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When it comes to Apple's iPhone X sales, Wall Street got it wrong

Apple's quarterly results and projections weren't quite the tragedy analysts expected.

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Apple CEO Tim Cook, shown here in September after unveiling the iPhone X, found redemption Tuesday when the company released its latest earnings.

James Martin/CNET

Turns out the iPhone X isn't too pricey after all.

That's one major takeaway from Apple's earnings report Tuesday. The company, which many feared would report dismal iPhone sales and offer a soft sales forecast for the current quarter, ended up surprising just about everybody -- even Apple executives. 

iPhone unit sales, while not soaring, held their own. They rose 2.9 percent year over year to 52.2 million phones. That led Apple to project revenue for its fiscal third quarter, which ends in June, that's largely in line with Wall Street's expectations.

And that iPhone X -- which starts at $999, or $300 more than the iPhone 8 and $200 more than the iPhone 8 Plus -- was the top-selling Apple device every week of the quarter, according to CEO Tim Cook. The iPhone X is the most expensive phone Apple has ever made.

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"We were surprised somewhat that through all of this period of time that the iPhone X winds up as the [best] selling, most popular [device] for every week ... since the launch" in November, Cook said Tuesday in a conference call with analysts.

He wasn't the only one surprised. In the weeks leading up to Apple's results, analyst after analyst cut earnings estimates and warned the iPhone boom times could be over. They based their fears on results from Apple's component suppliers, including Samsung, almost universally warned about weakness in the mobile market.

They were wrong.

"Cook delivers again despite rampant fears," noted GBH Insights analyst Daniel Ives, who last week warned Wall Street was in "full panic mode" ahead of Apple's results. On Tuesday, he said that Apple's forecast for the June quarter "was much better than feared" and would be a "major relief" for investors.

For the current quarter, Apple said it expects sales of $51.5 billion to $53.5 billion, with the midpoint higher than the $52 billion expected by analysts, according to a poll by Yahoo Finance.

As Steven Sinofsky, a former Microsoft executive who's now a partner at VC firm Andreessen Horowitz, tweeted: The "analyst community once again demonstrates little understanding of how supply chains work, especially when made up of public (China) companies."

Cook took a triumphant, almost scolding tone during his call with analysts, repeatedly talking about his confidence in Apple's future and its iPhone franchise, which accounts for nearly two-thirds of Apple's revenue. At one point, he provided a laundry list of accomplishments that makes him "very bullish on Apple's future" -- including dramatic growth in the services business, a "huge" installed base of active devices, and "the best pipeline of products and services [Apple's] ever had.

"Since we split the line with the launch of iPhone 6 and 6 Plus back in 2014, this is the first cycle that we've ever had where the top of the line iPhone model has also been the most popular," Cook noted, firing back at Wall Street worries the iPhone X is too expensive to sell in high numbers.

Still, that doesn't mean Apple's iPhone sales will start soaring again.

Loup Ventures analyst Gene Munster expects iPhone shipments to remain flat or rise up to 5 percent each year over the next four years.

Apple's forecast for the current quarter "suggests that the iPhone business is becoming more stable, albeit at a lower growth rate," Munster said. "While investors will always have some anxiety regarding the quarterly iPhone number, the results and guidance suggest we've entered a period of greater visibility in the iPhone business."

Apple increasingly will rely on its services business, which includes the App Store, Apple Music, iCloud and Apple Pay, and other operations to bolster its overall results. And one day, services could even become more important to Apple -- and Wall Street -- than the iPhone.

Industry watchers have "been seeing Apple shifting from a device company to a services company," said Michael Obuchowski, chief investment officer for Apple shareholder Merlin Asset Management. "Many analysts will continue to be obsessed with the number of iPhones sold in a quarter, but increasingly iPhones will become just part of a growing number of 'devices' designed specifically to access Apple Services."

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