Apple's AI Breakthroughs At WWDC 2024 Lead To Higher iPhone Sales Projections By Goldman Sachs

Goldman Sachs analysts, led by Michael Ng, were highly encouraged by the financial prospects presented at Apple’s Worldwide Developers Conference (WWDC) 2024, where the tech giant unveiled significant updates to its operating systems and introduced several new generative AI features, including Apple Intelligence and ChatGPT integration, which they believe will drive product upgrade demand and open avenues for future AI monetization.

Key Announcements At WWDC 24

Goldman Sachs noted that the introduction of Apple Intelligence, with generative AI features embedded across iPhone, Mac, and iPad, marks a pivotal step in Apple's AI strategy.

According to the analysts, this development not only enhances product appeal but also sets the stage for future large language model (LLM) integrations. “Apple Intelligence will be available on iPhone 15 Pro/Pro Max or iPad & Macs with M1 or better,” highlighting the integration’s scope.

The updates to Apple's core operating systems, including iOS 18, iPadOS 18, macOS 15, watchOS 11, tvOS 18, and visinOS 2, were seen as instrumental in strengthening the Apple ecosystem. The analysts emphasized that these updates reduce user churn by regularly improving security, privacy, and features, thereby solidifying the user base.

“Apple’s OS updates contribute to the strength in the Apple ecosystem and reduce churn in the installed base,” they stated.

The expansion of the Vision Pro augmented reality headset to new global regions is another crucial highlight. Goldman Sachs expects this move to significantly boost sales. The Vision Pro will be available in Mainland China, Hong Kong, Japan, and Singapore starting June 28, with additional launches in Australia, Canada, France, Germany, and the UK on July 12.

New Generative AI Features

Apple’s introduction of generative AI features, including deeper Siri integration and advanced image editing tools, was seen as a transformative upgrade. These features are designed to leverage personal context, delivering insights that are highly relevant and useful to users.

“Notable features from Apple Intelligence include Siri's deeper integration, writing Tools for enhanced productivity, and advanced image capabilities,” the report noted.

Goldman Sachs also highlighted the seamless integration of ChatGPT within Apple’s operating systems, facilitating enhanced functionality for Siri and content generation through Writing Tools. The analysts foresee additional third-party LLM integrations in the future, bolstering Apple’s AI capabilities.

Goldman Sachs Raises iPhones Sales Estimates

Goldman Sachs raised its iPhone unit sales estimates by 9.5 million units (2% more than previously expected) for 2025 and by 10.1 million units for 2026, reflecting increased optimism around the product replacement cycle.

The overall company revenue forecast for the 2025 fiscal year has been raised from $416.9 billion to $426.5 billion, and for the 2026 fiscal year, from $446.9 billion to $457 billion. The earnings per share estimate has also increased, from $7.26 to $7.43 for 2025, and from $8.19 to $8.38 for 2026.

The analysts highlighted that the current valuation of Apple is attractive both on an absolute and relative basis compared to its historical multiples and key tech peers.

The investment bank maintains a Buy rating on Apple, with a 12-month price target of $238 which implies a 23.2% upside from the latest price close.

Shares of Apple fell nearly 2% on Monday following the WWDC 2024, and traded 0.2% lower in the premarket trading Tuesday.

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