Apple Shares Rise After Beating Earnings Projections

Tim Cook Workshop Event Getty H 2016
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The tech giant announced its fiscal third-quarter results after the market closed on Tuesday.

Apple shares rose after the closing bell when it posted quarterly earnings that slightly beat analysts' expectations on Tuesday.

The tech giant said it earned $1.42 per share on $42.4 billion in revenue, while Wall Street expected the new-media behemoth to post $42.2 billion in revenue and $1.40 in per-share earnings in its fiscal third quarter.

Analysts also expected Apple to sell 40 million iPhones in the quarter, and it sold 40.4 million.

The company is readying its iPhone 7 for launch later this year and the iPhone 8 is expected about a year after that.

Shares of Apple dropped 1 percent on Tuesday to $96.63, and they were up 6 percent in after-hours trading.

Apple's revenue and profit was down compared to the same frame a year ago as it sold fewer iPhones, iPads and Mac computers, but still outperformed expectations. The company's guidance was for another small revenue drop in the current quarter but, again, analysts expected worse.

At $24 billion, the bulk of the company's revenue came from the sale of iPhones, with Macs generating $5.2 billion and iPads at $4.9 billion. Apple made $6 billion in revenue from its "services" unit and another $2.2 billion in "other products."

On the conference call, CEO Tim Cook said its services business, which includes Apple Music, the App Store and iCloud, will be the size of a Fortune 100 company by next year. Its $6 billion in revenue was a 19 percent increase from a year ago.

"Services will continue to grow very briskly," he told analysts on Tuesday.

The falling sales of iPhones was expected because of lackluster demand in China, plus users worldwide appear to be hanging on to their current models for longer timeframes than before.

During the conference call, though, Cook said he visited China, as well as India, and he is very optimistic about growth in both of those high-population countries.

The most recent quarter marks the second time Apple reported declining iPhone sales after eight years of growth.