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Apple CEO Tim Cook at the company’s keynote event in 2019. (Apple Photo)

Apple snapped a streak of sliding revenue in its third quarter driven by continued growth in services. However, revenue from Apple’s flagship hardware division declined year-over-year as the tech giant prepares for its next iPhone release.

Apple bested analyst expectations for both revenue and profits, and shares in the company rose more than 3 percent in after-hours trading.

Revenue: Apple posted $53.8 billion in revenue, up 1 percent and ahead of analyst expectations of $53.39 billion. Revenue from the services division grew 13 percent to  $11.45 billion. The product division brought in $42.3 billion in revenue in the quarter, down 1.8 percent from a year ago.

Profits: Apple beat analyst expectations of $2.10 per share in profits, reporting net income of $10 billion, or $2.18 per share.

Looking ahead: Apple posted better than expected guidance for its crucial fourth quarter, which typically includes the latest iPhone release. Apple expects to post revenue of $61 billion to $64 billion in its fourth quarter, compared to analyst expectations of $61.02 billion.

“This was our biggest June quarter ever — driven by all-time record revenue from Services, accelerating growth from Wearables, strong performance from iPad and Mac and significant improvement in iPhone trends,” Apple CEO Tim Cook said in a statement. “These results are promising across all our geographic segments, and we’re confident about what’s ahead. The balance of calendar 2019 will be an exciting period, with major launches on all of our platforms, new services and several new products.”

Despite the record services revenue Cook highlighted, growth in the division is beginning to slow.

Apple is dipping into its vast cash reserves with its acquisition of Intel’s smartphone modem unit for $1 billion earlier this week. The deal gives Apple the ability to develop its own modems for faster, 5G iPhones.

Apple’s revenue declined year-over-year the past two quarters. Cook warned investors early this year that China’s weakening economy and trade tensions with the U.S. were weighing on the company’s revenues. The company has also seen fewer iPhone upgrades than expected.

Apple has unveiled a number of new products and services over the last couple months as it looks to build on rising services revenue and refresh existing products to juice the hardware side.

  • In late March, Apple unveiled a streaming service called Apple TV+, magazine subscription offering Apple News+, game streaming service Apple Arcade and an Apple-branded credit card that works with Apple Pay and will be released in August.
  • At its Worldwide Developer Conference in June, Apple showed off a new operating system specifically for the iPad, the latest version of iOS and MacOS — which included the demise of iTunes — and a refreshed Mac Pro supercomputer and the powerful Apple Pro display.
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