Apple stock surges to all-time high as forecast hints at strong sales boost (AAPL)

Apple also issued strong revenue guidance for its fourth fiscal quarter, suggesting strong sales growth year-over-year.

The strong guidance also hinted at the launch of a redesigned iPhone in September, which is expected to sell briskly.

Although CEO Tim Cook had warned that iPhone sales might see a "pause" ahead of the expected September launch of the new iPhone, iPhone unit sales were in line with Wall Street expectations and in line with last year's performance.

Notably, Apple sold 14% more iPads than it did a year ago, breaking a 13-quarter streak of year-over-year declines. However, revenue was only up 2% on an annual basis, suggesting that many of these sales were of the less expensive $329 iPad Apple introduced during the quarter.

One trouble spot in the earnings was Apple's performance in China, which was down 10% year-over-year.

Apple also announced a cash dividend of $0.63 cents per share, payable on August 17.

Here are the key results:

Q3 EPS (GAAP): $1.67, up 17% year-over-year, vs expectations of $1.57

Q3 revenue: $45.4 billion, up 7% year-over-year, vs expectations of $44.95 billion

Gross margin: 38.5%, up 1% year-over-year, vs expectations of 38.2%

iPhone unit sales: 41.0 million, up 1% year-over-year, vs expectations of 41.1 million

iPad unit sales: 11.42 million, up 14% year-over-year

Mac unit sales: 4.292 million, flat year-over-year

Q4 revenue guidance: $49 billion - $52 billion vs expectations of $49.21 billion

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Notes from the call

[5:00] Hold music has started. We're expecting CFO Luca Maestri and CEO Tim Cook today.

[5:02] And we're off. Tim Cook calls the results "very strong" and predicts that Apple will "extend" its competitive lead this fall, potentially hinting at a big iPhone launch this fall.

[5:04] Cook says there was a lot of demand at the high end of the iPhone lineup. "One decade after the iPhone launch, we have passed 1.2 billion cumulative iPhones sold."

[5:05] Cook says that its services business is the size of a Fortune 100 company, which is faster than the company had predicted. (Apple predicted it would happen this year.)

[5:06] Apple is doing it for the kids — Cook is spending a long time talking about its software to teach students how to code.

[5:07] Sales of Apple watch were up over 50% in the June quarter, Cook says.

[5:09] Cook highlights Apple's $1 billion fund that invested in Corning and is "laying a foundation for a new era of technology-driven manufacturing" in the US.

[5:11] "It's still early in the beta period, but it's clear that ARKit has captured the imagination of our developer community." Cook says that Apple will have the largest augmented reality platform this fall.

[5:14] Tim Cook talking about HomePod, the speaker Apple previewed earlier this summer. Says listeners were blown away by sound quality.

[5:15] Now CFO Luca Maestri is giving his prepared remarks.

[5:18] Maestri says that 3 out of 4 Apple Pay transactions take place outside the US.

[5:21] Walmart will use iPads for employee training. Deloitte and other enterprise customers are also going great, Maestri says.

[5:25] Apple issued $10 billion in debt last quarter, Maestri says.

[5:27] It's question and answer time. First up is Katy Huberty from Morgan Stanley, who asked about gross margin.

[5:30] Shannon Cross asks about China. Cook says iPhone was flat year-over-year. He also blamed Hong Kong for dragging the segment down. "We're at the trough of that, which is nice," Cook said.

[5:34] Tim Cook: "We do think about the rumors and the volume of them that there is a pause in our current numbers" of people waiting for the next iPhone.

[5:35] Cook is asked about President Trump and his claim that Apple plans to build three big factories. Cook dodges and answers a question about increasing jobs in the United States. "We've already deployed $200 million to Corning in Kentucky to expand the plant to make innovative glass."

[5:39] "There's probably several plants that can benefit from some investment to grow or expand or set up shop in the US for the first time, we're very excited about that."

[5:40] Cook says that China requires VPN apps to have a license from the government, and Apple was required by the Chinese government to remove VPN apps from the App Store. "There's still 100s of VPN apps on the App Store," Cook said. Cook says they're hopeful the Chinese government loosens the regulations.

[5:45] Channel inventory question getting at when Apple will launch the next iPhone. Maestri: "We do not guide on channel inventory, we've never done that."

[5:47] Question about TV and self-driving cars. "We have done some original content, it's focused on Apple Music currently, we have some more that's launching in a week or so," Cook said. Says it's about learning, Apple is new in the space. Also to give Apple Music subcribers some original content.

[5:50] Autonomy is the "mother of all AI projects," Cook says.

[5:52] ARKit question. "Just take a look at what's already on the web, what people are doing. It's all over the place. From entertainment to gaming. More small business solutions ... I think AR is big and profound and it's one of those huge things and we'll marvel on the start of it. Customers are going to see it in a variety of ways. ... We'll start to see some applications there as well ... Feels great to get this thing going," Cook said.

[5:57] Tim Cook: "We have no comment on anything that's not announced."

[6:00] We're done here. Thanks for tuning in!