Apple posted stronger-than-expected earnings for its fiscal first quarter, driven by robust growth in its services segment. However, iPhone sales, the company’s largest revenue driver, declined slightly, missing analyst projections.

Total revenue rose 4% year-over-year to a record $124.3 billion, aligning with analyst expectations. Net income reached $36.33 billion, translating to earnings of $2.40 per share—both all-time highs and above forecasts.

Mixed Performance Across Product Segments

While Apple’s services division continued its rapid expansion, growing 14% to $26.34 billion, hardware performance was more varied. Mac and iPad sales both saw double-digit growth, rising over 15% to $8.99 billion and $8.09 billion, respectively.

However, iPhone revenue declined by nearly 1% to $69.14 billion. The drop comes despite strong initial sales of the iPhone 16, which launched in September. The shortfall was particularly evident in China, where Apple saw its only regional decline in quarterly sales.

China Market Challenges

Apple faces growing competition from Chinese manufacturers such as Huawei and Vivo, which have expanded their market share. CEO Tim Cook noted that iPhone 16 sales have performed better in markets where Apple Intelligence features are available. In China, these features have yet to launch due to regulatory constraints.

Despite challenges, Apple saw a record number of device upgrades in the quarter, with its active device base reaching 2.35 billion. Cook emphasized that iPhone 16 demand has outpaced that of its predecessor in most regions.

Outlook and Market Reaction

Looking ahead, Apple expects revenue growth in the mid-to-low single digits for the fiscal second quarter, in line with analyst expectations. The company also projected gross margins between 46.5% and 47.5%, exceeding forecasts.

Following the earnings release, Apple shares rose about 3% in after-hours trading. The stock has gained more than 27% over the past year.