Apple Intelligence won’t boost iPhone sales, analysts say

Apple (AAPL+1.23%) is expected to introduce its much hyped artificial intelligence features next week, but analysts aren’t expecting the rollout to turbocharge lagging demand for its latest lineup of iPhones.

Apple Intelligence, as the suite of features are known, are the Cupertino, California-based company’s first and highly-anticipated foray into AI. But a delayed rollout and a global slowdown in smartphone sales for the quarter put a damper on hopes that the iPhone maker could see an uptick in upgrades.

The tech giant could add Apple Intelligence to iPhones — specifically iPhone 15 Pro models or newer — on Oct. 28, in a software update that will give users their first look at what Apple’s version of AI will be capable of. But Analysts at Jefferies (JEF-1.20%) warned in a research note published Sunday that this likely won’t give iPhone sales a boost.

Read more: Apple is losing to Huawei in China. Here’s why

Jefferies said the upgrades, which will include limited hardware capabilities and a relatively small AI model, “are not significant enough” to improve iPhone sales.

The research firm expects an incremental rollout of Apple Intelligence features in subsequent software updates over the next six months, with a big step up in AI capabilities on the iPhone likely not on the horizon until 2026.

Sales for the new slate of iPhones largely disappointed, growing just 1% year-over-year for the current quarter, according to Jefferies’ note citing market research data from Counterpoint. That’s including the fact that iPhone 16 deliveries began two days earlier than last year.

Overall, global smartphone sales rose just 2% in the quarter, down from 6% growth in the second quarter of the year. Paired with rising costs for hardware related to AI, Jefferies said it is expecting overall downward pressure on smartphone deliveries and sales to continue through the end of this year.

While analysts initially touted the growth opportunities and the potential for an upgrade “super cycle” for Apple, recent research shows that a minority of consumers buy a new iPhone because of new features. Most only opt to upgrade their smartphones once they become obsolete, or are stolen or damaged.

The company, too, was hoping Apple Intelligence would help drive sales. It reported sales of almost $86 billion for the quarter ended June 29, up 5% from a year earlier and topping Wall Street estimates. But the company continues to face growing competition in China, including from homegrown smartphone maker Huawei, which has continued to be a drag on its sales.

Apple is set to report earnings on Oct. 31.