Apple Inc. (AAPL) Stock Soars on Blowout Q3 Earnings

Apple Inc. (Nasdaq: AAPL) reported fiscal third-quarter earnings after the bell on Tuesday, beating on both revenue and earnings per share. AAPL stock quickly spiked more than 4 percent in afternoon trading as Wall Street applauded the solid quarter.

Apple stock had already been on a hot streak, boasting year-to-date gains of nearly 29 percent in 2017. The run, it appears, shall continue.

Apple earnings: Q3 by the numbers. Earnings per share grew 17 percent to $1.67 on revenue of $45.4 billion -- easily beating on both metrics.

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Analysts were expecting EPS of $1.57 on revenue of $44.89 billion, an increase of 6 percent year-over-year.

During Tuesday's trading day, the market was on edge about whether the company would be able to issue good guidance for the fiscal fourth quarter, which runs from July to September. Typically, Apple releases a new iPhone model each September, so poor guidance for Q3 could quite easily be interpreted as "you're not getting the new iPhone before October."

The timing of the release wouldn't have been such a direly important issue for AAPL if it weren't for three things:

-- This is the 10th anniversary of the first iPhone, and markets have been abuzz practically since the iPhone 7's release a year ago about what sort of top-of-the-line features this year's model would have -- and how much it would sell for.

-- If Apple's fiscal fourth-quarter guidance was poor, implying a later release, it would give investors no clue about when the new flagship smartphone (rumored to be called the iPhone 8) actually would come out. "Sometime in the last three months of the year" isn't very specific, and AAPL stock owners, like most shareholders, loathe uncertainty. So do customers, and the holidays wait for no retailer -- no matter how big its bank account is.

-- Lastly, and most importantly for the Apple stock price: The iPhone still makes up more than 60 percent of company revenue.

As it turned out, guidance -- like both Q3 EPS and revenue -- came in better than expected. So those concerns, at least for now, were quelled. Phew.

Apple forecast fiscal fourth-quarter revenue between $49 billion and $51 billion, or a midpoint of $50.5 billion. Analysts were expecting $49.21 billion on average.

Services revenue. One of the brighter spots of the Apple earnings report was services revenue, which saw growth of 22 percent, or roughly 3 times the company's total growth rate.

"It's encouraging to see that service revenues are growing this quarter. Shareholders hope that the service segment continues growing due to its higher margins," says K C Ma, professor of finance at Stetson University.

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The services segment -- which includes income streams like the App Store, iTunes, Apple Music and Apple Pay -- is almost like what Amazon web services is to Amazon.com ( AMZN), except AAPL would still be wildly profitable without it.

AAPL stock buybacks and long-term concerns. If there's one thing that never changes about Apple -- at least in recent years -- it's that the company is an absolute cash cow. The company announced that, through AAPL stock buybacks and dividends, it returned $11.7 billion in capital to shareholders.

While the 1.7 percent dividend yield might not sound like much, shareholders have gotten over $60 billion in dividends alone since the dividend was reinstated five years ago. And with a payout ratio of 27 percent, Apple is one of the best stocks to buy for dividend growth.

Apple, in fact, has so much money on its hands that one of the most common investor concerns is essentially what to do with it all. Many advocate an increased dividend, while others fall more firmly in the camp of R&D spending in the hopes of coming up with the next Great Product to supplant the iPhone as the company's main source of revenue.

While the iPhone is admittedly a tough act to follow, CEO Tim Cook has had plenty of time -- almost six years to the day -- to come up with a new product. In that time, Cook has given the market a sum total of one new product: the Apple Watch, which isn't even popular enough to be broken out into its own line item.

For buy-and-hold investors, that's worrisome.

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"There is always concern about the iPhone's long-term growth prospects beyond the iPhone 8 launch later this year," Ma says. "As the gains in smartphone sales slow, Samsung just had a record quarter, exceeding Apple in both top- and bottom-line numbers."

John Divine is an investing reporter for U.S. News & World Report, where he covers financial markets and the economy, with a focus on individual stock analysis. He has been an investor himself for over 10 years, and has been writing professionally about stocks and investing for the last five years. He previously wrote about the stock market for The Motley Fool and InvestorPlace, and his work has appeared on Yahoo! Finance, MSN Money, and AOL DailyFinance. He graduated from Appalachian State University in 2011 with a bachelor's degree in finance and banking. At Appalachian, he was a member of the Bowden Investment Group, a team of students that ran a real-money portfolio worth over $100,000. You can follow him on Twitter or give him the Tip of the Century at jdivine@usnews.com.