“I think augmented reality is big and profound,” Apple CEO Tim Cook said during the earnings call for third fiscal quarter of 2017. Since then, the Cupertino-based company has already turned iPhone into world’s largest platform for AR applications with ARKit and it is now shaping up to be a very big focus area.
Now, Bank of America Merrill Lynch believes that Augmented Reality alone could turn into an $8 billion revenue stream for Apple. The analysts explain that AR applications are likely to command a price premium over traditional applications for developers and it could lead to increased revenue for Apple as well. “We think AR apps will command a price premium,” Wamsi Mohan, senior equity research analyst at Bank of America Merrill Lynch wrote to clients in a note Tuesday.
Mohan estimates the revenue opportunity to be between $6 billion to $8 billion for Apple. He explain that $1 billion of this revenue will come from AR applications while the other will come from increased sales of iPhone due to new augmented reality technologies. At WWDC 2018, Apple announced shared AR experiences which will differentiate augmented reality experience on iPhone from other platforms.
Apple is also said to be working on an AR headset, which could debut in 2020. The numbers from Bank of America Merrill Lynch does not account for the potential of such a wearable device. According to 9to5Mac, Mohan believes introduction of AR glasses could bump the revenue to as much as $11 billion.
Mohan says Apple has opportunity of $6 billion to $8 billion in additional revenue from now until 2020. “If Apple were to introduce AR-specific eyewear, which is not factored into the bank’s current model, the revenue upside could be as much as $11 billion,” he added. Apple has over 1 billion active devices on its iOS platform and its augmented reality platform called ARKit has the potential to work on all these devices.
Watch: Apple ARKit Ikea app demo
While its competitors worked on specialized hardware to enable AR experiences, Apple tweaked its software to bring quality AR experience to mobile device. The secure and always updated nature of its device allows for the experience to work seamlessly even on older devices. With ARKit 2, Apple is further improving the AR experience as it and the bank believes that the stock price could hit $230, roughly $40 more than its current trading price.