Apple Inc. delivered third-quarter financial results that crushed Wall Street’s expectations today, with iPhone sales up almost 50% compared to the year prior, but its stock fell in extended trading as it warned growth would likely slow in the next quarter.

The company reported a profit before certain costs such as stock compensation of $1.30 per share on revenue of $81.4 billion, up by an impressive 36% from a year ago. That surpassed expectations by some distance, with analysts forecasting a profit of just $1.01 per share on sales of $73.33 billion.

Apple Chief Financial Officer Luca Maestri hailed a “record operating performance” for the company, setting new revenue records in each of its geographic segments and double-digit growth in every product category.

“We generated $21 billion of operating cash flow, returned nearly $29 billion to our shareholders during the quarter, and continued to make significant investments across our business to support our long-term growth plans,” he added.

It was Apple’s iconic iPhone product line that led the way with revenue up 49% from a year ago, to $39.57 billion. Revenue for iPads rose 12%, to $7.37 billion, and Mac revenue hit $8.24 billion, up 16% from the year prior. The company also saw strong growth in services, with sales there up 33% to $17.48 billion, while its “other products” revenue, which includes its iPods and wearable gadgets, leaping by an impressive 40%, to $8.76 billion.

The quarter was all the more impressive because it’s traditionally seen as the slowest in Apple’s financial year. However, the company has received a big boost from the COVID-19 pandemic, with remote work and home education trends boosting sales of many of its devices.

In a conference call with analysts, Apple Chief Executive Tim Cook (pictured) said the strong iPhone sales were not just thanks to existing customers upgrading their old devices. He said many former Android customers had bought their first iPhones during the quarter. “We saw very strong double-digit increases in both upgraders and switchers during the quarter,” Cook said.

Perhaps the real star was Apple’s services business. Many investors had been concerned that it would slow as people around the world return to work and have less time for online services and apps. But that didn’t happen, with the 33% growth in services revenue even faster than the 26.7% growth rate seen in the previous quarter.

Apple doesn’t break down how its services revenue is composed, but Cook told CNBC in an interview after the earnings call that it saw record sales in music, video, cloud services, advertising and payments. “It’s clear that our long running investment in our services strategy is succeeding,” he insisted.

Looking at the overall picture, the CEO pointed out that Apple’s results would have been even more spectacular if not for the worldwide semiconductor shortage that hampered sales of other products.

“The shortage primarily affected Mac and iPad,” Cook told CNBC. “We had predicted shortages to total $3 billion to $4 billion. But we were actually able to mitigate some of that and we came in at the lower than the low end part of that range.”

However, in the conference call Cook told analysts the company might struggle to mitigate supply chain problems during the next quarter. As a result, he said iPhone and iPad sales were likely to be affected in the next three months.

Maestri confirmed Apple is expecting slower growth than it saw in the quarter just gone. He said this would also stem from unfavorable foreign exchange rates and reduced growth in the services business, as well as the chip supply issues. The company did not provide formal guidance for the fourth quarter, however, something it has declined to do since the beginning of the pandemic.

The quarter shows once again that Apple as a company stands and falls with iPhone sales, analyst Holger Mueller of Constellation Research Inc. told SiliconANGLE. “IPhone sales soared and Apple delivered record revenue,” he said. “It’s good to see the diversification on the services side, but investors know Apple depends on the iPhone more than anything else.”

As investors digested the report, Apple’s stock lost more than 2% in the after-hours trading session.

Pund-IT Inc. analyst Charles King said the stock drop was of little concern, noting that other tech companies, including Microsoft Corp., also fell after-hours despite posting strong results, though Microsoft’s shares recovered later.

“Despite Apple’s caution about chip shortages and other potential problems in the months ahead, the company is well-positioned to maintain its leadership in key markets,” King said.

Photo: Apple