Apple's AI strategy at WWDC could spark a new iPhone upgrade cycle and lift services revenue by $6 billion annually, Morgan Stanley and Goldman Sachs analysts estimate.
Apple unveiled its strategy to embed artificial intelligence across its ecosystem at the Worldwide Developers Conference in June, and analysts are now recalibrating services revenue estimates. The company's push into on-device and cloud-based AI features could drive a new upgrade cycle for iPhones and iPads, with older devices locked out of the most advanced capabilities.
Morgan Stanley analysts called the AI rollout the most significant product catalyst since the Apple Watch launch in 2015. They estimated that the upgrade tailwind could lift iPhone unit sales by 10-12% in the fiscal year ending September 2025. That would translate into roughly $8 billion in incremental hardware revenue, the analysts said.
Services revenue, which has become Apple's second-largest profit engine, stands to benefit more directly. The company is expected to introduce a paid tier for advanced AI features under the Apple Intelligence brand. Goldman Sachs estimated that if 20% of the active iPhone base subscribes at $10 a month, the services division would add $6 billion in annual revenue. The analysts said that figure could reach $12 billion by 2027 as more devices support the features.
Apple shares have risen 17% since the conference, outperforming the S&P 500 by nine percentage points over the same period. The stock trades at 32 times forward earnings, a premium to the five-year average of 28 times. Some fund managers argue the multiple is justified by the growth optionality in services. Others point out that the revenue contribution from AI features will be gradual and dependent on consumer adoption.
A key question for the September quarter will be how aggressively Apple prices its AI subscription. Management has not disclosed pricing details. Current iPhone users already generate average services revenue of roughly $80 per device per year, a figure Bernstein analysts said could rise to $110 per device by 2027 if the AI tier gains traction.
The company also faces regulatory scrutiny over its App Store practices in the European Union. The Digital Markets Act requires Apple to allow alternative app stores on iOS, a change that could reduce services margins if developers bypass Apple's 15-30% commission. Apple is contesting the rules in court, with a ruling expected before year-end.
For now, the AI narrative is the dominant driver. Wedbush analysts said the rollout gives Apple a clear path to a $4 trillion market capitalization within the next year. The company currently trades at a market value of about $3.5 trillion.
Drafted by a large language model from the source reporting linked above, then screened by automated publishing checks. It is not read by a journalist before publication. Some articles cite our Alpha Score. Verify prices and figures against the original source. Educational coverage, not personalized advice.