An electronic device may include a display for displaying image content to a user and dynamic image stabilization circuitry for dynamically compensating the image content if the device is moving unpredictably to help keep the image content aligned with the user's gaze. The electronic device may include sensors for detecting the displacement of the device. The dynamic image stabilization circuitry may include a usage scenario detection circuit and a content displacement compensation calculation circuit. The usage scenario detection circuit receives data from the sensors and infers a usage scenario based on the sensor data. The content displacement compensation calculation circuit uses the inferred usage scenario to compute a displacement amount by which to adjust image content. When motion stops, the image content may gradually drift back to the center of the display.