Talk of Silicon Valley losing steam was put on hold as two technology titans, Apple Inc. and Facebook Inc., tallied better-than-expected quarterly earnings and revenue.
Apple's stock climbed more than 7% in after-hours trading after it reported that sales of iPhones blew past Wall Street's projections. Facebook's shares spiked 4% after it said ad revenue rose 82% year over year.
Although many tech stocks slid in recent weeks, the robust financial results demonstrated that, at least for now, the underlying businesses of these two leading companies remain strong.
In Apple's case, investors had grown increasingly anxious that the company might report its first year-over-year decline in revenue in more than a decade. Instead, the company reported quarterly revenue of $45.6 billion, well above the analysts' consensus of $43.62 billion, and up from the $43.6 billion the company posted in the year-earlier quarter.
Apple's earnings were $10.2 billion, or $11.62 a share, compared with $9.5 billion, or $10.09 a share, for the same quarter a year ago. Wall Street analysts had expected $10.22 a share.
"The iPhone was key in driving our stronger-than-expected results," Cook said on a conference call.
Indeed, Apple sold 43.7 million iPhones last quarter, up from 37.43 million iPhones a year ago and far in excess of analyst estimates of 37.97 million. Cook said the company was gaining ground in a number of markets outside the U.S., and in the process was proving that its strategy of focusing on higher-quality, premium phones was succeeding.
The big blemish for Apple in the quarter was sales of iPads.
Analysts were expecting iPad sales to fall to 19.38 million from 19.48 million in the same quarter a year ago. Instead, the company said it sold only 16.35 million units. Cook insisted that iPad sales met Apple's own internal expectations and that changes in inventory between last year and this year account for much of the big dip.
Still, even taking that into consideration, the number of iPads sold would have declined, Cook said.
Shareholders seemed willing to overlook that, in part, thanks to the announcement that Apple would increase its stock buyback and dividend plan from $100 billion to $130 billion. It also announced it would split its stock 7-for-1 in June.
The news may not squelch the bigger question of whether the company can deliver any new, innovative blockbuster products under Cook. But for the moment, the latest developments at least will relieve some of the more immediate fears investors had about the company's near-term performance.
Apple's stocked closed Wednesday at $524.75, down $6.95 or 1.31%, before earnings were released. After the report, Apple's stock rose $40.14, or nearly 8%, to $564.89.
"It was a strong quarter," said Bill Kreher, an analyst at Edward Jones. "This quarter will fend off the bears. But going forward, the company must rely on new product categories to accelerate growth. The fact the iPad is not going well leads to some urgency over what will replace those revenues over time."
Facebook, meanwhile, crushed expectations with its first-quarter financial results.
The world's biggest social network reported profit of $642 million for the three months ended March 31, nearly three times its profit of $219 million in the year-earlier period. Revenue was up 72%, to $2.5 billion.
Excluding one-time items, Facebook's profit was $885 million, or 34 cents a share, compared with $312 million, or 12 cents, in the year-earlier period.
Analysts had expected earnings per share of 24 cents on revenue of $2.36 billion, according to a poll by Thomson Reuters.
Facebook also reported earnings after the bell. During regular trading its stock fell $1.67, or 2.7%, to $61.36. In after hours trading, it rose nearly 4% to $63.57.
The Menlo Park, Calif., company said that revenue from advertising was $2.27 billion during the quarter. Mobile advertising revenue, a closely watched metric, represented about 59% of total advertising revenue. That was a significantly bigger chunk than a year ago, when mobile advertising revenue accounted for about 30% of total ad revenue.
User engagement was also up: Facebook reported that it had 802 million daily active users in March, a 21% increase over March 2013. Mobile daily active users totaled 609 million, up 43%.
It had 1.28 billion monthly active users as of March 31, up 15%. Mobile monthly active users totaled 1.01 billion, up 34%.
"Facebook's business is strong and growing, and this quarter was a great start to 2014," said Mark Zuckerberg, Facebook founder and chief executive, in a statement.
Facebook also announced that Chief Financial Officer David Ebersman had informed the company he was stepping down after serving in the position for nearly five years.
He will be succeeded as CFO by David Wehner, currently Facebook's vice president of corporate finance and business planning, on June 1. Ebersman will remain with the company through September.