Apple Reports First Quarterly Revenue Decline Since 2003

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Apple CEO Tim Cook

The company sold 51.2 million iPhones during the quarter.

Investors braced Tuesday for what was expected to be Apple's worst quarterly earnings in more than a decade, and the iPhone maker gave them just that. 

The Cupertino, Calif.-based tech giant reported earnings of $1.90 a share and a more than 12 percent decline in revenue to $50.6 billion for the second quarter. It was the first time since 2003 that Apple reported a decline in quarterly revenue, a result of slowing iPhone sales and a product slate short on of must-have new gadgets. 

Analysts, as polled by Thomson Reuters, were expecting earnings of $2 a share on revenue of $51.97 billion, on the lower end of Apple's fiscal second-quarter forecast. 

The company's stock responded to the revenue and earnings misses, dropping more than 5 percent during after-hours trading.  

The second-quarter report, which was delayed by one day to accommodate executives and employees who wanted to attend the Monday memorial service of former Apple board member and tech advisor Bill Campbell, revealed that iPhone sales dropped by 16 percent to 51.2 million. The company sold 10.3 million iPads, down 18 percent from last year, and 4 million Macs, down 13 percent. 

During a conference call with investors, CEO Tim Cook highlighted growth in Apple's services category, which includes iTunes and Apple Music, noting that it was the second-largest revenue generator behind iPhones during the quarter. 

He also addressed the "very busy and challenging quarter" and blamed the weak sales on macroeconomic headwinds as well as fewer upgrades to the newest iPhone after a large number of conversions for the larger screen on the iPhone 6 last year. 

Apple reported that fiscal third-quarter revenue is expected to fall between $41 million and $43 billion, well below the approximately $47 billion that analysts were expecting. 

Apple shares closed Tuesday down less than one percent to $104.35.