Apple's 3Q earnings beat expectations

By Barry Eitel

SAN FRANCISCO (AA) – Apple’s third-quarter earnings released Tuesday beat expectations, although it was below revenue for the same period a year ago.

The company reported revenues of $42.4 billion for the third quarter of the 2016 fiscal year, topping analyst expectations of $42.09 billion.

Apple stock was up more than 7 percent in after-hours trading following the news that was released after markets closed Tuesday.

The device maker also said it sold 40.4 million iPhones globally in the quarter, another surprise to analysts. The figure is down 15 percent from the third quarter of last year, but the company believes the slowdown is due to the world iPhone market reaching a saturation point.

Apple also touted itself as a truly global brand during the announcement, claiming 63 percent of all its revenue came from outside the United States.

“We are pleased to report third quarter results that reflect stronger customer demand and business performance than we anticipated at the start of the quarter,” chief executive Tim Cook said in a statement. “We had a very successful launch of iPhone SE and we’re thrilled by customers’ and developers’ response to software and services we previewed at [the Worldwide Developers’ Conference] in June.”

The company’s services sector, including cloud computing products like iCloud and Apple’s famous App Store, are becoming large drivers of revenue as iPhone sales slow. Those services earned nearly $6 billion in revenue.

“Our services business grew 19 percent year-over-year and App Store revenue was the highest ever, as our installed base continued to grow and transacting customers hit an all-time record,” CFO Luca Maestri said in a statement.

The good news was needed by Apple. Last quarter, the company announced iPhone sales had declined for the first time since the smartphone was released in 2007.