Cook said Apple is rethinking how it prices the iPhone outside the United States after largely setting the price in USA dollars, which made the phones more expensive in local currencies.
"The services number is good, and that is the growth engine going forward that people will continue to focus on", said Ivan Feinseth, an analyst with Tigress Financial Partners.
Apple shares rose nearly 4 percent in extended trading on Tuesday.
Cook, who is in regular contact with U.S. President Donald Trump, said trade tensions with China, which may have depressed sales of its phones, were easing. Despite lower than expected sales of the iPhone XS, XS Max and XR, Cook hailed those 2018 phones as "by far the best iPhones we've ever shipped". "I'm optimistic that the two countries will be able to work things out".
Its flagship iPhone saw its revenue fall 15% from the prior year. iPhones brought in $51.98 billion in sales, but analysts were looking for $52.67 billion. Services gross margin hit 63 per cent. Wall Street expected $53 billion on sales of 68 million devices. This helps emphasize that the iPhone base is still growing at a substantial rate, and helps it show investors how many customers are subscribing to services (there are more than 360 million paid customers across services, if you're wondering).
Interestingly, Apple reported that its other businesses, collectively, grew by 19 percent. Meanwhile, WeChat, an all-in-one app for messaging, payments and more, reduces the difference between Apple's iOS and Android. And revenue from services - an increasing area of focus for Apple - topped $10.8 billion during the holiday quarter, a 19 percent gain from previous year.
"[The price] is actually a pretty small difference in the USA compared to previous year, however the foreign exchange issue amplified that difference in global markets, in particular the emerging markets", the Apple boss told analysts on a conference call.More news: Callum Hudson Odoi handed in a transfer request after Bayern Munich bid
Local iPhone pricing in Canada usually is more expensive locally due to the fluctuations. "And so as we've gotten into January and assessed the macroeconomic condition in some of those markets we've chose to go back to more commensurate with what our local prices were a year ago in hopes of helping the sales in those areas".
The Cupertino, California-based company said fiscal second-quarter revenue will be between $55 billion and $59 billion.
Apple also reported better-than-expected earnings from the key holiday quarter.
Apple really isn't selling as many iPhones.
"We generated very strong operating cash flow of $26.7 billion during the December quarter and set an all-time EPS record of $4.18", said Luca Maestri, Apple's CFO.
Apple is banking that investors will realize the company can still reap huge profits by selling various services on the 1.4 billion devices running on its software.