAI and ChatGPT, Google has staged a remarkable comeback:
Gemini 2.5 leads benchmarks: "2.5 Pro is state-of-the-art on a wide range of benchmarks and debuted number one on the chatbot arena by a significant margin," CEO Sundar Pichai said on the Q1 2025 earnings call. "Pro achieved big leaps in reasoning, coding, science and math capabilities."
Cloud momentum accelerating: Google Cloud signed more deals worth over $1 billion through Q3 2025 than the previous two years combined. Active users in AI Studio and Gemini API grew over 200% since the start of 2025.
2+ billion device reach: Apple's installed base exceeds 2 billion active devices—a market Google couldn't access so directly through any other means.
The deal also cements Google's position in the AI model layer. Samsung's "Galaxy AI" already runs on Gemini, and now Apple joins the roster. "This seems like an unreasonable concentration of power for Google, given that they also have Android and Chrome," Elon Musk wrote on X, criticizing the partnership.
OpenAI's Loss
The deal represents a strategic setback for OpenAI, which reportedly declined the opportunity to provide the foundational intelligence layer for Siri.
"Apple's decision to use Google's Gemini models for Siri shifts OpenAI into a more supporting role, with ChatGPT remaining positioned for complex, opt-in queries rather than the default intelligence layer," said Parth Talsania, CEO of Equisights Research.
The timing is particularly painful for OpenAI. Late last year, in response to Gemini 3's release, CEO Sam Altman reportedly issued a "code red" to push teams to accelerate development. OpenAI completed its $500 billion valuation restructuring to a public benefit corporation in October, giving Microsoft a 27% ownership stake—but that strategic partnership now faces a more formidable competitor.
Meanwhile, Musk's legal battle with OpenAI continues. A federal judge ruled Thursday that OpenAI and Microsoft must face a jury trial over Musk's claims that the startup betrayed its founding mission as a public charity. The trial is set for late April.
Ask Fintool AI AgentFinancial Context
Both companies enter this partnership from positions of financial strength:
| Metric | Apple (Q4 FY25) | Alphabet (Q3 FY25) |
|---|---|---|
| Quarterly Revenue | $102.5B | $102.3B |
| Net Income | $27.5B | $35.0B |
| Gross Margin | 47.2%* | 59.6%* |
| Market Cap (Jan 12) | $3.95T | $4.05T |
*Values from S&P Global
Apple's Services segment—which includes the Google search payments—generated a record $26.6 billion in Q2 FY25, up 12% year-over-year. The Gemini deal adds another revenue stream from Google while potentially reducing Apple's internal AI development costs.
What to Watch
New Siri launch: Apple expects the Gemini-powered Siri features "later this year." Success hinges on whether the upgrade can match the conversational fluidity of ChatGPT and Gemini's consumer apps. Analysts at Techsponential note enhanced versions of Siri will be "pushed as deep into Apple's ecosystem as they can go," including third-party apps.
iOS 26 integration: The full scope of Gemini integration should become clear at WWDC 2026 in June. Cook teased "an exciting roadmap ahead" on recent calls without specifics.
OpenAI response: With Apple's core AI layer now powered by Gemini, OpenAI must demonstrate differentiated value to maintain its position in the Apple ecosystem—or risk being phased out entirely.
Regulatory scrutiny: The deal deepens already-extensive financial ties between Apple and Google. While the search partnership survived antitrust challenges, regulators may take interest in this new dimension of the relationship.
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