Apple is experiencing a strong rebound heading into the holiday quarter, with iPhone shipments estimated to be up 3.5% year-over-year for Q3 2024, according to market research firm IDC. The growth comes as the tech giant positions its new Apple Intelligence AI features as a key driver for device upgrades and future sales.
Nabila Popal, senior director at IDC, explained that despite the staggered rollout of Apple Intelligence in markets outside the US, Apple is expected to continue growing through the holiday season. The company anticipates many customers will upgrade from iPhone 13, iPhone 12, and earlier models to the new AI-enabled iPhone 16, future-proofing their purchases for the long term.
Wall Street responded enthusiastically to the positive sales indicators, with Apple’s stock hitting a record intraday high on Tuesday following the IDC report. Major investment firms including Morgan Stanley, Bernstein, and Evercore ISI reiterated their “buy” ratings. The stock has surged nearly 25% since the beginning of the year, boosting CEO Tim Cook’s net worth to an estimated $2.2 billion, according to Forbes.
The iPhone 16 launched in late Q3, shipping to customers less than a month ago, notably without its main selling point initially available — the generative AI features called Apple Intelligence. This unusual launch strategy raised questions about early demand, with some analysts suggesting softer pre-orders based on shorter delivery times.
However, Morgan Stanley analyst Erik Woodring countered concerns, stating that shorter delivery times simply demonstrated Apple’s supply-chain readiness to meet demand rather than indicating weakness. The official launch of Apple Intelligence is expected by the end of October, with new Macs also reportedly on the way.
Competition in China remains fierce, with local rival Xiaomi growing shipments 3.3% year-over-year in Q3. Despite regulatory hurdles and demand challenges in key markets like China and Indonesia, analysts believe Apple’s global AI strategy is sound. Jacob Bourne, tech analyst at Emarketer, noted that the combination of iPhone 16 and Apple Intelligence rollout should provide significant sales boosts in other regions, potentially offsetting localized issues.
Morningstar analyst William Kerwin expressed optimism that Apple’s AI strategy would drive iPhone unit sales growth over the next two years, though he cautioned that the share price may have “overshot the firm’s fundamentals” with the market being “too exuberant” in valuing future cash flows. Apple’s earnings release is scheduled for October 31, which will provide clearer insight into actual sales performance.
Key Quotes
Despite the staggered rollout of Apple Intelligence in markets outside the US, Apple will continue to grow in the upcoming holiday season as it expects many customers to upgrade from the iPhone 13, iPhone 12, and prior models to a new AI-enabled smartphone, future-proofing their purchases for the long term
Nabila Popal, senior director at IDC’s data and analytics team, explained why Apple’s AI strategy is driving upgrade cycles despite the phased international rollout, highlighting how AI capabilities are becoming a key factor in consumer purchasing decisions.
Despite facing regulatory hurdles and demand challenges in key markets like China and Indonesia, which are likely to persist, Apple’s global strategy appears sound
Jacob Bourne, tech analyst at Emarketer, assessed Apple’s overall position, suggesting that the company’s AI-focused approach can overcome regional obstacles through strength in other markets.
Overall, the market clearly has more confidence in the firm now that it has a tangible AI strategy vs. the beginning of the year when shares were down on views of it being a laggard in AI
Morningstar analyst William Kerwin explained the dramatic shift in investor sentiment toward Apple, attributing the stock’s 25% year-to-date gain directly to the company’s concrete AI strategy and the launch of Apple Intelligence features.
Our Take
Apple’s transformation from AI skeptic to AI champion in less than a year reveals how quickly artificial intelligence has become non-negotiable for tech giants. The willingness to launch the iPhone 16 before Apple Intelligence was ready shows remarkable confidence that AI features alone will drive holiday sales — a bold bet that could reshape product launch strategies industry-wide.
What’s particularly noteworthy is the “future-proofing” narrative emerging around AI-enabled devices. Consumers aren’t just buying current capabilities; they’re investing in AI potential, similar to how 5G was marketed. This psychological shift could extend upgrade cycles while simultaneously making AI capabilities the primary differentiator in saturated smartphone markets.
The China challenge remains Apple’s Achilles heel, where local competitors like Xiaomi are developing AI features tailored to domestic preferences and regulations. Apple’s global AI strategy may work elsewhere, but winning in China will require more than Apple Intelligence — it will demand localization and regulatory navigation that could test the company’s AI ambitions.
Why This Matters
This story represents a pivotal moment in Apple’s AI transformation and demonstrates how artificial intelligence is becoming the primary driver of hardware sales in the smartphone industry. Apple’s shift from being perceived as an “AI laggard” at the beginning of 2024 to now commanding a 25% stock increase shows how critical AI strategy has become for tech valuations.
The Apple Intelligence rollout signals a broader trend where AI capabilities are no longer optional features but essential selling points that drive multi-year upgrade cycles. This has significant implications for the entire consumer electronics industry, as competitors will need comparable AI features to remain competitive.
For businesses and consumers, this marks the beginning of the “AI-enabled device” era, where purchasing decisions increasingly hinge on AI capabilities and future-proofing considerations. The fact that Apple is betting its holiday season success on AI features that weren’t even available at launch demonstrates extraordinary confidence in AI as a value proposition.
The story also highlights how AI is reshaping global tech competition, particularly in markets like China where local competitors are rapidly developing their own AI capabilities. Apple’s ability to leverage AI to offset regional challenges could set a template for other multinational tech companies navigating complex global markets.
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