Apple (NASDAQ:AAPL) made a significant leap into the realm of artificial intelligence (AI) during its recent Worldwide Developers Conference (WWDC). This move marks a pivotal moment for the tech giant, which has been perceived as lagging behind some of its competitors in integrating AI capabilities into its products and services.
At WWDC, Apple unveiled a comprehensive set of AI features that are set to permeate its entire ecosystem. These include enhancements across native applications and services, promising to deliver smarter, more intuitive user experiences across iPhones, iPads, Macs, and other devices. For instance, AI-driven improvements in Siri, Apple’s voice assistant, aim to provide more personalized recommendations and faster response times. Similarly, AI will enhance features like photo and video editing, predictive text, and smart home automation through Apple’s HomeKit.
J.P. Morgan analyst Samik Chatterjee views Apple’s strategic embrace of AI as a game-changer, particularly in the context of upcoming iPhone releases. He believes these AI advancements will redefine expectations and drive a significant upgrade cycle among consumers. Chatterjee revised his forecasts for iPhone sales volumes in anticipation of this momentum, predicting that the iPhone 16, slated for launch in fiscal year 2025, will initiate a wave of upgrades. The subsequent iPhone 17 launch, expected to peak in fiscal year 2026, is projected to further amplify Apple’s financial performance.
Specifically, Chatterjee now forecasts iPhone volumes to reach 250 million units in calendar year 2025, followed by an increase to 275 million units in calendar year 2026. These projections reflect his optimism that AI-enhanced features will resonate strongly with consumers, spurring demand and driving revenue growth.
Beyond iPhones, Chatterjee also revised his outlook for Apple’s Services segment, which encompasses offerings like Apple Music, iCloud, and the App Store. He anticipates that the integration of third-party AI applications within Apple’s ecosystem will unlock new monetization opportunities. This could include enhanced subscription offerings, premium app features, and expanded content partnerships, all leveraging the power of AI to deliver more personalized and compelling user experiences.
In light of these positive developments, Chatterjee raised his adjusted earnings per share (EPS) estimates for fiscal year 2025 to $8.10 and fiscal year 2026 to $9.69. These figures significantly exceed the current consensus estimates on Wall Street, underscoring his bullish outlook on Apple’s financial performance driven by AI-led innovations.
Despite heightened investor expectations post-WWDC, where buy-side estimates outstrip sell-side projections due to excitement over the AI-driven upgrade cycle, Chatterjee believes there is still untapped potential for Apple’s stock. Currently trading at approximately 22 times his FY26 earnings forecast, he suggests that a valuation multiple closer to 25 times would better reflect the company’s growth prospects.
Looking ahead, Chatterjee sees further upside beyond iPhones, envisioning AI-driven enhancements also benefiting Apple’s iPad and Mac product lines. This broader adoption of AI across Apple’s hardware and software portfolio reinforces his positive stance on the stock’s long-term growth trajectory.
As a result of these factors, J.P. Morgan raised its price target for Apple’s stock from $225 to $245, implying a potential upside of 14% over the next 12 months. This upward revision underscores J.P. Morgan’s confidence in Apple’s ability to capitalize on AI innovation and drive sustained shareholder value in the years ahead.
In summary, Apple’s strategic embrace of AI at WWDC represents a pivotal shift in its product strategy, setting the stage for enhanced user experiences and robust financial performance. Chatterjee’s analysis highlights how AI-driven advancements are poised to fuel a significant upgrade cycle for iPhones while unlocking new growth avenues across Apple’s broader ecosystem of products and services.