Morgan Stanley has expressed renewed optimism about Apple Inc., citing stronger-than-expected iPhone demand in China and the potential for upward estimate revisions.
Analyst Erik Woodring wrote in a Thursday note that “the Apple story could be turning the corner,” driven by higher iPhone build forecasts and the possibility of valuation expansion.
Stronger iPhone builds in China fuel forecasts
According to Morgan Stanley’s China team, iPhone sales in the June quarter outperformed expectations, prompting an 8% increase in its September iPhone builds estimate.
This improvement stems from stronger-than-expected iPhone sell-through, which reduced channel inventory below normalized levels and created a larger restocking opportunity.
The revised build forecast is concentrated entirely on iPhone 16 (2 million units) and iPhone 16 Pro Max (2 million units) models.
Woodring noted that while the September quarter outlook has already factored in these improvements, it could signal more upside in the December quarter — a period that typically experiences greater volatility.
“Relative to our current 78 million December quarter iPhone shipment forecast, this could imply modest iPhone shipment upside, though we’ll be able to narrow this range next month when the iPhone 17 is officially launched,” he said.
AI integration still in development
Apple’s broader growth prospects also hinge on the rollout of Apple Intelligence, the company’s suite of artificial intelligence features.
Key functions, including an updated Siri with AI capabilities, have faced multiple delays since their initial announcement last year.
The company is expected to reveal details of its new iPhone model next month, which could align with further AI announcements.
Morgan Stanley believes forward iPhone unit and revenue growth expectations remain relatively muted, despite several positive factors.
These include elongated replacement cycles, pent-up demand, new form factors in development, and structural gross margin tailwinds.
Woodring also pointed out that pricing remains an “underappreciated lever” for both Apple’s products and services, noting that the company has not raised services prices in two years.
Market position and potential catalysts
Apple shares have fallen more than 7% in 2025, and according to Woodring, many institutional investors remain underweight the stock compared with other megacap technology peers.
He also highlighted that peak tariff risk has passed, regulation appears less of a near-term obstacle than previously feared, and Apple is trading in line with its trailing five-year average relative to the S&P 500.
While regulatory pressures persist as a long-term consideration, Morgan Stanley sees room for Apple to benefit from potential AI-related partnerships, which could serve as a catalyst for a breakout in the stock.
“In our view, Apple is one potential AI partnership away from breaking out,” Woodring concluded.
The note underscores a shift in sentiment among some Wall Street analysts, as policy clarity, product cycles, and improving demand dynamics give Apple fresh momentum heading into the second half of the year.
The next major update to investor expectations may come with the launch of the iPhone 17, expected to provide further visibility into both demand trends and the company’s AI strategy.
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