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

BofA Securities analyst Wamsi Mohan on Wednesday maintained a Buy rating on Apple Inc AAPL with a price target of $265.

The rerating reflects an expected strong iPhone upgrade cycle in fiscal 2025 and 2026 driven by the need for the latest hardware to enable generative AI features, higher growth in Services revenue, higher margins from more internally developed silicon, continuing capital returns and AI features that can drive higher institutional ownership.

Mohan maintained a Buy on Apple on stable cash flows, earnings resiliency and potential beneficiary of AI use on edge devices.

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As per SensorTower data, App Store revenues in the fiscal second quarter 2025 (after 91 days) increased to $8.6 billion (+15%, according to data on developer revs from SensorTower), with total downloads (iPhone + iPad) +5% (8.9 billion) during the same period.

In the second quarter, Mohan noted app store dollars per download increased to $0.95, +9%.

For March, App Store revenue increased by +11% globally.

The Productivity category of Apps was the fastest-growing segment in the fiscal second quarter of 2025, with revenues growing +54% after 91 days. Productivity grew to 4% of total revenue from 3% in the fiscal second quarter of 2024, driven by ChatGPT, which has seen daily active users on the Apple App Store grow by more than five times from January 2024 (4 million DAUs) to March 2025 (20 million DAUs).

The Unified app store noted DAU growth at roughly the same rate, from 13 million in January 2024 to nearly 75 million in March 2025.

During the quarter, ChatGPT (63 million) and DeepSeek (42 million) were the two most downloaded apps on the Apple App Store globally (Unified app store downloads were 180 million for ChatGPT and 80 million for DeepSeek during the quarter).

Apple recently announced that the Apple TV App will be available on Android mobile devices (including phones, tablets, and foldables).

Android users can have a better experience without accessing Apple TV+ using a browser.

According to Sensor Tower data, Apple TV averaged ~1.5 million DAUs during March but has yet to see meaningful revenue appear in the data.

Mohan noted in the long term, this can help to increase subscription revenue by making Apple TV+ more readily available and convenient to view on the Android installed base, which is much larger than the iOS installed base.

Mohan modeled services revenue growth of +12% for total services revenue in the fiscal second quarter of 2025 and +13% in fiscal 2025, estimates that could prove conservative if App Store strength persists.

AAPL Price Action: AAPL stock is down slightly at $223.14 at publication on Wednesday.

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