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Apple’s biggest quarter ever was kind of a letdown — but investors were fine with it

The iPhone X debut wasn’t enough to push iPhone sales to a new record.

Apple CEO Tim Cook VCG/VCG via Getty Images

Apple just posted its biggest quarter of all time: As expected, revenue passed $88 billion during its fiscal first quarter, up 13 percent year over year, and the company generated $20 billion in profit.

But still, it was not as much as many analysts were expecting, and iPhone, iPad and Mac shipments were lower than many had forecast. For those looking for oversized outperformance, Apple’s record quarter was a letdown.

Apple shipped 77.3 million iPhones during the December quarter, down from 78.3 million in the same period a year ago. But this was supposed to be an iPhone “super cycle” led by the iPhone X, which debuted during the period.

“iPhone X surpassed our expectations and has been our top-selling iPhone every week since it shipped in November,” Apple CEO Tim Cook said in a canned statement.

But many analysts expected better-than-expected iPhone X supply to lead to bigger, record sales, north of 80 million units. That did not happen.

And it’s not because a supply/demand problem was pushing sales to the current March quarter. Instead, Apple’s revenue forecast for its fiscal second quarter is just $60 billion to $62 billion, well below Wall Street’s consensus, which was $66 billion this morning, and even below some conservative estimates.

What did happen: The higher-priced iPhone X pushed Apple’s average iPhone selling price to $796, up almost $100 from the same time a year ago. That’s good.

Apple’s “Other Products” segment, which includes the Apple Watch, AirPods and Apple TV, grew 36 percent to $5.5 billion. Wearables revenue was up 70 percent year over year, the company said on its earnings call. That’s also good — the Apple Watch is driving some growth.

And Apple’s business in China grew for its second quarter in a row, following many periods of shrinkage. (It’s still down from its peak in 2015.)

While Apple’s quarter set records broadly, this wasn’t a blowout relative to heightened expectations.

Still, investors seem optimistic, especially as Apple announced plans to become net-cash neutral. After initially dipping, shares are up more than 3 percent in after-hours trading.

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