It's done on-device to handle the problem of linking. All calls from the app into framework have to be linked when you do AOT, and Google can't do that without having device images of every android device and compiling on-demand for whatever device is requesting the install.

And then you'd still have to fall back to on-device compilation if Play Store doesn't know what the device is anyway (aka, all custom ROMs), or when you take an OTA (otherwise you'd need to re-download all installed apps for the new OTA image).

Plus, the dex bytecode is considerably smaller than the AOT result, so wire transmission costs are cheaper doing on-device compilation - call it a form of compression.