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NEW YORK (TheStreet) -- Apple (AAPL) - Get Apple Inc. Report shares were dropping 7% following fiscal third-quarter results despite revenue beating Wall Street expectations, buoyed by the 59% increase in iPhone revenue from the year-ago quarter.

The Cupertino, Calif.-based company reported earnings of $1.85 per share on $49.6 billion in revenue, as revenue rose 33% year over year. Apple was expected to generate $49.3 billion in revenue with earnings per share of $1.80, according to analysts surveyed by Thomson Reuters.

Gross margin was between 39.7% during the quarter.

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The company sold 47.5 million iPhones, compared to 35.2 million in the year ago quarter, on top of the 10.9 million iPads sold.  No sales numbers were given for the Apple Watch.

"We had an amazing quarter, with iPhone revenue up 59% over last year, strong sales of Mac, all-time record revenue from services, driven by the App Store, and a great start for Apple Watch," Apple CEO Tim Cook said in a statement. "The excitement for Apple Music has been incredible, and we're looking forward to releasing iOS 9, OS X El Capitan and watchOS 2 to customers in the fall."

For the fiscal fourth-quarter, Apple said it expects revenue between $49 billion and $51 billion, with margins between 38.5% and 39.5%, and operating expenses between $5.85 billion and $5.95 billion, with a 26.3% tax rate.