Morgan Stanley's latest survey: Apple's AI feature user penetration rate exceeds expectations with strong willingness to pay

According to Zhitong Finance APP, despite some industry experts being reserved about Apple's (AAPL.US) artificial intelligence feature "Apple Intelligence," Morgan Stanley released a report on Tuesday indicating that the feature has received high recognition from American consumers.

Analyst Erik Woodring wrote in a report to clients that, based on the latest AlphaWise survey data, the user acceptance of Apple Intelligence is "better than expected," with consumers showing a significant increase in awareness of its features and a clear willingness to pay.

Woodring stated: "Although tariff policies bring many uncertainties, our survey of 3,300 American consumers conducted in March 2025 shows that, firstly, consumer acceptance of Apple Intelligence far exceeds expectations; secondly, the iPhone replacement rate has reached an all-time high; and thirdly, consumers show strong interest in the design of new models."

Woodring added: "Therefore, when we look at this from a more macro perspective, stepping outside the current uncertainties of tariffs, we believe that Apple's advancements in software and hardware—if properly implemented—will help accelerate the device replacement cycle and bring additional revenue opportunities for the services business, which is the basis for our upgrade rating for Apple." In addition to the "overweight" rating, Woodring set a target price of $220 for Apple.

Woodring noted that in the past six months, nearly 80% of eligible American iPhone users have downloaded and used the Apple Intelligence feature. Most users rated it as easy to operate, innovative, and significantly enhancing the user experience. Notably, nearly 42% of respondents indicated that having Apple Intelligence in the next-generation iPhone is extremely or very important; among users who may replace their phones in the next 12 months, this proportion rises to 54%.

The survey also showed that American consumers are willing to pay an average of $9.11 per month for unlimited use of Apple Intelligence, an increase of 11% compared to the survey data from September 2024.

Woodring believes: "Although Apple is unlikely to charge for this feature in the short term, considering the global base of 1.4 billion iPhone users, 32% (and growing) of American iPhone users own iPhones that support Apple Intelligence, and users are willing to pay up to $9.11 per month (this situation does not seem to be reflected in market expectation models), the potential annual revenue from Apple's Apple Intelligence subscription service could reach hundreds of billions of dollars in the long run."

Woodring stated that the survey results also highlight the importance of iPhone design. Since the launches of the iPhone 12 and iPhone X in 2021 and 2018, respectively, Apple has not made substantial updates in this regard Woodring added, "Looking ahead, we are highly confident that Apple will launch a mid-range thin and light model in the fall of 2025, and we believe the likelihood of releasing a high-end foldable phone in the fall of 2026 is continuously increasing. Both products will help stabilize iPhone growth. Key data shows that 40% of American iPhone users are 'very interested' in upgrading to a thin and light or foldable model (30% of users are only interested in the thin and light model, while 24% are only interested in the foldable model)."