Apple's iPhone 17 cycle is better than we expected, says Morgan Stanley's Erik Woodring

Core Insights - Early data points suggest that the iPhone 17 launch cycle is better than expected, though not robust [2][4][6] - Demand indications for the iPhone 17 and Pro Max are positive, while the Air model faces challenges [5][6] - The stock market is pricing in a 4% growth in iPhone units for fiscal 2026, but there is potential for higher growth if additional factors are realized [9][10] Demand and Sales Performance - Initial demand for the iPhone 17 family appears to be up year-over-year, but quantifying this is complex due to various moving parts [4][6] - The iPhone 17 and Pro Max are performing well, while the Air model requires in-person evaluation to appreciate its features [5][6] Market Expectations - The market currently anticipates a 4% increase in iPhone units, but excitement will require stronger sales and advancements in AI and foldable technology [9][10][11] - Selling an additional 1-2 million phones is not sufficient; significant growth requires selling 20 million or more [11] AI and Partnerships - Apple is expected to pursue partnerships for AI development rather than acquisitions, with potential collaborations with companies like Google or OpenAI [12][14][15] - The strategy may involve Apple acting as a distribution partner for outsourced AI technology, monetizing through both hardware and services [15]