LOS ANGELES — Apple shipped fewer iPhones than Wall Street expected in the first three months of the year, a surprise drop that dented its stock price.

Shares fell 2% after hours. The stock (AAPL) is up 27% this year.

What happened to iPhone sales?

Apple CEO Tim Cook attributed the dip to media hype on the next model. It' was "due to the earlier and much more frequent reports about future iPhones," Cook said in a call with analysts.

The quarter is usually a lull before the big fall sales launch. That pattern didn't disappoint.

The Cupertino, Calif. company said net income rose to $11 billion, or $2.10 a share, on $52.9 billion in sales, up nearly 5% — less than forecast. That's up from $10.5 billion, or $1.90 a share in the year-ago quarter, on $50.6 billion in sales.

Analysts polled by S&P Global Market Intelligence forecast $2.02 a share on sales of $53.02 billion.

Sales of its best-selling iPhone fell 1% to 50.8 million, short of the 51.5 million iPhones expected by analyst firm CFRA Research. Its average selling price was higher, boosting revenue, thanks to demand for the iPhone 7 Plus.


Ipad sales fell to 8.9 million units, and Mac sales gained 4% to 4.2 million. It also made a big jump in the Services division, which includes iTunes, iCloud and Apple Music, bringing in $7 billion in revenue.

Apple also raised its quarterly dividend to 10.5%, making it the biggest dividend payer in the world, according to S&P Dow Jones Indices.

The holiday quarter is when Apple is expected to release a re-designed, souped up 10th anniversary version of the iPhone. Consumers either buy the new iPhone in the first six months of release, or wait for the next one.

Today's Apple results are "a non-event,” says Gene Munster, an investor who runs the Loup Ventures firm in Minneapolis. “Clear sailing to iPhoneX.”

Many analysts are referring to the next iPhone as either the iPhone 8, or the iPhoneX, reflecting the 10th anniversary edition. The first iPhone was released in June, 2007.

Still, some analysts have suggested that Apple might have to delay the fall phone, or offer it in limited supply due to supply constraints.

While the iPhone still dominates Apple’s sales, the growth is coming from its Services division, which already tops revenues from Apple's core Macintosh computer products. Credit Suisse says the division, which profits from the demise of DVDs and need to backup our data, could reach $52 billion annually from $26 billion today.

Apple doesn't report sales figures for the Watch, which hasn't turned into an iPhone or iPad size hit, but Cook, while declining to offer specifics, said that if it factored in sales for the Watch, Apple's new AirPods and Beats headphones, sales would equal that of a Fortune 500 company.

On the call with analysts, Cook talked about investing in India, which has emerged as the No. 3 market for Apple after the United States and China, and one he expects to grow even larger.

"There's a huge opportunity for Apple there," he said.

Sales fell in China, despite having 7 of the top 10 grossing Apple retail stores in the world based there. Cook cited the devaluation of currency by 5%, and weak performance in Hong Kong, which has seen a slump in tourism. "What I now believe is that we'll improve a bit more during this current quarter, not back to growth but improve -- but make more progress."