Apple Intelligence Feature and iPhone 16 Sales Outlook

Jefferies analysts have expressed skepticism regarding the upcoming Apple Intelligence feature, claiming it won't notably enhance iPhone 16 sales.

The feature is anticipated to debut with iOS 18.1 on October 28, but analysts believe “the features are not significant enough… to drive better iPhone 16 sales.” They attribute this sentiment to hardware constraints and the limited size of Apple’s AI model, which utilizes only 3 billion data parameters.

Expectations are for Apple to roll out incremental AI upgrades in future updates through iOS 18.2 to 18.4 over the next six months. iOS 18.1 with AI is set to launch in more English-speaking countries by December, with plans for expansion into non-English markets in 2025.

Jefferies perceives Apple Intelligence as an early-stage initiative, projecting substantial advancements won’t materialize until 2026. They stated, “AI on device is still early days, and will only see a step-up in 2026 for iPhone (Android will be even later) as the hardware tech is commercialized.”

Regarding iPhone 16 sales, Jefferies has noted disturbing trends, including reduced delivery wait times for new models, indicating weak demand. In China, most iPhone 16 Pro models are now available immediately, a trend mirrored in the U.S., where delivery times for the Pro and Pro Max models have shortened by 6-22 days.

Additionally, Jefferies has highlighted that Apple may have reduced orders for key iPhone components, with supplier Largan Precision signaling weak 4Q24 expectations. They stated, “It is highly likely AAPL has cut lens orders for iPhone,” reflecting subdued demand across the lineup.

With global smartphone growth slowing, Jefferies maintains a cautious outlook, noting that the advanced AI hardware necessary for significant improvements is still years away. The firm holds a Hold rating on Apple shares (NASDAQ:AAPL).