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Investing.com -- In a note Monday, Morgan Stanley (NYSE:MS) analysts cautioned that higher-than-expected iPhone builds in the March quarter are not a sign of stronger consumer demand but rather a strategic move by Apple (NASDAQ:AAPL) to mitigate the impact of potential U.S.-China tariffs.
In their latest research, Morgan Stanley raised their Q1 iPhone build estimate by 2 million units to 50 million, implying 53 million shipments for the quarter—a figure 2 million higher than their prior estimate and 2.5 million above consensus expectations.
However, they note that this increase is not demand-driven.
“We believe the increase to iPhone builds this month reflects Apple pulling forward iPhone production to mitigate the impact of U.S./China tariffs and therefore we don’t make any adjustment to our March quarter iPhone build forecast,” the analysts wrote.
Looking ahead, Morgan Stanley’s preliminary build estimates for the June quarter stand at 41 million units, representing a 5% year-over-year increase but an 18% quarter-over-quarter decline, which is consistent with historical seasonality.
This, according to the bank, suggests that Apple’s production is returning to normal levels after the temporary tariff-driven increase.
Beyond iPhones, the bank also highlights strong growth in Apple’s App Store revenue, which is tracking 11% year-over-year growth month-to-date in March, with a 13.7% increase for the quarter overall.
Morgan Stanley analysts reaffirm that the iPhone production uptick is not a reflection of increased consumer demand and warn that investors should not misinterpret the temporary boost in builds as a sign of stronger end-market trends.