Apple's revenue forecast for the second quarter on Thursday was below market expectations, adding to concerns of a plateau in demand for its newer iPhones, including the anniversary edition iPhone X.
The company forecast second-quarter revenue between US$60 billion and US$62 billion, while analysts on average were expecting US$65.73 billion, according to Thomson Reuters I/B/E/S.
Shares of the world's most valuable technology company were down 1.3 per cent in extended trading on Thursday.
In the latest fiscal first quarter, the company said it sold 77.32 million iPhone units, below analysts' average estimates of 80.03 million, according to financial data and analytics firm FactSet.
However, average selling prices were stronger than expected - US$796 against expectations of US$756 – a fact that chief financial officer Luca Maestri attributed to higher demand for its newest iPhones.
"It was really driven by the success of the iPhone X and also the iPhone 8 and iPhone 8 Plus," Maestri told Reuters in an interview. "The new lineup has done incredibly well."
The company's iPhones continue to be a major chunk of revenue, accounting for about 70 per cent in the first quarter, even as newer pockets of growth from its services segment emerge.
In recent weeks, Wall Street analysts had speculated that iPhone X sales may have been slower than previously expected for the first quarter and may drop off sharply for the March quarter, lowering their estimates for the March quarter and full fiscal 2018.
The company, which will be paying US$38 billion in repatriation tax, said net income rose to US$20.07 billion, or US$3.89 per share in the first quarter, from US$17.89 billion or US$3.36 per share, a year earlier.
Analysts were expecting earnings of US$3.86 per share.
Apple has set aside money for potential repatriation taxes for several years, so its large tax bill did not result in a major one-time charge.
The company forecast a tax rate of about 15 percent for the second quarter.
Revenue rose about 13 percent to US$88.29 billion for the first quarter ended Dec. 31, beating analysts' average expectation of US$87.28 billion.
Revenue from the services segment, which includes iTunes, Apple Music, iCloud, and Apple Pay, rose about 18 per cent to US$8.47 billion in the quarter.
Maestri also detailed the company's plans for its cash. He said the company, which has about US$163 billion in cash net of debt on its balance sheet, plans to balance its cash and debt. He did not say whether that would come in the form of returning capital to shareholders or capital expenditures.
"Over time, we are trying to target a capital structure that is approximately net neutral. We will have approximately the same level of cash and debt on the balance sheet," Maestri said. "We're going to take that (cash net of debt) balance down from US$163 billion to zero."
Reporting by Pushkala Aripaka in Bengaluru and Stephen Nellis in San Francisco; Editing by Bernard Orr.