Despite posting a double-digit growth in its iPhone business, which make up a huge chunk of Apple's entire business, Wall Street isn't shy about showing its disappointment over Apple's not meeting the bar it has set for itself when Steve Jobs first unveiled the iPhone.

Apple shares tanked by 7 percent in after-hours trading following its latest quarterly earnings report. The shares are now down from $130.75 to $121.80, marking the sharpest stocks decline for Cupertino since January 2013, when investors were grilling Tim Cook over his ability to innovate beyond the iPhone.

The slump in shares overshadow Apple's continuous double-digit growth, which is unusual for a company of its size, and the growing Chinese market where Apple is planning to open 40 new retail stores in the next 12 months.

Overall, Apple posted a revenue of $49.6 billion, which represents a 33 percent increase from last year's figures. Profit is also doing well, with a 38 percent increase to $10.7 billion. Majority of Apple's financial success is fueled by its increasing iPhone sales, which contributed $31.4 billion in revenue.

Apple sold more than 47.5 million iPhones over the last three months, a 35 percent increase from the same period in 2014, but it falls short of analyst expectations for 50 million iPhones sold and a 40 percent growth from last year, thus accounting for the 7 percent drop in Apple's shares.

However, Cook remains positive about the iPhone, saying that It "has a lot of legs on it" and that only around 27 percent of iPhone owners have upgraded to the new iPhones, which leaves a lot of room for more sales, especially during the last quarter of the year, as most people prefer to upgrade during this time. Cook also says that the spring quarter saw the highest rate of new customers switching over from Android.

"We view that as a very bullish sign on the future that there's a lot of head room left for upgrades," Cook says.  

Sales of Apple's Mac computers are also on the rise, which is a good sign for Apple as the overall PC market continues to drop. Apple's MacBooks, which recently received minor upgrades, account for $6 billion in the company's overall revenue, which is equivalent to 4.8 million units.

The bigger doubts arise over the continuing downward slide of the iPad, which has been on the decline for well over a year now. Apple sold 10.9 million iPads during the last quarter, a steep 18 percent drop from last year's figures, contributing $4.5 billion to the company's revenue. Apple is aware of this, which could be the reason for the rumors about a large-screen iPad Pro that could take the place of computers for corporate customers.

The Apple Watch is also not making a good impression on investors, as Apple has declined to reveal concrete figures for its newest product, only saying that it had a "great start." Apple chief financial officer Luca Maestri says the Apple Watch sold more than the iPhone and the iPad during their first nine weeks. Cook also says the Apple Watch exceeded the company's expectations, considering that it was initially on sale on line and that Apple struggled to keep up with demand.

"We looked back at similar periods for iPhone and iPad when they were originally launched, and we've actually sold more Apple Watches that we sold iPhone and iPad at the time," Maestri said.

Analysts have estimated Apple Watch sales between 1.5 million and 2.5 million units. Jan Dawson of Jackdaw Research has scaled down his earlier prediction of 5 million units sold to 2.5 million, while Toni Sacconaghi also cut down his expectations of 3 million Apple Watches sold to 2 million.

"It's way too early to render a verdict on the watch," Sacconaghi says. "All we can say is relative to expectations, whether those were misplaced or not, the watch was a disappointment this quarter." 

Photo: David Sandoz | Flickr

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