In its fiscal Q324, Apple reported another solid quarter, with sales growing by 5% year-over-year, marking an improvement from the 4% decline in March 2024. The September guidance suggests that growth will remain steady, but, longtime Apple analyst Gene Munster writes, “more importantly, I continue to believe that the company will experience its strongest product cycle ever over the next two years, driven by Apple Intelligence that will lead upside to earnings.”
Gene Munster for Deepwater Asset Management:
Overall, I estimate that about 80% of the company’s 2.2 billion-plus active devices will need to be upgraded to access generative AI features.
Now that September guidance is in place, investors can increasingly shift their focus to CY25 and CY26 growth expectations, which should see further acceleration in revenue growth driven by the upcoming supercycle. The Street expects FY24 growth to be 1.5%, FY25 to be 7.4%, and FY26 to be 6.1%. However, I believe growth in FY25 will be closer to 9%, and FY26 will be closer to 8%…
[I]t’s clear that Apple is trading its distribution network of approximately 1.9 billion monthly active users for access to OpenAI’s models and the corresponding Azure infrastructure. This is a great trade for Apple because it allows them to immediately catch up in the generative AI feature race without spending hundreds of billions of dollars and 3-5 years to build it themselves. In the end, the partnership approach should prove to be a win for investors in the form of higher revenue growth (driven by Apple Intelligence features), which should lead to higher margins.
Support MacDailyNews at no extra cost to you by using this link to shop at Amazon.
MacDailyNews Take: Munster is on the right track. The pent-up demand for new Apple Intelligence-capable iPhones —- and, indeed, iPads and Macs, as well -— is being underestimated by most Wall Street analysts. Apple remains woefully undervalued.
Please help support MacDailyNews. Click or tap here to support our independent tech blog. Thank you!
Support MacDailyNews at no extra cost to you by using this link to shop at Amazon.
On what basis does MDN think Wall Street is underestimating the impact of AI on Apple’s bottom line in the next year or two? On exactly that basis, Apple’s stock price has already increased 30% since April! That’s 30% increase by a 2 TRILLION DOLLAR COMPANY! Given that most users have yet to see any meaningfully useful AI features (I am running the latest 18.1 beta and only see marginally useful stuff so far), I doubt Apple will see a significant increase in sales of the iPhone 16 series – contrary to the claims made by those analysts who pushed AAPL up by 30%. IF and only IF Apple shows broadly useful AI features – like a vastly improved Siri – will people clamor for a new iPhone. That won’t happen until the iPhone 17, I think.
I am betting against what you are saying. iPhone 16 will sell like no other iPhone before for 3 reasons: AI, 5 x zoom in iPhone 16 Pro, and it’s time for many people to replace their old iPhone.
Doubting Thomas. A larger Pro Max, dedicated camera shutter button, next-gen periscope camera, all-model action buttons, faster charging and new colors ON TOP OF Apple Intelligence and the steady feature rollout starting this fall will drive more iPhone sales than at any other point in a decade. Most iPhone buyers aren’t inhaling tech news on a daily basis, all they know is that they need/want a new iPhone and that this years models will offer the biggest improvements since the all-screen X in 2017 and first Plus models in 2014.
Let’s hope AAPL rally to $275 rather sooner than later. 🙏 🍎🍎🙏💰💰
Do most consumers even know much about A.I. and what it can do for them? I doubt it. It’s not as though the average consumer is heavily into tech. Consumers may replace their older iPhones because newer iPhones may be of some benefit to them (better battery life). As an Apple investor and also retired, I’m not happy about hearing A.I. taking the place of humans although I’m not in danger of losing any job. I can’t imagine an iPhone supercycle taking place (due to a weak economy) but it would be nice if A.I. features can give iPhone sales a slight boost for a year or two.
People don’t have to know much about A.I. – as long as they know that they can ask Siri anything and receive the appropriate answer or action on their iPhone, that will suffice. And this is what Apple stands for: Simplicity. You don’t need to know the tech behind it, just use it.