Desktop iGPU improvements are arguably more important for Intel, because they go into so many OEM office PCs, and end up flooding the used market later.
Fully enabled Arrow Lake-S iGPUs are faster than the 5700G (Vega 8). Also faster than the 8500G (Radeon 740M - RDNA3 @ 4 CUs) at 1080p but slower at 720p
according to TechPowerUp's review.
Only Core Ultra 5 235/225 models have compromised iGPUs (3 and 2 Xe Alchemist cores respectively).
If Intel moved to 8 Xe3 Celestial cores for Nova Lake-S, maybe you could see tripled performance, around an Arc A380 or RX 6400. Just a guess. That would have legitimate low-end 1080p performance.
On the media engine side, Lunar Lake is the latest. It adds H.266 (VVC) decode only, and I think AV1/H.265/VP9 support is the same, so only up to 10-bit encode for AV1/VP9, and 12-bit encode with 4:2:0 chroma subsampling for H.265. So there's room for improvement. There hasn't been much news about the AV2 codec so it probably won't be ready to go into a 2026 product like Nova Lake.