Morgan Stanley Explains Why Apple Is Avoiding AI Search

Apple has been making waves in AI lately, and naturally, the rumors started. Some speculated Apple might buy a rising AI search company like Perplexity to catch up with Google and Microsoft. But not everyone is sold on the idea. In fact, Morgan Stanley thinks it would be a bad move.

In a recent investor note shared with AppleInsider, analyst Erik Woodring from Morgan Stanley called the idea of Apple acquiring an AI search engine “misguided.” Why? Because Apple doesn’t even want to be in the search engine game. It is not trying to go head-to-head with Google Search or build its own version of Perplexity. Instead, Apple is focused on developing virtual assistant-like features based on its own large language models (LLMs), while also partnering with third-party tech where needed.

Morgan Stanley believes Apple’s plan is more about enhancing Siri and building smart AI experiences directly into the iPhone and other devices. It is not focused on launching a standalone AI search engine. So, while Perplexity or similar tools may look tempting, the idea simply does not align with Apple’s strategy.

A Reality Check on Apple Intelligence

If you are hoping Apple Intelligence will get a big upgrade this fall, you might want to temper those expectations. Morgan Stanley does not expect any meaningful AI announcements in the September quarter. Not only is Apple taking its time, but the firm also thinks Apple Intelligence probably will not evolve much until after 2026.

That may sound slow, especially when Google, Meta, and Amazon are sprinting ahead. However, Apple’s approach has always focused more on long-term control and integration rather than rushing to match features.

Apple’s Core Business Remains Strong

Even if AI is not Apple’s headline act this quarter, its business is doing just fine. Morgan Stanley raised its Q3 revenue forecast to $90.7 billion, up 5.8% from last year. What is behind the strong numbers?

• iPhone sales are stronger than expected, with higher average selling prices.
• iPad and Mac demand remains solid, with estimated growth of 9% and 1%, respectively.
• Services like the App Store are set to grow 11.6% year-over-year, despite investor concerns around the App Store injunction and Apple’s lack of Q2 guidance.

This would mark the eighth straight quarter in which Apple Services has grown between 10% and 15%, showing that the company still knows how to make money, even without flashy AI announcements.

Looking Ahead: AI at Apple May Be Slow, But Strategic

Morgan Stanley thinks Apple’s growth might slow down a bit in the September quarter, but it is still trending upward. The firm now expects Apple to make $96.5 billion in revenue, slightly higher than its earlier estimate of $95.7 billion. Profits per share should also increase to $1.61. Even with $1.5 billion in additional costs due to tariffs, Apple is expected to maintain a solid 46.1% profit margin.

Rather than rushing into the AI search race, Apple is taking its time. It wants to build a smarter Siri and develop helpful assistant features using its own AI models. Morgan Stanley agrees that this may appear slow now, but the firm believes Apple is on the right path.

If you are an investor, that means you should stay confident. For users, it means being patient. Siri might not impress you this year, but Apple is quietly working behind the scenes to make sure it eventually does.