Apple reported a record-breaking $124.3 billion in revenue for the holiday quarter, marking a 4% year-over-year increase. However, the company fell short of Wall Street's expectations for iPhone sales and experienced a significant 11.1% drop in revenue from Greater China, its largest decline in the region in over a year.

The earnings report, released Thursday, showed that Apple's flagship iPhone segment generated $69.14 billion in revenue, below analyst projections of $71.03 billion. This was the company's largest iPhone sales miss since early 2023, when supply chain disruptions impacted production in China. Despite the shortfall, CEO Tim Cook remained optimistic, pointing to strong performance in regions where the company's new artificial intelligence-driven Apple Intelligence software is available.

"During the December quarter, we saw that in markets where we had rolled out Apple Intelligence, the year-over-year performance on the iPhone 16 family was stronger than those markets where we had not rolled out Apple Intelligence," Cook told CNBC. However, he acknowledged that Apple Intelligence is currently limited to a handful of English-speaking countries and is not yet available in China.

Apple's struggles in China were particularly pronounced, with revenue in the region dropping to $18.51 billion. Cook attributed the decline to three key factors: inventory adjustments in distribution channels, the absence of Apple Intelligence in the Chinese market, and an anticipated boost from a national subsidy issued by the Chinese government after the quarter ended. "If you look at the negative 11, half of the decline is due to a change in channel inventory, and so the operational performance is better," Cook said.

While iPhone sales disappointed, Apple saw strength in other segments. Mac revenue jumped 15% year-over-year to $8.99 billion, driven by the launch of new MacBook Pro, iMac, and Mac Mini models powered by Apple's custom silicon chips. iPad sales also surged 15% to $8.09 billion following the introduction of a new iPad Mini. "It's driven by the significant excitement around our latest Mac lineup," Cook said.

Apple's services division, which includes subscriptions, warranties, and App Store transactions, continued to be a major growth driver, generating $26.34 billion in revenue, up 14% from a year ago. Cook highlighted that Apple now has over one billion active subscriptions across its platforms.

However, the company's wearables and accessories category, which includes AirPods, Apple Watch, and Beats headphones, saw a 2% decline in revenue to $11.75 billion.

Despite the mixed results, Apple reported a 7.1% increase in net income, reaching $36.33 billion for the quarter. Earnings per share came in at $2.40, exceeding analyst expectations of $2.35. The company also maintained a strong gross margin of 46.9%, slightly above forecasts.

Looking ahead, Apple did not provide official revenue guidance but signaled that the March quarter would likely see continued momentum in certain product categories. Wall Street is currently projecting earnings per share of $1.66 on $95.46 billion in revenue for the next quarter.

Apple also announced that it would return $30 billion to shareholders through dividends and stock buybacks. The company declared a dividend of 25 cents per share.