Apple (NASDAQ:AAPL) recently announced it will integrate AI into its operating systems and grant third-party developers broad access to features, including Siri.
According to Bank of America analysts, this decision is expected to spur significant innovation from developers and help drive improved growth in the company’s Services segment.
“We view conversational AI with context and privacy as key to monetization of the installed base of Apple devices over time with increased productivity, higher priced Apps, increased subscription and payments from partners,” analysts said.
Based on their bottom-up revenue analysis, BofA analysts expect Apple's Services revenue to increase by 14% year-over-year in fiscal 2024, driving the company's overall margin higher. They believe that low double-digit growth is sustainable for the period from fiscal 2024 to 2026.
“Our analysis suggests that Licensing and Subscription Services will drive the bulk of near-term revenue growth,” analysts continued.
“For Licensing, revs tied to Safari payments remains the main contributor; however, we note that there is some risk from litigation as Google’s payments to Apple are under scrutiny. Within Licensing, we expect search Ad rev to accelerate.”
BofA reiterated a Buy rating on AAPL and the price target of $230.