A continued slowdown in iPhone sales – which account for two thirds of income – led to Apple reporting a drop in annual revenue in October, the first such fall in 15 years.
Analysis – Dave Lee, BBC North America technology reporter
A momentary sigh of relief for Tim Cook as the iPhone performs very well indeed over the holidays.
But it’s worth looking to the future a little, because that’s what investors do in these situations.
In its forecasts, Apple said it anticipated people holding off from upgrading until the new iPhone is revealed, meaning a slump in growth, or maybe a return to decline, over the next few months.
While people waiting for the new phone is nothing out of the ordinary, you get the sense Apple fans, both casual and dedicated, are gearing up for something extraordinary.
And that’s because this will be the 10th anniversary iPhone – and some are hoping for a major new innovation, rather than the slightly more incremental improvements made in the past couple of years.
As ever, Apple is a victim of its own success. Pressure weighs heavy ahead of the launch which will likely be in September.
Mr Cook said demand was particularly high for the larger iPhone 7 Plus during the quarter.
The iPhone 7 models – which were released in September and included an improved camera but ditched the traditional headphone socket – now account for about 17% of Apple’s phone sales, according to research firm Localytics.
Apple said it had sold 78.3m iPhones in the three months to 31 December, up from 74.8m a year before.
It reported revenue of $54.3bn from iPhone sales, along with $7.2bn from the Mac, $5.5bn from the iPad and $4.0bn from other products, including the Apple Watch.
Services boom
Revenues from its services division – including the App Store, Apple Music and iCloud – were $7.1bn. The segment is now close to overtaking the Mac as Apple’s second biggest source of revenue.
“Services obviously continues to be a real success story for them,” said Jackdaw Research analyst Jan Dawson. “It’s one of the fastest-growing segments they have, driven largely by the App Store.”
Analysts expect growth in services to help offset declining hardware sales as the smartphone market matures.
Apple executives warned that some customers were holding back on phone upgrades in anticipation of the 10th anniversary iPhone later this year.
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