Apple

This year’s shareholder meeting had a scripted tone, offering no new business updates. Gone are the days of free-flowing Q&A sessions that once made headlines. This shift has transformed the meeting into a forum aimed at aligning investors with the company’s vision. Apple’s focus remains unchanged: building the world’s best devices and services while integrating AI into its core. The market responded positively, with AAPL shares finishing the day flat, compared to the Nasdaq, which closed down 1.3%.

Apple is increasing its U.S. investment to $500B over the next four years, boosting annual spending by $39B compared to its 2021 commitment. However, the company was likely on track to increase spending by $20B annually to support natural business growth, meaning the true incremental investment is around $20B per year. The investment is the right move as it nearly eliminates tariff risks while expanding data centers, building a new manufacturing facility in Texas, and supporting AI infrastructure for Apple Intelligence.

Deepwater’s second annual Frontier Tech Survey measures the American public’s viewpoint on emerging technologies, including AI, Electrification & Automation, the Creator Economy, and Relationship with Tech. Key Takeaways: AI – General usage is increasing but we are still early in the…

Apple's reported partnership with Alibaba to bring AI to China alleviates some of the headwinds Apple has been facing in the region for the past two years. Apple’s path forward in China will depend on how well it integrates AI into its devices, navigates growing nationalist sentiment, and adapts its pricing strategy to match shifting consumer behaviors.

Apple’s September quarter results reflected stronger than expected iPhone sales and gave guidance for December that suggested top line growth will essentially be unchanged from September. In other words, Apple Intelligence will not accelerate growth in the December quarter, a reality that is disappointing to the "iPhone supercycle" camp. I believe once these features are in place, and available worldwide, the supercycle will begin, likely in the Jun-25 quarter.

I believe iPhone revenue will grow at 15% in FY25, compared to the Street's estimate of 7%. For FY26, I expect 17% growth versus the Street’s 8%. The most significant factor in my estimate is my belief that 8% of the iPhone installed base will upgrade early in FY25, and 14% in FY26. However, the dark side to the supercycle is I estimate iPhone revenue will be down 5% year-over-year in both FY27 and FY28.

Meta and Google are shifting their development focus away from Virtual Reality (VR) and Mixed Reality (MR) to ambient computing in the form of smart glasses given the potential that artificial intelligence adds to the form factor. I believe the annual market for smart glasses will reach hundreds of millions of units over the next decade, leading Apple to refocus its Spatial Computing initiatives to be more in line with Meta and Google wearables.

Apple reported another solid quarter, with sales growing by 5% year-over-year, marking an improvement from the 4% decline in March 2024. The September guidance suggests that growth will remain steady, which is a positive surprise given the potential impact of the Osborne Effect. More importantly, I continue to believe that the company will experience its strongest product cycle ever over the next two years, driven by Apple Intelligence that will lead upside to earnings.

Apple made good on expectations, announcing generative AI integration across its software and applications. Accessing these features will require 85% of Apple users to upgrade some or all of their devices over the next few years. This means revenue growth in FY25 and FY26 will likely be +10%, ahead of the current 6% and 4% expectations, which should be a positive for AAPL.

The most recent data coming out of China gives us a better picture of what is going on in Apple's China business. iPhone sales in Mainland China were likely down 5% y/y in Mar-24, better than Apple's reported 8% decline in Greater China. When Cook said iPhone grew in China in Mar-24, he was likely talking about units, not revenue. In other words, this means China's non-iPhone segment was down 12%, notably lower than the global average of Apple's non-iPhone revenue which was up 4% y/y.

Three of the four iPads got long awaited updates including thinner design, bigger screens, faster chips, and more memory. These changes will jump start the segment's growth in June and September after being down for 9 of the past 10 quarters. Looking into 2025, I expect the iPad to be on a steady decline of around 2% as the segment is impacted by the reality of infrequent upgrades. The big surprise announcement was the pace that Apple is introducing new chips, a sign that the company will use hardware as a competitive advantage once they get more into the AI race.

Shares of $AAPL traded up 6% following March results as investors were relieved that the company maintained Street revenue guidance along with an increased share buyback. The next seven months will likely show Apple's business accelerating every quarter from down 4% y/y in Mar-24 to up 6% in Dec-24. More importantly, the company reiterated their optimism that they will bring generative AI to most of their products, likely starting in the Fall. Bottom line: Apple's business is intact, revenue growth is improving, and the company is pursuing generative AI to further boost sales.