11:12 AM EDT, 03/12/2025 (MT Newswires) -- Apple's ( AAPL ) delay in releasing advanced Siri capabilities means the company will have fewer features to encourage iPhone upgrades in fiscal 2026, eventually leading to a slower replacement cycle for iPhones, Morgan Stanley said in a Wednesday note.

The analysts said the delayed integration of advanced Siri into Apple's ( AAPL ) artificial intelligence system is expected to reduce iPhone upgrade rates for the next 12 months compared to their previous expectations. They revised their iPhone shipment forecasts for 2025 and 2026, now predicting 230 million units for 2025, implying no growth compared to 2024, and 243 million units in 2026, a 6% increase year-over-year, which suggests a slower replacement cycle for iPhones.

The analysts also said they are factoring in $2 billion in higher product input costs for 2025 due to tariffs on products from China, although they believe Apple ( AAPL ) will manage most of the tariff costs. As a result, they lowered their fiscal 2026 revenue and earnings per share estimates by 5% to 6%, expecting $436 billion in revenue and $8 in EPS, which are 1% to 2% below market consensus.

The analysts said that since their previous iPhone forecast assumed that iOS 18.4 would launch in April with a more advanced Siri to boost upgrade rates, they now believe it's necessary to lower their upgrade rate assumption and fiscal 2026 shipment forecast. The revision is because an advanced Siri is unlikely to be available until after the iPhone 17 launch. "That's not to say other factors cannot support iPhone growth in fiscal 2026, but without a 'killer AI app' in market ahead of the iPhone 17 launch," the analysts said they "don't see AI features contributing to accelerating upgrade rates as meaningfully as we did previously."

Morgan Stanley cut its price target to $252 from $275 while keeping an overweight rating on the stock.

Shares were down 2.4% in recent trading.

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