Apple Inc. is inching closer toward becoming the world’s first trillion-dollar valuation company after smashing expectations with record-breaking third-quarter earnings.

The iPhone maker Tuesday easily beat Wall Street’s forecasts with earnings of $2.34 per diluted share, up 40 percent from the same period one year ago. Revenue also rose 17 percent, coming in at $53.3 billion for the quarter.

Analysts had pegged Apple’s earnings at $2.18 per share on revenue of $52.34 billion.

The earnings and revenue are Apple’s highest-ever for a third quarter, which is traditionally a slow one for the company as its customers await the release of new products in the second half of the year.

Investors were delighted with Apple’s performance, bidding up its share price more than 4 percent in after-hours trading. The rise edges Apple closer to a milestone $1 trillion valuation. Currently, the company is worth $935.3 billion at the time of writing, which means its stock needs to rise about 7 percent to hit that magic number.

Apple said it sold 41.3 million iPhones in the third quarter, up 1 percent from a year ago. That amounted to revenue of $29.9 billion, up 20 percent from a year ago. Revenue was boosted by a jump in the average selling price of the device to $724, above the analyst consensus of $693.

Analyst Patrick Moorhead of Moor Insights & Strategy said the numbers were boosted by expensive iPhone X model, which saw solid sales in the quarter despite reports earlier this year that the company was halving its production targets for the device.

“I predicted iPhone X success as long as Apple could get enough of its proprietary parts, and it did,” Moorhead said. “Once again, Apple silenced its critics by blowing away revenue numbers led by upgrades to the high-priced iPhone X.”

While iPhone sales continue to explode, the signs were less promising with the company’s other product lines. Apple said it sold 11.55 million iPads worth $4.74 billion in revenue, but this was down 5 percent compared to the same period last year. Apple’s Mac personal computers also declined 5 percent, with 3.72 million units sold for $5.33 billion in revenue.

Still, Apple was boosted by a significant jump in services revenue. The company said revenue here hit $9.5 billion, up 31 percent from a year ago.

The services revenue growth is hugely encouraging for Apple because it’s rapidly becoming a significant part of its business, especially in terms of future growth, said Holger Mueller, principal analyst and vice president of Constellation Research Inc.

“If you ever doubted that Apple is going to thrive or die with the iPhone, this quarter has put all doubts to rest,” Mueller said. “Now it is all about monetizing the platform with services, and that has to move from a ‘nice side revenue’ to a key revenue driver for Apple.”

Apple Chief Executive Tim Cook underlined this point, saying the results were were driven not only by strong sales of iPhones but also services and wearables.

Later, on a conference call, Cook revealed that the company is all set to double its fiscal 2016 services revenue by 2020. He said services revenue was boosted by several areas, including paid subscriptions, which now number more than 300 million. He added that App Store revenue “exceeded our wildest expectations,” generating nearly twice the amount of what Google’s Play store has done so far in 2018, according to third-party estimates.

“Balancing out the iPad and Mac declines were big upticks in services, which are critical for Apple’s long-term growth,” Moorhead said. “’Other’ products, even though the company doesn’t break out details, were up big as well, a very positive sign for Watch, HomePod and Apple TV.”

Apple further pleased shareholders with an updated revenue forecast for the next quarter, when it’s expected to launch new iPhone models and other products. The company said it’s expecting fourth-quarter revenue in the $60 billion to $62 billion range, above Wall Street’s forecast of $59.57 billion.

The positive forecast suggests that Apple may have multiple devices lined up for the fall, and indeed, the latest rumors indicate three new iPhone models are in the pipeline, including a giant 6.5-inch model, as well as a new Apple Watch and iPad Pro.

As always, Cook refused to be drawn on the speculation, saying instead that Apple will “continue to provide different iPhones for folks to meet their needs.”

Image: Håkan Dahlström/Flickr