Apple's profits typically skyrocket during the fourth quarter, when new models of the iPhone often arrive and shiny new devices are purchased as holiday gifts. Last year Apple notched a record $18 billion in profit during this period, the largest ever recorded by a single public corporation. This year the company topped that, generating a profit of $18.4 billion on $75.9 billion in revenue during the last three months of 2015. The average sale price for its best selling devices, the iPhone, iPad, and Mac, was also a record high, boosting Apple's margins to 40.1 percent.

But, the company also predicted that revenue for the second quarter of 2016, which for Apple is the first three months of this year, would come in between $50 and $53 billion. That is down from the $58 billion in revenue it booked during the second quarter of 2015, and would mark the first year-over-year revenue decline for Apple in the last thirteen years. This led to slew of questions from investors and analysts who wondered if Apple will now be seen as a value stock, one with a great business but not explosive growth. It was the best of times, it was the worst of time.

There was only one new Apple device released during this period, the iPad Pro. But Apple also began selling the iPhone 6S and 6S Plus during the final three months of 2015. While news that Apple suppliers were seeing a decline in orders has generated headlines in recent weeks, none of that slack is visible in this latest earnings release, thanks in large part to a boost from record-setting sales in China.

Major device sales were flat or down across the board

But revenue was down in Japan and the Americas, with big growth in China being the only reason Apple's revenue hasn't already seen a year-over-year decline. The total number of iPhones sold in Q1 of 2016, 74.78 million, was basically flat against the same period in 2015. iPad sales declined 21 percent from 2015, with 16.1 million sold this quarter. And Mac sales were down three percent from last year, to 5.31 million.

As usual, iPhone sales were by far the largest revenue driver at Apple. But the best growth for the company is now coming from its "services" and "other products". Services — which consists of things like the app store, iCloud, AppleCare, and Apple Pay — grew 26 percent year over year to $6.05 billion. "Other Products", which includes the Apple Watch and Apple TV, grew its revenue 62 percent year-over-year, bringing in 4.3 billion this quarter. It's difficult to tell exactly how well each item sold, because the financial results from those products are still lumped into an ever-expanding black hole, a category which is simultaneously the most interesting part of Apple's earnings and the most difficult to tease apart for detail.

Flat iPhone sales, macro headwinds and forecasts first revenue decline since 2003. Investors' view of value changes https://t.co/FsfDg0qFV7 — Benedict Evans (@BenedictEvans) January 26, 2016

Apple highlighted the increasing diversity of its product line by noting that it has over 1 billion active users across all iOS devices within the last 90 days. And it noted that this quarter saw record sales of both the Apple TV and Apple Watch, without providing more detailed numbers.

On today's call with investors, Apple CEO Tim Cook started off by congratulating his team on another record quarter. He then segued to discussing the headwinds Apple faces from the volatile environment in the global economy, and the weakening of most foreign currencies against the dollar. Apple's growth rate, Cook noted, would have been 7 to 8 percent higher without these currency headwinds. It now earns about two thirds of its revenue overseas.

Tim Cook expressed his strongest interest yet in virtual reality

When asked if he thought the smartphone market had reached saturation, or if the longer replacement cycle was driving a decline in sales, Cook demurred, pointing to the "melee" in the global economy as the biggest driver of the year-over-year declines. He highlighted India as a country that Apple expects to grow as a customer base, and noted that the market for Apple's product could recover in Brazil and Russia once the price of oil stopped cratering. Apple also emphasized that, by the measurements it follows, the rate of consumers who are eager to switch from Android to iOS is actually at an all time high, and that 60 percent of its user base has not yet upgraded to the newest iPhone 6 or 6S units.

What kind of future products might give Apple its next big hit in hardware? Perhaps a virtual reality headset? Asked about virtual reality on today's investor call, Cook sounded bullish. "In terms of VR, um, uh, no I don’t think it’s a niche. I think it can be, it's really cool, and has some interesting applications." Sounds like Apple is interested, although we still don't know how long the company plans to sit on the sidelines.