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Apple's 'golden' AI-driven iPhone upgrade cycle isn't looking so shiny

Jan 11, 2025 - businessinsider.com
Apple's venture into AI with Apple Intelligence has not yet sparked the anticipated "super cycle upgrade" for iPhones, as analysts had hoped. Despite launching Apple Intelligence in October, limited to iPhone 15 Pro models or later, consumer excitement has been underwhelming. This has led to a rare downgrade of Apple stock to "sell," with analysts noting a lack of consumer interest in AI functionality. The iPhone 16, marketed as the first AI-centric iPhone, saw a 12.7% drop in preorder sales compared to its predecessor. Analysts have adjusted their expectations, predicting tepid growth in the first year and more aggressive growth in the second year.

While Wall Street was initially optimistic about Apple's AI announcements, the full potential of Apple Intelligence is still unfolding. Gene Munster of Deepwater Asset Management suggests that a super cycle of iPhone upgrades could occur in late fiscal 2025 or 2026, as Apple continues to develop its AI capabilities. The impact of Apple Intelligence on revenue remains uncertain, with more clarity expected when Apple reports its Q1 2025 earnings on January 30.

Key takeaways:

  • Apple has not yet capitalized on the initial hype of Apple Intelligence, with analysts adjusting their expectations for an iPhone super cycle upgrade.
  • Apple Intelligence is available only on iPhone 15 Pro models or later, but the anticipated "golden upgrade cycle" has not materialized, leading to a rare downgrade to "sell."
  • The iPhone 16, marketed as the first iPhone built for AI, saw a 12.7% drop in preorder sales compared to the iPhone 15, indicating lukewarm consumer interest in AI features.
  • Analysts believe a super cycle of iPhone upgrades could still occur in the latter half of fiscal 2025 or in fiscal 2026, as Apple continues to develop its AI capabilities.
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