Beyond the summer apple (NASDAQ:AAPL) It previewed Apple Intelligence, which some analysts call the most important product since the iPhone.
Artificial intelligence capabilities that the tech giant unveiled at its Worldwide Developers Conference in June highlighted the benefits Apple can gain from controlling both a smartphone’s hardware and operating system. Seamlessly integrate data and take actions across multiple apps. Apple Intelligence makes Siri a more capable assistant, improves user communication with generated text and images, and simplifies photo editing.
Unfortunately, when the new iPhone 16 and iPhone 16 Pro launched last month, Apple Intelligence wasn’t ready to ship to the public. Users will have to wait for the release of iOS 18.1, which is reportedly scheduled for October 28th. At that point, owners of the latest iPhones will be able to experience the upcoming AI features, although it will still be several months before they are fully released. Features Apple promised over the summer are coming to its devices.
The question for investors now is whether they should buy the stock before the broader public starts to see what Apple Intelligence can actually offer.
How will Apple Intelligence impact your business?
The biggest impact Apple Intelligence will have on Apple in the near term will probably be on iPhone upgrade rates. Only new iPhone 16 devices and iPhone 15 Pro and Pro Max can support these new software features. In other words, only a small percentage of iPhones used before this year’s release will be compatible with the new AI features.
If early Apple Intelligence users find the new features appealing, more iPhone users may upgrade their devices sooner than they would otherwise.
Observers won’t know how the iPhone 16 launch turns out until Apple releases its fourth-quarter results on October 31st, but early signs are mixed. According to Apple, the lead time for shipping the iPhone 16 was relatively short at the beginning of its release, but it remained extended until the end of September. morgan stanley Analyst. Overall, this bodes well for the iPhone 16’s sales trajectory.
As the rollout of Apple Intelligence features is delayed over the coming months, demand may become more stable as upgrade cases increase. This could lead to iPhone sales exceeding expectations for several quarters. However, analysts are already expecting sales to increase by 5% to 10%.
The long-term potential of Apple Intelligence
Apple laid important groundwork before rolling out Apple Intelligence, and the technology could form the basis of the company’s new services business success.
Apple likes to store data on-device. However, some Apple Intelligence features require processing to be offloaded to the cloud. This means sending the data to the server. Here’s how to integrate ChatGPT with Apple Intelligence. To maintain data privacy for users, the company has built a system it calls Private Cloud Compute.
Apple may allow developers to use Private Cloud Compute to build AI apps to maintain data privacy. This could pave the way for Apple to deduct its standard revenue from app sales or charge for compute while funding the buildout of data center capabilities.
Alternatively, the company could maintain control over the iPhone’s AI features and bill users directly. Jefferies analyst Edison Lee believes Apple could charge users $10 a month for AI features. It’s certainly within the realm of possibility, considering that OpenAI and other popular generative AI services charge even higher fees for premium features.
Apple’s ability to monetize its artificial intelligence services over the long term has far greater potential than short-term upgrade rate increases. Still, the stock could rise if Apple surprises investors with better-than-expected iPhone sales on October 31st.
The stock is currently trading at a premium of 30.5 times expected 2025 earnings, but the stock is worth that much. Given the significant free cash flow this business generates (much of which is funneled into share buybacks) and the potential for continued growth in services revenue driven by Apple Intelligence and its AI infrastructure, the stock It’s worth buying. Also, while the public availability of Apple Intelligence on October 28th may not have a big impact on short-term results, it still leaves some upside room, so it’s worth buying before the news. be.
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Adam Levy holds a position at Apple. The Motley Fool has a position in and recommends Apple. The Motley Fool has a disclosure policy.
Should you buy Apple stock before October 28th? Originally published by The Motley Fool
