Shares in Apple fell in after hours trading as sales of iPhones declined for the first time since the product launched in 2007.

Although the figures were in line with Apple’s predictions, they failed to meet Wall Street targets, a disappointment that was compounded by lower forecasts for the quarter ahead.

The stock reacted accordingly, with the company’s share price dipping below $100 for the first time since February.

The company sold around 51.2 million iPhones in its second fiscal quarter, some 10 million fewer devices than in the same period a year earlier, and 10 million iPads. Mac sales came in around 4 million. Although the sales of the iPhone were higher than analyst estimates, earnings of $1.90 per share were below the $2 per share that the market had expected. Revenue was also lower than expected at $50.56 billion.

Apple also said it was raising its capital return programme to shareholders by $50 billion through a $35 billion increase in its share buyback authorisation and a 10 per cent rise in the quarterly dividend.

Apple forecast third-quarter revenue of $41 billion to $43 billion, short of the Wall Street consensus of $47.3 billion.

While Apple executives had predicted iPhone sales would decline this quarter, they must reassure investors that the drop represents a momentary roadblock for the company, rather than a permanent shift for the product that fuelled its meteoric rise.

The company was facing a tough comparative period, with the year-ago quarter boosted by the new generation of iPhones, with larger screen sizes.

Developed markets

In an earnings call following the release, chief executive Tim Cook moved to allay fears that the iPhone had hit saturation point in developed markets, pointing to a record number of customers switching from Android and other operating systems in recent months.

“There’s still really good business in the developed markets,” he said. “it’s our job to come up with great products people desire and attract more Android switchers.

The latest figures do not include any sales bump that may have been achieved with the launch of the iPhone SE. Apple began selling the device, which is intended to tap into the market for smaller-screened phones, at the end of March.

But Mr Cook said the company was optimistic about attracting new customers with the SE, noting that demand had outstripped supply of the device.

He pointed macroeconomic headwinds at work, dragging on Apple’s growth. “We’re optimistic this too shall pass,” he said. “The market - and particularly us - will grow again.”

The company has yet to present another device that can drive sales in the same manner as the iPhone has over the years, though last year it released the Apple Watch, its first new product without co-founder Steve Jobs at the helm.

However, there was little detail on the sales of the watch, with Mr Cook saying only that it had met expectations. The company bundles the sales of Apple Watch in with Apple TV, Beats products, iPod and accessories in its results.

It has also introduced services such as Apple Music, which Mr Cook said now has 13 million paying customers.

Defensive position

“Apple is going to be put in a position, in a defensive position of how they show growth, and this is an area that Apple has not had to do for the last few years,” said Patrick Moorhead, an analyst at Moor Insights & Strategy.

Although Apple’s revenue in Greater China fell 26 per cent from the year-ago quarter, chief financial officer Luca Maestri stressed that the company’s commitment to the market, its second largest, is unchanged.

“We continue to be extremely optimistic about the Chinese market, and we continue to make a lot of investment there,” he said.

Rather than buying the iPhone 6S and 6S Plus, many consumers are waiting for the release of the expected iPhone 7 later this year to upgrade their phones, according to analysts.

In reaction to Apple’s report, shares of its suppliers Skyworks Solutions, Qorvo, Broadcom and NXP Semiconductors all fell 1 percent or more on Tuesday.

Apple had planned to release its quarterly results on Monday but delayed the event by a day due to the memorial service for Bill Campbell, a longtime Apple board member who mentored many prominent executives in Silicon Valley.

Additional reporting: Reuters