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Here's the next big thing for Apple, according to top analyst Milunovich

After pent-up demand for the next iPhone eases, the next big thing for Apple could be augmented reality, closely followed analyst Steven Milunovich said Wednesday.

The UBS IT hardware analyst said many people are still holding on to their iPhone 6 they purchased in 2015, and are waiting for Apple's next phone. He said the iPhone 8 is likely to have incremental changes, like a new screen, longer battery life, a faster processor and perhaps wireless charging.

"If you're an Apple customer, you have not had that," Milunovich said on "Squawk Box."

"But perhaps the next big thing is augmented reality, which is initially going to be in the phone and eventually could be separate devices like glasses. We think there basically could be a fight for the body," he said. "For the wrist, ears, eventually in terms of the face for wearables."

Milunovich's comment came a day after Apple said in its second-quarterearnings release it sold fewer iPhones than expected as overall smartphone buying intent has fallen to a nine-year low.

Apple CEO Tim Cook told CNBC on Tuesday the company is "seeing a kind of delay in purchasing behavior that we think is a consequence of the number of rumors and reports about future products."

On Wednesday, Gene Munster, who was Piper Jaffray's widely followed Apple analyst before leaving to launch Loup Ventures, said Apple's results reinforce the importance of AR.

"We agree with the market that a bet on shares of AAPL is a bet on the company's ability to transition from their existing iPhone platform to an augmented reality-driven platform in the future," he said in a post.

Cook has talked about several new technologies since becoming CEO, including driverless cars, artificial intelligence and augmented reality.

In March, Bloomberg reported that Apple was beefing up its staff with acquisitions and some big hires to help design augmented reality glasses and iPhone features. Apple reportedly has patents for augmented reality maps, facial recognition, a headset and new camera software.

—CNBC's Anita Balakrishnan contributed to this report.