Apple Poised to Post Record Quarter as Investors Look for Insight Into iPhone Demand

The results are scheduled to be released Thursday after markets close in New York and as U.S. equities have taken a wild ride this week amid concerns about inflation and geopolitical risks. While Apple shares had been on a tear earlier this month, they have fallen 10% this year so far to $159.69 a share Wednesday.

Apple’s results—and the market’s reaction—will be watched closely by investors as a bellwether ahead of other big U.S. tech companies posting quarterly results, including

Amazon.com Inc.,

Google-parent

Alphabet Inc.

and Facebook-parent

Meta Platforms Inc.

Those companies report next week.

In what may be a preview of what’s to come,

Microsoft Corp.

on Tuesday reported strong profit and sales results that beat analyst expectations. But the company’s stock was still punished, with shares falling more than 5% initially in after-hours trading that evening before they rose more than 2% on a rosy forecast. The dramatic swing underscores concern among investors worried about tech titans’ growth potential and valuations after two years of soaring to new heights.

Of greatest interest Thursday: iPhones. Year-over-year iPhone sales may have risen to $67.6 billion, a 3% gain, during the fiscal first quarter that ran October through December, according to the average estimate from analysts surveyed by FactSet. Analysts project iPhone revenue will rise less than 1% this fiscal year compared with the preceding year, when sales rose 39% and helped fuel Apple’s greatest year ever.

Even with a slowdown, the Cupertino, Calif., tech giant may report a record $31.3 billion profit, or $1.90 a share, for the important holiday period, according to analysts’ estimates.

That would exceed the company’s previous best-ever quarter a year earlier, when it earned $1.68 a share, fueled by the arrival of the 5G-cellular-capable iPhone 12 models and sales of iPad tablets and Mac computers to workers and students in lockdown.

Early in the pandemic, Chief Executive

Tim Cook,

a longtime logistics expert, largely navigated the company around the choppy waters of supply chain disruptions that had disrupted rivals. That ability was tested when the severity of shortages finally hit Apple last summer—a signal that no company could be spared from work stoppages, parts shortages and labor costs.

During the July-September quarter, Apple said it lost out on $6 billion in sales because of supply constraints and predicted a larger hit during the fiscal first quarter. In October, Apple executives also cautioned that while they expected overall sales to rise during the quarter versus a year ago, the company’s iPad business would fall because of supply limitations.

In total, analysts expect fiscal first-quarter revenue to rise 6.7% to a record $119 billion. Sales of Macs may have risen 14%, while iPad revenue declined 2.89%, according to analysts’ estimates.

Despite expectations that iPhone sales growth will slow this year, Apple shares had sailed higher in recent weeks before the recent marketwide downturn. The company’s market valuation briefly surpassed $3 trillion on investor enthusiasm for new product lines beyond the iPhone. Many are betting Apple’s foray into extended-reality headsets, possibly later this year, will open new doors for the company.

In recent weeks, some investors and analysts have also expressed increased optimism that Apple has figured out ways to boost production to meet demand. “I expect the holiday quarter to beat estimates,” said Daniel Morgan, a senior portfolio manager who focuses on technology at Synovus Trust Co., which counts Apple among its largest holdings. “My biggest reason for optimism surrounds the recent reports coming out of the companies in the Apple food chain that supply parts to manufacture the iPhone that have made upbeat forecasts lately.”

Still, Apple had acknowledged longer-than-desired wait times for certain products during the gift-giving quarter. Adding another wrinkle to the holiday season, the company curtailed in-store shopping at several locations throughout December as the Covid-19 Omicron variant spread. The company had aimed to return office workers to their desks in February but has since postponed such plans.

Apple typically faces scrutiny in the years after a big iPhone debut as analysts and investors ask what’s next to juice sales. Excitement ahead of the iPhone 12 pushed Apple shares to new heights in anticipation that the newest iPhone would fuel record sales.

Investors’ instincts proved correct. Even with Covid-related production delays, the introduction of the iPhone 12 in late 2020 helped fuel almost $100 billion in profit in fiscal year 2021.

Now investors and analysts debate whether the growth can continue. Analysts such as

Tim Long

at

Barclays

say this year and next may prove more challenging as evolutionary iPhone offerings could lead to customers holding on to their phones longer. That’s similar to what happened with the iPhone 6s in fiscal year 2016 and iPhone XS in fiscal year 2019. “The iPhone 12 cycle was strong,” Mr. Long told investors in a note Monday. “We have seen this trend before.”

Some remain bullish.

Dan Ives,

an analyst for Wedbush who has been supportive about Apple, reiterated that sentiment in a note this week, calling the stock “a ‘safety blanket’ tech name in this market storm.”

“While the supply chain issues have curtailed some growth for Apple on this massive product cycle playing out across its entire hardware ecosystem, we believe the pent-up demand story for Cupertino is still being underestimated by investors,” he wrote.

Write to Tim Higgins at Tim.Higgins@WSJ.com