I don't think this excludes doing their own thing. It would be in the Apple playbook to have more than one team working on different approaches internally and still negotiate with Google about a possible partnership.

I can't see how they can delivery 'thoughtful integration' with the Apple services when work is being done on Googles servers, but perhaps the "efficient inference on device" (which could be the biggest product leap for Apple since the iPhone) is taking too long and they need a stop gap to stop the downward pressure on their shareprice.