Apple becomes a ‘leading distributor’ of AI in 26, Morgan Stanley claims
AI accelerated upgrades
The prognosis is laid out in fresh research from the company, published today and seen by Apple Must. The analysts also say they don’t believe Apple Intelligence has impacted iPhone replacement cycles much at this time, noting that users are upgrading their devices less frequently, at once every five years.
[Also read: 12+ BIG Apple announcements to expect in 2026]
They expect people will continue using them for longer in future – though AI support is certainly something consumers are becoming keener to see. 54% of iPhone upgraders say that having Apple Intelligence support on their next iPhone is “extremely important”.
Keeping the customer satisfied
This may change, however, once Apple introduces a revamped Siri with Gemini. This will consist of a trillion parameter Gemini to power Siri contextual intelligence alongside Apple’s own AI models for specific tasks.
“Apple is unlikely to disclose that Google powers these capabilities,” Morgan Stanley said, though they speculate the company may already be paying for customized Gemini models. The analysts also predict more agentic AI features, specially enabling voice activation of features from third party apps.
In the event Apple does capture popular imagination with its Siri upgrade next year, the analysts believe the company has a lot to gain. “We estimate that 550M+ iPhones will remain unable to run Apple Intelligence exiting FY26,” they also said. “Creating a strong incentive for older-device owners to upgrade in FY2027.
What people want, say Morgan Stanley
What’s in the way?
“We will monitor whether Apple can 1) attract and retain top talent and 2) deliver proprietary AI capabilities effectively with new leadership in 2026,” the analysts said.
A fresh opportunity
The analysts also suggest Apple will begin to monetize Apple Intelligence from 2027. They anticipate a free baseline access with a range of tiers for expanded AI functionality. On the basis of a $19.99/m subscription, they estimate that if just 5% of Apple’s customers subscribe to added Apple Intelligence services then Apple would generate up to $10-$20 billion in services revenue per annum.
“This underscores Apple’s potential to unlock significant recurring revenue if it successfully monetizes its large user base,” they said. Other catalysts will include the Siri update in iOS 26.4, Apple’s anticipated spring product launch and the addition of new Apple Intelligence features at WWDC in June.
The analysts seem pretty confident. They raised their Apple stock target to $315 in expectation of an “incredible” 2026. During the year, they expect AI improvements, new products, and invigorated focus on services, they said.
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