Key Takeaways:
Apple's bet that artificial intelligence would spark a wave of iPhone upgrades is losing traction with consumers, a UBS survey shows, even as the company prepares its first foldable device to reignite demand.
Only 24% of smartphone users said they would upgrade their device specifically for Apple Intelligence features, down about 500 basis points from the first half of 2026, according to a UBS Evidence Lab survey of more than 7,500 users across five major markets. The proportion of respondents who said AI features had "no impact" on their purchase decision rose to about 31%, up roughly 300 basis points.
"The data suggests Apple Intelligence has not yet translated into a material upgrade catalyst for consumers," David Vogt, an analyst at UBS, said in a report. The findings challenge the narrative that AI-powered features would drive a so-called supercycle of iPhone replacements, a thesis that has supported Apple's valuation premium relative to other hardware makers.
Apple shares have climbed back above $300, but UBS maintained its $296 price target, based on 30 times estimated 2027 earnings per share of $9.86. The bank forecasts iPhone shipments of about 261.6 million units in fiscal 2026, up 15.7% year over year, driven largely by strong iPhone 17 demand and pull-forward purchases ahead of expected price increases across Apple's product lineup.
Foldable iPhone offers a potential catalyst
The survey did reveal one bright spot for Apple: consumer interest in foldable phones. While overall interest in the foldable category declined about 600 basis points to negative 8%, preference for an Apple-branded foldable device strengthened, with the relative premium expanding about 600 basis points to roughly 48%, UBS said.
Apple is expected to unveil its first foldable iPhone at its September product event, with initial production of about 5 million units, according to supply chain reports. That would represent roughly 2% upside to UBS's iPhone shipment forecast for the year. Counterpoint Research projects global foldable smartphone display orders will reach about 27.5 million units in 2026, up 24% from 2025, with Apple's entry accounting for 29% of those orders — just behind Samsung's 31% share.
The foldable iPhone, which may carry the iPhone Ultra branding, is expected to have an average selling price of about $2,500, with higher-storage configurations reaching as much as $3,000, according to IDC. That would make it the most expensive iPhone Apple has ever sold by a wide margin. The premium pricing could help lift Apple's overall iPhone average selling price even if foldable volumes remain modest relative to the broader lineup.
Valuation hinges on product cycle execution
The AI upgrade disappointment leaves Apple's near-term stock performance more dependent on hardware cycle execution than on the technology narrative that has buoyed mega-cap tech peers. Apple trades at roughly 31 times forward earnings, a premium to the S&P 500's 22 times but below the 35-plus multiples commanded by AI-focused companies such as Nvidia.
Rising memory costs and a potential adverse ruling in the Epic Games App Store case before the Supreme Court add to the headwinds. Apple has flagged "significantly higher memory costs" ahead, while an unfavorable decision on its 27% external payment fee could reset the economics of its services business, which generated a record $30.98 billion in revenue last quarter.
Of 56 analysts covering Apple, 35 rate it a buy, 19 a hold and two a sell, with a 12-month average price target of about $319, according to consensus data. The stock has gained 42% over the past 12 months and sits about 3% below its 52-week high of $317.40. The September foldable launch represents the clearest near-term catalyst for the shares, though its impact on earnings will depend on how many consumers are willing to pay $2,500 or more for an iPhone.
This article is for informational purposes only and does not constitute investment advice.
