Apple Is the Only Smartphone Maker Gaining Share as iPhone Upgrade Rates Hit Record Highs

Apple is currently the only company gaining share in the smartphone market, with iPhone upgrade rates reaching all-time highs, according to Morgan Stanley. Erik Woodring, the firm's head of U.S. tech hardware research, said during a CNBC interview that the core business remains remarkably resilient, supported by what he described as a "tremendous" performance from Apple's hardware lineup.



The iPhone remains the primary engine of growth, posting revenue increases of more than 20 percent in the December quarter. That momentum is expected to carry into the March quarter, following what CEO Tim Cook recently described as staggering demand for the latest models. Woodring added that interest in future form factors, including foldables, is also tracking at very high levels among consumers.


On artificial intelligence, Apple is taking a more capital-light approach than many of its peers. The company is keeping capital expenditures in the $13 billion to $14 billion range, opting to license technology from Google instead of making large infrastructure investments. This strategy lowers the bar for returns as Apple prepares to outline its AI roadmap at WWDC26 on June 8.

Apple does face a notable headwind from rising memory costs. Morgan Stanley is forecasting a blended gross margin of 45 percent for the June quarter, below the broader analyst consensus of 47.7 percent. The gap reflects ongoing pressure across the hardware sector as component costs remain elevated.

The company still has several levers to offset those costs. Demand for high-end Pro models remains relatively inelastic, giving Apple room to adjust pricing if needed. In addition, its Services division now generates more than 40 percent of gross profit dollars and continues to grow steadily. Woodring described Apple as a "supply chain maestro," noting the company is well positioned to maximize total gross profit through pricing strategy and supplier negotiations.

While some analysts remain cautious about Apple's slower rollout of generative AI, Morgan Stanley says it is still too early to determine whether AI will act as a headwind or tailwind. The company's upcoming developer conference is expected to provide clearer direction on how Apple plans to differentiate its approach. For now, its installed base of more than 2.5 billion active devices continues to provide a strong foundation for future software-driven growth.