Services revenue in the fiscal third quarter rose 12.6% to $11.46 billion, a new record, but missed expectations of $11.73 billion, according to IBES data from Refinitiv. Apple CEO Tim Cook told Reuters that after factoring out a one-time payment from lawsuits a year ago and foreign-exchange effects, the services segment growth rate would have been 18%.

IPhone sales fell 12% to $25.99 billion, about in line with expectations of $25.96 billion, according to Refinitiv data. (Graphic: https://tmsnrt.rs/2yAEoCh)

Apple shares were up 3.5% to $216.10 in after-hours trading after the news.

China sales fell 4% to $9.16 billion, after declining 22% in the fiscal second quarter. The Chinese smartphone market shipments declined 6% in Apple’s fiscal third quarter, according to market research firm Canalys.

Trade tension between the United States and China have weighed heavily on Apple because it has slowed down economic growth in China, a major market for Apple. Apple effectively cut iPhone prices in China earlier this year after currency exchange rates had made its phones too expensive for many Chinese consumers.

Cook told Reuters that results for mainland China, a subset of Apple’s greater China region, were positive.

“We actually grew in mainland China,” Cook told Reuters. “Non-iPhone revenue grew 17%. We grew in every category outside of iPhone.”

Apple said it expects revenue for the current fiscal fourth quarter of between $61 billion and $64 billion, compared with analyst estimates of $61.02 billion.

For the fiscal third quarter ended in June, Apple reported a 1% rise in revenue to $53.8 billion and a 7% drop in earnings per share to $2.18, compared with expectations of $53.39 billion and $2.10 per share, according to Refinitiv data.

“In regards to iPhone, the most important thing for us is that we continue to grow the installed base,” Cook told Reuters. “And we did that on iPhone. And so the fact that people are hanging onto them a little longer, it’s not something I worry about in the 90-day clock.”

Apple did not give the number of active Apple devices, but in January said it was 1.4 billion, with 900 million of those being iPhones. Investors used the number, called the installed base, as a proxy for how many subscribers it can gain for its services business. In April, Apple disclosed that it has 390 million paid subscribers to its own services and third-party apps. The company has set a goal of 500 million by 2020.

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