Apple Services Boost Tech Giant to Solid Quarterly Earnings

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Apple CEO Tim Cook

Services revenue came in at $11.45 billion, beating Wall Street's expectations.

Shares of Apple on Tuesday were climbing 6 percent in after-hours trading when the firm posted second-quarter earnings that beat the expectations of analysts as music and other services surged while its main engine of sales, the iPhone, saw a decline.

Apple was expected to earn $2.37 per share on revenue of $57.5 billion during the quarter, but it posted $2.46 per share on $58 billion.

Apple was hoping to bounce back from weakening iPhone sales, notably in China, and Wall Street expected it to do just that, hence its shares have risen 40 percent in the past three months. While iPhone sales might have disappointed again, Apple has offered strong guidance that suggest demand is on the upswing again.

The financial results come a month after the technology and new-media giant unveiled products for streaming TV, gaming and news at a high-profile event. The TV product will not only compete with Netflix, but also similar services coming from Disney, WarnerMedia and NBCUniversal.

By product category, Apple said it sold $31.1 billion worth of iPhones, $4.9 billion in iPads, $5.5 billion in Macs and $5.1 billion in wearables. The company exceeded expectations in iPads and wearables, but fell short in Macs and iPhones. 

Apple no longer discloses unit sales, but the $31.1 billion in iPhone revenue was down from $37.6 billion in the same quarter a year earlier. CEO Tim Cook told Wall Street analysts on Monday that the iPhone "declines were significantly smaller" toward the end of the quarter, suggesting a turnaround is afoot.

The exec called the firm's wireless AirPod headphones "a cultural phenomenon" and Apple said services revenue came in at $11.5 billion, beating Wall Street's expectations and rising from $9.9 billion in the same quarter last year.

Apple said it has 390 million worldwide paid subscriptions for its services, up from 120 million a year ago. Apple Music and iCloud are a couple of key services, and the company will launch Apple TV+ and Apple Arcade before the end of the year.

"Our March quarter results show the continued strength of our installed base of over 1.4 billion active devices, as we set an all-time record for services," Cook said. He added that Apple saw its strongest iPad growth in six years, and boasted that Apple Pay can now been used at Ticketmaster and for NFL tickets.

Apple authorized an additional $75 billion in share repurchases and said it is raising its quarterly dividend for the seventh time in less than seven years. The company said it will pay a 77 cent per-share dividend on May 16.