Apple logged $36.3 billion in profit in what chief executive Tim Cook called its "best quarter ever."

Revenue growth was powered by Apple's service and digital content unit, with iPhone sales slipping in markets like mainland China where they tallied $18.5 billion.

Overall iPhone sales in the quarter were $69.1 billion, about a half-billion less than it took in for handsets in the same period a year earlier, according to an earnings release.

"Our record revenue and strong operating margins drove (earnings per share) to a new all-time record with double-digit growth," said Apple chief financial officer Kevan Parekh.

"We are also pleased that our installed base of active devices has reached a new all-time high across all products and geographic segments."

In the quarter, Apple's services segment -- which includes Apple Music, iCloud, the App Store, and Apple TV+ -- reported revenue of $26.3 billion, compared to $23.1 billion in the same period a year earlier.

Apple shares slipped slightly to $234.33 in after-market trades.

The Americas remained Apple's largest market with $56.2 billion in revenue, while Europe showed strong growth at $33.9 billion.

Investors are eyeing demand for new iPhones with artificial intelligence features, especially after Apple stumbled with the technology.

Apple pushed out a software update in mid-January which disabled news headlines and summaries generated using AI that were lambasted for getting facts wrong.

The move by the tech titan comes as it enhances its latest lineup of devices with "Apple Intelligence" in a market keen for assurance that the iPhone maker is a contender in the AI race.

Apple Intelligence is a new suite of software features for all devices that was announced at the company's annual developers conference, where it also announced a partnership with ChatGPT-maker OpenAI.

In the short-term, the new powers include AI-infused image editing, translation, and small, creative touches in messaging, but not more ambitious breakthroughs promised by other AI players, such as OpenAI or Google.

"Apple intelligence builds on years of innovations we've made across hardware and software to transform how users experience our products," Cook said on an earnings call, adding that it "opens up an exciting new frontier and is already elevating experiences across iPhone, iPad and Mac."

- Headline trouble -

Apple's decision to temporarily disable the recently launched AI feature came after the BBC and other news organizations complained that users were getting mistake-riddled or outright wrong headlines or news summary alerts.

The company hopes that customers are attracted to buy the latest iPhone models by its new AI powers.

Along with Apple, other tech giants like Google, Microsoft and Amazon are convinced that generative AI's powers are the next chapter of computing and are boosting spending so as not to be left behind.

Apple lost its status as the best selling smartphone brand in the crucial Chinese market last year with a pair of local rivals surpassing it with surging shipments, according to industry data provider Canalys.

"Intense competition has led to a constantly shifting landscape," said Amber Liu, Research Manager at Canalys.