Analysts at UBS have indicated that data suggests a stagnant iPhone cycle for Apple (NASDAQ:AAPL), despite market expectations of a recovery in demand fueled by advancements in artificial intelligence (AI).

In a recent note, UBS highlighted that market sentiment shifted from cautious to bullish following Apple’s quarterly earnings report, with anticipation building around AI capabilities and functionalities to be unveiled at the Worldwide Developers Conference (WWDC) in June.

However, UBS’s supply chain checks, particularly regarding iPhone build rates, along with analysis of Apple’s inventory and manufacturing purchase obligations, paint a different picture. They suggest a challenging demand environment and a subdued iPhone cycle.

According to UBS analysts, recent checks indicate iPhone procurement of 218-227 million units in CY24, showing a modest increase compared to CY23 but still falling below the build rates seen in Y21/CY22. Additionally, Apple’s inventory and manufacturing purchase obligations stood at just $40.4 billion by the end of March 2024, marking a 16% year-over-year decline and approximately 14% of UBS’s projected next 12-month product revenue estimate.

Despite forecasting a 4% increase in iPhone revenue in the September/December quarters combined, UBS remains skeptical about a robust iPhone 16 cycle. They believe that, despite the optimism surrounding AI advancements ahead of WWDC, current checks and analysis do not support expectations of a strong iPhone cycle.

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