San Francisco: Apple's third-quarter net income plunged 27 per cent to $7.8 billion on a decline of iPhone sales, although it still exceeded Wall Street's expectations. According to the Cupertino-based tech giant, 40.4 million iPhones were sold in the quarter, compared with 47.5 million in the same period of 2015. The figure surpassed the expectation of 40.02 million units, prompting Apple shares to spike around seven per cent in after-hours trading, Efe news reported. Revenue for the third fiscal quarter contracted by 14.6 per cent to $42.36 billion compared with revenue of $49.6 billion in the same period last year because of the drop in iPhone sales for the second consecutive quarter. Earnings per share were $1.42, above the analysts expected earnings of $1.38 per share and revenues of $42.1 billion. The company reported that its gross profit margin was 38 per cent. "Today we're pleased to report third quarter results that reflect stronger customer demand and business performance than we anticipated just 90 days ago," Apple's CEO Tim Cook said in a statement. Meanwhile, Apple's chief financial officer Luca Maestri said the results had exceeded their expectations in a quarter marked by currency fluctuations and comparisons between iPhone's latest model, the 6S, and the best-selling iPhone 6. Apple's profits suffered the first decline in 13 years in the quarter ending March 26 and iPhone sales contracted for the first time in history, a setback that halted the meteoric rise of the tech giant. One of the problems is the slowdown of the company's businesses in China which Apple sees as the next growth engine. Services including the App Store and cloud storage (iCloud), among others, generated revenue of $6 billion, a 18.9 per cent increase compared to a year ago. Apple also expects a gross margin between 37.5 and 38 per cent during the current quarter ending September and anticipates revenues of between $45.5 billion and 47.5 billion. Apple shares currently are down 8.2 per cent since the start of the year.