Apple’s iPhone 16 and Apple Intelligence will drive “good growth,” analyst says

Apple launched the latest models of iPhone, smartwatch and AirPod at its annual event on Monday. With a new emphasis on artificial intelligence capabilitiesanalysts are optimistic about the coming months and years for the tech giant.

The Cupertino, California-based tech giant has unveiled major hardware changes, including larger screens for the iPhone 16 Pro and Pro Max, improved camera quality, powerful chips and other sleek new tech specs in its new iPhone lineup.

Along with a new operating system, iOS 18 – the first to support the new Apple AI Initiative: Apple Intelligence — Apple is poised to lead an exciting new upgrade cycle, according to Morningstar stock analyst William Kerwin.

“Ultimately, the thesis is that for consumers to have this Apple Intelligence in their hands, they have to buy the new phone to go with it,” Kerwin said. “We think this will generate a good year of growth in 2025”

Early AI features, which will only be available on iPhone 15 Pro models or later, will be release as a software update in beta form in October, with more features to be released in the coming months. Given the large processing power required to run Apple Intelligence, less than 10% of current iPhone users could upgrade their devices to use the new AI features, according to Bloomberg.

This staggered software release is unusual for Apple, which would typically ship the latest iPhone models with the latest technology already installed. iPhone 16 will be available from September 20. But Kerwin said this does not reflect negatively on Apple or Apple Intelligence.

“It just goes to show that Apple won’t put out a product until it’s perfect in their eyes,” Kerwin said. “It’s more important for them to release a ‘perfect’ product versus a rushed product a month in advance, because once you’ve released a sub-par product, that can create reputational issues.”

Apple shares fell nearly 2% following the event, but ended the day slightly in the green. That decline was not unusual: Apple shares fell on 12 of the 17 days after the iPhone was released, according to data compiled by Bloomberg.

Morningstar remained bullish on Apple shares, projecting 10 percent iPhone revenue growth for fiscal 2025. And Kerwin said Apple Intelligence could help drive a “multi-year growth cycle.”

“In our view, there will be consumers who may not upgrade in the first year, but then as you learn, and as Apple adds more features and functionality to Apple Intelligence, you know, they should to conduct a multi-year upgrade cycle. Kerwin said.

Apple has long sought out iPhone users to trade in their old models. In recent years, much of the old iPhone buzz has died down as more people keep their smartphones longer. According to Wedbush estimates, around 300 million iPhones worldwide have not been updated in over four years. To try to find its next big thing, Apple is reported spending 30 billion dollars a year on research and development, according to Sherwood.

But analysts hope Apple’s AI game could help it begin to turn that around. Wedbush analysts, led by Dan Ives, said in a report that Apple Intelligence could mark the beginning of the “consumer AI revolution,” with more than 240 million iPhones potentially sold in fiscal 2025 as a result of the AI-driven upgrade cycle.

“We expect developers over the next 6 to 12 months to build hundreds of generative AI-powered apps that will be key ingredients in Apple’s recipe for success as its technology builds the building blocks of the wave of consumer AI that we see it coming from the beginning. with the iPhone 16,” Ives said.

Wedbush analysts said last month that Apple’s AI play could boost its market capitalization by up to more than 4 trillion dollars. Apple currently has a market capitalization of $3.31 trillion.