Apple Zings Past Estimates

Updated with comments from Apple's post-earnings conference call

Apple ( AAPL) flew by targets on the wings of iPhone and Mac sales.

The iPhone maker posted pro forma earnings of $1.35 a share, compared to an adjusted profit of $1.19 a share in the year-ago quarter and well above the $1.17 that analysts were looking for, according to Yahoo! Finance.

Sales for Apple's fiscal third quarter ended last month were $8.34 billion, 12% higher than the $7.45 billion level a year ago and better than the $8.2 billion analysts anticipated.

"We're making our most innovative products ever and our customers are responding," CEO Steve Jobs said in a press release. "We're thrilled to have sold over 5.2 million iPhones during the quarter and users have downloaded more than 1.5 billion applications from our App Store in its first year."

Apple Tops Shopping Lists

With the iPhone's contribution to the top line, Apple's gross margins widened to 36.3%, surpassing the 34.4% analysts were looking for. The current September quarter may be more of a drag margins as Apple offers more back-to-school Mac discounts.

Apple's new iPhone 3GS and its $99 cohort helped boost sales. Analysts were looking for around 5 million iPhones to be shipped in the quarter.

Mac sales were 2.6 million units, up 4% from year-ago levels and reversing the declines in Apple's computer sales in the March quarter. Analysts were looking for 2.3 million to 2.6 million Macs to be sold. From a revenue perspective Apple saw an 8% drop in from a year ago as people bought more lower priced models.

Looking ahead, Apple says it expects earnings in a range between $1.18 a share to $1.23 a share on sales of $8.7 billion. Apple is known for its conservative guidance. Analysts were looking for September quarter earnings of $1.30 a share on $9.5 billion in sales for the September quarter.

There has been some speculation that Apple may select Verizon as its new partner when its agreement with AT&T ( T) expires in the second quarter of next year.

Apple told analysts on an earnings conference call that its phone company partners are thrilled with the iPhone.

Apple's COO Tim Cook said the company has an excellent relationship with AT&T and "we are very happy with it."

A few minutes later in the call, Cook said Apple was working to expand iPhone distribution. "We recognize there are some large markets that aren't covered," referring in part presumably to the other half of the U.S. market controlled by Verizon ( VZ) and Sprint ( S).

On international expansion, Cook said China is a big target.

"China continues to be a priority project, and we hope to be there within a year," Cook said.

The success of the new iPhone 3GS illustrates Apple at its best. The bold bet on mobile phones helped change the smartphone landscape and created a product cycle strong enough to out paddle the recession.

A big concern among investors is whether Apple can sustain the iPhone mojo beyond the most recent quarter as new smartphones from Research In Motion ( RIMM), Motorola ( MOT) and Palm ( PALM) compete for the smartphone dollar.

Steve Jobs: The Man, the Myth, the Turtleneck

Tech investors also question whether Apple, which is more reliant on consumer spending than peers like RIM or Hewlett-Packard ( HPQ) and Dell ( DELL), can continue to sell luxury gadgets in a time when consumers aren't all that financially confident .

Apple shares rose $4.75, or 3%, to $156.35 in afterhours trading Tuesday.

If you liked this article you might like

Dropbox Exec: How We Added $1 Billion in Sales With Amazon and Google Lurking

Dropbox Exec: How We Added $1 Billion in Sales With Amazon and Google Lurking

Tech Stocks That Look Fairly Cheap Following the Rout

Tech Stocks That Look Fairly Cheap Following the Rout

Tech Stocks That Look Fairly Cheap Following the Rout

Tech Stocks That Look Fairly Cheap Following the Rout

Cramer: Today Was Just Awful

Cramer: Today Was Just Awful

Facebook Leads Sharp Decline of FANG Stocks This Week