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Apple beats on earnings, light on revenue

Wall Street is going to need some time to sort out Apple’s third quarter results.

iPhone sales were up year over year — to 35.2 million — but not as much as the Street expected. iPad sales, at 13.3 million, were lower than expected. And Mac sales, at 4.4 million, surprised just about everybody.

But the biggest surprise may be Apple’s closely watched gross margins. GM in Q3 came in at 39.4%, up 2.5 percentage points from last year’s 36.9%.

The company also announced a cash dividend of $0.47 per share, payable August 14.

“Our record June quarter revenue was fueled by strong sales of iPhone and Mac and the continued growth of revenue from the Apple ecosystem, driving our highest EPS growth rate in seven quarters,” said Tim Cook in a press release.

“We generated $10.3 billion in cash flow from operations and returned over $8 billion in cash to shareholders through dividends and share repurchases during the June quarter,” said Luca Maestri, Apple’s CFO. “We have now taken action on over $74 billion of our $130 billion capital return program with six quarters remaining to its completion.”

Apple’s shares, which closed at $94.72, up $0.78 (0.83%) for the day, were basically flat in after-market trading.

The numbers:

  • Revenues: $37.432 billion, up 6% year over year
  • Profits: $7.7 billion
  • Earnings per share: $1.28, up 20%, Apple’s highest growth rate in seven quarters
  • iPhone unit sales: 35.203 million, up 12.7%
  • iPad unit sales: 13.276 million, down 9.2%
  • Mac unit sales: 4.413 million, up 17.6%
  • iPod unit sales: 2.926 million, down 36%
  • iTunes, Software and Services: $4.485 billion, up 12.4%
  • Accessories: $1.325 billion, up 12.4%
  • Gross margin: 39.4% (well above guidance)
  • Revenue guidance for Q4: $37 to $40 billion
  • GM guidance: 37%-38%
  • Cash and marketable securities: $164.5 billion, up $13.8 billion

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The conference call with analysts began at 5 p.m. ET (2 p.m. PT). Seeking Alpha has a transcript.

Notes from the conference call:

  • Cook for the first time gave an estimate of iPad penetration in the enterprise: 20%. That’s considerably less than the 99% of Fortune 500 companies that were testing it and helps explain why Apple is turning to IBM to sell and service iOS devices in business.
  • Strong numbers from greater China: iPhone sales up 48% year over year, compared with 24% for all smartphone sales and Mac sales up 39%, compared with a PC market that contracted 5% in China.
  • Cook says iPhone trade-ins, rather than cannibalizing new phone sales, are beneficial for the Apple ecosystem because it means “more people can join the party.”

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Follow Philip Elmer-DeWitt on Twitter at @philiped. Read his Apple (AAPL) coverage at fortune.com/ped or subscribe via his RSS feed.