by Apple (AAPL) has a difficult 2024. The company’s shares are down 7% year to date; iPhone sales are slowing in China, the third largest market; and the European Commission, the European Union’s competition watchdog, recently slapped the tech giant with a $2 billion antitrust fine, among other regulatory ones. Apple says it will appeal. Oh, and the Department of Justice is reportedly preparing its own antitrust suit against the Cupertino-based company.
Those headlines are enough to hurt any company. But Apple is not just any company. It is the second most valuable publicly traded company behind Microsoft and has an installed base of 2.2 billion active devices worldwide.
And, according to at least two Wall Street analysts, the company has several other tricks that will help it sustain in the coming months, including its potential in the AI generation space and the ability to take advantage of its massive user base . to goose subscription sales.
Generative AI could help
Wall Street is obsessed with everything generated by AI. And while Nvidia and Microsoft seem to be the biggest beneficiaries of the market’s love for the technology, Apple could also stand to get a good deal from the AI explosion.
“We think so [Apple’s] AI strategy will focus on inference to incorporate the device for [large language models] which will greatly enhance the user experience not only for iPhone but also for Mac/iPad,” Evercore ISI analyst Amit Daryanani wrote in a recent investor note.
In addition, it could encourage people to buy new devices. “Given their vertical integration and especially their control over their own silicon, [Apple] It seems to be in a better position to not only expand the moat around the iOS ecosystem but also could drive an accelerated refresh cycle if the final implementation is deemed to be a big enough change,” he said.
Apple is widely expected to debut a new version of its iOS operating system during its WWDC event in June. And while the company hasn’t hinted at what its future holds, CEO Tim Cook has said the tech giant is working on something the company is “extremely excited about”.
Apple has been including neural engines, which help run AI applications, in the custom chips that power its iPhone, iPad and Mac product line for years. And that could give the company an edge in developing AI generation software on the device. AI software on the device means easier access to AI generator programs and improved security because you don’t have to share your data on the web.
Services are still a winner
Apple’s huge installed base of 2.2 billion devices also means it has a huge opportunity to continue growing its services business. Over the past three years, Apple’s annual services revenue, which includes things like subscriptions to Apple TV+, AppleCare, and Apple One, has grown from $68.4 billion in 2021 to $78.1 billion in 2022 and $85.2 billion in 2023. And analysts say that there is even more. runway.
According to Daryanani, growth in Apple’s services is understated and he expects “growth in the low-teens for [fiscal 2024].”
BofA global research analyst Wamsi Mohan offers a similar assessment of Apple’s services business, saying in a research note that he expects “a continued increase in services monetization [revenue] per original device installed.”
Apple gets to pay more people
But one of Apple’s biggest plays is its ability to make people cough up more and more of its iPhones. It managed to do this by rolling out its high-end Pro line of phones and outfitting them with exclusive features like better cameras and, more recently, more powerful processors. The promise of better capabilities, in turn, leads users to step up to the more expensive Pro devices compared to the standard iPhones.
That, along with the decision to sell last year’s iPhones at reduced prices, Wamsi says, helps Apple get cash even in years when iPhone sales have declined. And that’s especially important at a time when Apple’s sales in China are taking a hit.
“Despite slower unit sales, Apple managed to drive the unit mix to a higher value, which we believe will continue as a long-term trend, offsetting some of the potential unit weakness in China,” a he explained.
All that to say, while the early part of 2024 has been challenging for Apple, the company still has a lot, and nine months to turn things around.
Daniel Hawley He is the technology editor at Yahoo Finance. He has been covering the tech industry since 2011. You can follow him on Twitter @Daniel Howley.
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