Market Analysis

Apple's AI Features: A Boost for iPhone Sales, But Not Overnight

Amos Simanungkalit · 29 Oct14.8K Views

Image Credit: Bankaciyim

With the rollout of Apple Intelligence on Apple's latest iPhones this Monday, investors should be cautious, as the introduction of generative artificial intelligence is unlikely to result in an immediate spike in iPhone sales.

Apple (AAPL) is set to announce its fiscal fourth-quarter earnings on Thursday, but these results, covering the period ending September 30, won’t reflect any sales impact from Apple Intelligence. Analysts have also expressed concerns about a potentially slower upgrade cycle this time due to the gradual introduction of Apple Intelligence.

Earlier in September, Apple unveiled its next-generation iPhone 16 series and showcased new features utilizing generative AI. The Apple Intelligence update became available on Monday for the iPhone 16 and premium iPhone 15 models through the iOS 18.1 software update.

Initially, Apple Intelligence is only being released in the U.S., with plans to expand to other countries later. The initial demonstrations of Apple's AI capabilities appeared limited, highlighting tasks such as proofreading, scheduling calendar events, and performing other assistant-like functions.

"Today marks the launch of the first set of features, with many more to come in the coming months," Apple stated on Monday.

However, initial reviews of Apple Intelligence have been somewhat disappointing. The Verge noted, "Apple Intelligence has finally arrived, and like much of the AI on smartphones so far, it feels mostly underwhelming." Features outlined by ZDNet, including "writing tools to fix your messages" and notification summaries for efficiency, seemed to mirror offerings already available on rival devices from Alphabet Inc. (GOOG) (GOOGL).

Even Dan Ives, an analyst at Wedbush Securities and a supporter of Apple, characterized the technology as part of a "multi-year AI journey," while still anticipating that the new iPhones will "kick off a true supercycle" for the company. Software developers are also in the process of creating apps to leverage Apple's AI capabilities, with releases expected to come gradually.

The December quarter, which marks Apple's first quarter of fiscal 2025, will serve as the initial financial benchmark for the iPhone 16 and Apple Intelligence.

"All eyes will be on the [December-quarter] guidance and early insights into the performance of the iPhone 16 cycle as we approach the critical holiday selling season," said Angelo Zino, an analyst at CFRA Research, in a recent client note. He emphasized that clarity on various iPhone data points will be a focal point during the company's earnings call on Thursday.

Like some previous products, such as the Apple Watch, Apple Intelligence might begin slowly before evolving into a significant asset for Apple's finances.

However, since Apple Intelligence is a free download, its impact on sales will be hard to quantify. Whether it leads to a substantial upgrade cycle for iPhones will be revealing. While investors are hopeful, they should be ready for the possibility that this process may take longer than anticipated.