Morgan Stanley analysts believe that Apple's AI features could enhance iPhone performance, especially in markets where they are available, and predict a return to iPhone growth by fiscal year 2026.

Investor attention is shifting towards upcoming events, including the Worldwide Developers Conference (WWDC), new AI partnerships, and the anticipated launch of the iPhone 17.

Analysts have raised concerns that the new AI updates may not generate the expected consumer interest in new smartphones, prompting calls for Apple to accelerate its AI development.

Apple reported earnings of $36.3 billion for the past quarter, marking a 7% increase year-over-year, with total revenue rising to $124.3 billion, driven largely by $69.1 billion in iPhone sales.

Despite the positive earnings, a sales dip was anticipated due to the delayed rollout of AI features, which were only launched shortly before Halloween and had limited availability outside the U.S.

External economic pressures, including inflation and potential tariffs from the new Trump administration, are contributing to investor caution and uncertainty regarding Apple's future sales.

CEO Tim Cook reassured investors that the company is focusing on emerging markets to mitigate the sales decline in China.

Looking ahead, there are expectations for the release of a new iPhone SE model in spring 2025, which may feature an A18 chip and Apple Intelligence capabilities, although demand remains uncertain.

However, Jefferies analysts have downgraded Apple to 'Underperform', forecasting weak sales for the iPhone 17 and 18 due to a lack of significant hardware upgrades.

In a related development, Apple temporarily suspended a new AI feature that generated news summaries after complaints about inaccuracies, highlighting the challenges of integrating AI technology.

Despite broader concerns in the tech sector, Apple's stock performed relatively well, as its strategy to integrate AI into devices may help keep costs lower than competitors.

Ultimately, Apple's ongoing innovation and strategic focus are expected to help maintain its competitive advantage in the global market.