AI not only driver for Apple, services seen skyrocketing: Loop Capital
Apple (NASDAQ:AAPL) is scheduled to report fiscal third-quarter earnings after the bell on Thursday, August 1, with investors likely to be watching for sales results in the China region and updates related to artificial intelligence (AI).
However, according to Loop Capital, AI isn't the only significant growth driver for the tech giant; the firm’s analysts also see Apple's Services segment "skyrocketing."
More concretely, analysts emphasize the importance of Apple Music, Apple TV, and iCloud, projecting substantial revenue increases for these products in the coming years.
Apple Music currently generates $9.2 billion in revenue and is expected to grow further. Similarly, iCloud, which stands at $8 billion, “is primed for massive growth” driven by AI, Vision Pro, and more data-intensive apps, games, and video content, analysts noted.
Moreover, Apple TV, with nearly 125 million subscribers, generated just under $1 billion in the past year. According to Loop analysts, the growth opportunity within this service is “massive.”
“We expect content gains mainly through acquisition to drive the Apple TV growth,” they noted.
Analysts also highlighted Apple News, which currently commands about $1.3 billion annually, and has an $8 billion total addressable market (TAM).
Overall, Loop Capital’s analysis suggests that by 2030, the TAM for Apple’s Services could reach $391 billion, out of a total company TAM of $1.659 trillion. For comparison, the current TAM for Apple’s services sits at around $209 billion.
Still, the iPhone remains a cornerstone of Apple's product lineup, analysts said.
The upcoming iPhone 16 and 17 cycles are expected to benefit from the integration of AI, which will push consumers towards new devices as refurbished and older models will lag in performance.
The firm forecasts Apple’s total revenue to surpass $500 billion in the next 3-4 years, with iPhones accounting for roughly half of this amount.
Beyond the iPhone, Loop Capital also stressed the importance of Apple’s custom AI chip, which is expected to have “major implications in 2025 and beyond.”
In addition, the investment bank points to the resurgence of other devices like the Mac and iPad, which are recovering from sales slumps post-pandemic, aided by new designs and increased integration across Apple’s ecosystem.
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