Apple Inc. (NASDAQ:APPL) is expected to deliver record quarterly profits on Thursday despite reports about weak demand for its pricey iPhone X.
Analysts have forecast net income of at least US$19bn for the first quarter ended December 31, 2017, beating its previous quarterly record of US$18bn in 2015.
Revenue is forecast to rise 11% to US$86bn.
The results include sales of the iPhone X, which was released in November.
iPhone X sales
Estimates for iPhone X sales are mixed amid concerns many consumers feel the device is not worth the US$999 price tag.
Last week a leak revealed that Apple could end production of the iPhone X as soon as this summer following disappointing sales.
READ: Apple leak reveals iPhone X could be cancelled this summer
KGI analyst Ming-Chi Kuo said the iPhone X has failed to have as much impact in China as hoped.
He reckons Apple will ship about 18 million of the iPhone X in the first quarter of 2018.
BTIG analyst Walter Piecyk said smartphone upgrades remain at record lows and do not appear to be poised to rebound in the first quarter.
"Concerns about iPhone X sales have been well documented. Apple's stock has shrugged off a slew of analyst and press reports that highlight these trends," Piecyk added.
But Neil Cybart, an analyst at Apple newsletter Above Avalon, had a more positive view on the iPhone X. He expects “stellar” sales in the first quarter.
Cybart said Apple was able to overcome worries that it was unable to manufacture enough of the iPhone X to meet demand. He also thinks it could lift the average selling price of iPhones by more than US$100 to a new record above US$800.
Apple continues to tackle tough competition in China
However, the quarter is facing a tough comparative in the same period a year ago when it reported a strong performance.
Apple also needs to address sluggish sales in China but competition is fierce and many consumers reportedly don’t like the iPhone X because it has less usable space than on the iPhone 8 Plus.
Analysts at Canalys estimate that overall smartphone sales in China fell 4% last year, saying the market has “slowed faster than expected”.
Morgan Stanley, however, projects a “strong” double-digit percentage increase in iPhone unit sales in China for the quarter, compared with a slight fall in the US.
In total, analysts predict Apple sold 81 million iPhones in the first quarter, making up more than two-thirds of total sales.
US tax reform
Apple has said it expects to pay a record tax bill of US$38bn to repatriate cash held overseas.
READ: Apple to pay US$38bn in US taxes to repatriate foreign cash under Trump's new law
Investors hope the US tax reforms will result in an increase in Apple’s capital return programme but the company is unlikely to provide an update on its dividend and share buyback scheme before April.