This might be the best iPhone cycle Apple's ever had, says Melius' Ben Reitzes

Let’s turn now to Apple helping to propel the Dows rally today after iPhone maker announced $110 billion share buyback and reportedly quarterly earnings that beat estimates, the bar was a bit low. Joining me now to discuss the Cupertino colossus is Ben Wright says from Melius Research. Ben, it’s one thing to like Apple heading into the print, but you still like it from here despite iPhone sales and presumably unit sales in most markets, if not China, trending lower. Why do you think AI is going to spark a refresh cycle? Well, first of all, John, great to be here. Good to see you. I think that this is the through, you know we just saw the the lowest point for iPhone and it should get better. We we think China could even grow by the December quarter. And what we like about AI, John is that they’re going to release software that’s going to compel you to get the iPhone with the best processor and the most storage and then buy more services. And we’re really bullish about that think ASP’s and mix continues to even get better once they launch the iPhone 16 and then really get catalyzed with iPhone 17. This may be one of the best cycles for iPhones that’s that we’ve had and in its history. So I want to spend some time there because I think this is something that market often gets wrong about. Apple is not paying enough attention to WWDC, paying too much attention to the hardware announcements themselves. What do you think when when I think back on some Apple announcements that have really mattered, things like the video in the iPhone being able to shoot video and transmit that over 3G, things like iMessage. What are you looking for in the AI related announcements that we would expect to get out of WWDC both in apps and as they relate to developer tools that’ll convince you that this has legs? Well, that’s a that’s a long, you know, long answer. Let me try to summarize. I think that what we’re looking for is an iOS assistant that allows you to summarize things in Safari as well as your messages, add calendar appointments, and infuse generative AI into making the iOS better. But what I’m also excited about, I want to see is what they’re going to do in imaging and video, because those are things that suck up storage, help iCloud, and help you need the most storage and the fastest processor in your phone. So I think what I want to see is really good software, but then I want them to talk about how it’s going to process with low latency out on the phone using a small or LLM. And we think that could be great because that would mean you need the fastest, best phone to enjoy the AI and have the best experience, which then creates the Super cycle down the road. Tim Cook also starting to make the case and I haven’t heard much talk about this, that the work that the company’s been doing over the past four years or so on silicon, which we’ve seen the impact in things like Adobe software, in video editing and graphics work, that that same kind of work is going to benefit AI performance. Now we’ve been talking to Cristiano, I’m on this week over at Qualcomm, Talk about their launch of chips. That’s going to help with that as well. But do you see Apple’s vertical integration benefiting them on these product launches this year as it relates to AI performance in particular? Absolutely, John. I think that they have a real advantage being vertically integrated. You know, Google does stuff and they don’t control most of the people that make the phones, ETC. And these guys Apple, Cupertino, they control it all. And what they can do is they can turn the dial so that you have the best performance where stuff happens locally on your phone and privately and securely while you interact with the cloud really when you need to. And that’ll remove latency and make AI finally fun. Finally lack the latency and the time it takes seeing an hourglass almost. And I think they can do a really good job with that, and I’m excited to see what he has. But I think they lay the groundwork there. Also for the App Store, I wouldn’t be surprised they do stuff with either Gemini or with Open AI. I’m excited to see how they partner to have access to other models should you want to use them. I think they’re in the catbird seat where they can direct their model for a really good iOS experience and then give you access to other models and get paid for it. So I think that they’ll continue to have opportunity to monetize their digital real estate.