Apple is facing the challenge of convincing consumers of the power of Apple Intelligence, as the tech giant has yet to fully capitalize on the initial excitement surrounding the launch of this new feature. Analysts have tempered their expectations of a potential “super cycle upgrade” for iPhones, indicating a shift from the anticipated surge in sales.
This month, Apple is set to report its first earnings since the introduction of Apple Intelligence. Despite Apple’s significant investment in this venture, the predicted iPhone upgrade cycle has not materialized as expected. The introduction of Apple Intelligence took place in June last year during the Worldwide Developers Conference, with the feature becoming available on eligible iPhones in October.
Apple Intelligence is currently limited to iPhone 15 Pro models or later, a restriction that was anticipated to drive a substantial increase in iPhone upgrades. However, Wedbush analyst Dan Ives’ prediction of a “golden upgrade cycle” among iPhone users has not yet materialized, leading to concerns about its impact on Apple’s sales performance.
In an unexpected turn of events, Apple received a rare downgrade to a “sell” rating on Tuesday. Craig Moffett, senior analyst at MoffettNathanson, attributed this decision in part to a lack of consumer enthusiasm surrounding Apple Intelligence. Moffett highlighted the absence of any significant signs of an upgrade cycle and the growing indication that consumers are not particularly swayed by the AI features offered by Apple.
The launch of the iPhone 16 in September was heavily promoted by Apple as being specifically designed to leverage the capabilities of AI. Despite the initial hype surrounding Apple Intelligence, analysts have had to adjust their projections due to the subdued consumer response. Morningstar tech analyst William Kerwin emphasized that the initial excitement has now translated into more cautious growth expectations for the first year, with more aggressive projections for the following year.
Renowned Apple analyst Ming-Chi Kuo reported a 12.7% decline in sales figures for the iPhone 16 series during its initial preorder weekend compared to the previous year’s release. This drop in sales further underscores the challenges Apple is facing in driving excitement and adoption of Apple Intelligence among consumers.
Although there was optimism on Wall Street following the WWDC announcements regarding Apple’s AI capabilities, the full potential of Apple Intelligence is yet to be fully realized. Gene Munster, managing partner at Deepwater Asset Management, noted that while the upgrade super cycle remains a possibility, it may not materialize until later than initially anticipated.
Munster expressed confidence that Apple Intelligence will play a pivotal role in any potential super cycle, likely occurring in the latter half of fiscal 2025 or in fiscal 2026. He emphasized that there is still significant groundwork to be laid in order to facilitate a surge in iPhone upgrades driven by Apple Intelligence.
With Apple’s fiscal fourth-quarter earnings for 2024 closing shortly after the release of the iPhone 16, the impact of Apple Intelligence on revenue was not immediately apparent. Investors are eagerly awaiting the release of Q1 2025 data on January 30 to gain.
