Apple Set For Strong iPhone Upgrade Cycle Driven By AI, Analyst Says

BofA Securities analyst Wamsi Mohan recently expressed optimism about Apple Inc (AAPL), maintaining a Buy rating with a price target of $265. This positive outlook is largely based on an expected strong iPhone upgrade cycle anticipated for fiscal years 2025 and 2026. Mohan believes this upgrade cycle will be driven by consumers' demand for the latest hardware, especially as new generative AI features are integrated into these devices.

Mohan’s analysis highlights that the growth in the Services revenue is expected to play a significant role, alongside higher profit margins associated with more internally developed silicon. Additionally, continued capital returns and AI-driven features are anticipated to attract greater institutional ownership of Apple shares.

The analyst's confidence in Apple stems from the company's stable cash flows and resilient earnings, positioning them as a potential beneficiary of AI's application on edge devices.

As reported by SensorTower, App Store revenues soared in the fiscal second quarter of 2025, rising to $8.6 billion, which is a remarkable 15% increase compared to previous figures. During this same timeframe, total app downloads for iPhone and iPad grew by 5%, reaching a staggering 8.9 billion.

Mohan also noted that the revenue generated per download in the App Store increased to $0.95, up 9%. Notably, App Store revenue grew globally by 11% in March.

The Productivity category emerged as the fastest-growing segment in the App Store for the fiscal second quarter of 2025, with revenue surging by an impressive 54%. This growth is largely attributed to AI applications like ChatGPT, which saw daily active users climb from 4 million in January 2024 to 20 million by March 2025.

Furthermore, the Unified app store reflected similar growth in daily active users, increasing from 13 million in January 2024 to nearly 75 million by March 2025.

During the quarter, the top two most downloaded apps globally on the Apple App Store were ChatGPT and DeepSeek, with downloads reaching 180 million for ChatGPT and 80 million for DeepSeek.

Recently, Apple announced the availability of the Apple TV App on Android mobile devices, such as phones and tablets. This move is seen as a way to enhance the user experience, allowing Android users to access Apple TV+ content more conveniently without needing to rely on a web browser. On average, Apple TV saw approximately 1.5 million daily active users in March, although substantial revenue has not yet materialized from this initiative.

Mohan suggested that in the long term, this could lead to an increase in subscription revenue as Apple TV+ becomes more accessible to the larger Android user base compared to the iOS contingent.

Looking ahead, Mohan projected a 12% growth in total services revenue during the fiscal second quarter of 2025, followed by a 13% increase in fiscal 2025. These estimates could potentially be conservative if the App Store continues to show strong performance.

In related news, the stock price of AAPL is currently down slightly at $223.14.

Apple, iPhone, AI