Apple has reported its highest quarterly revenue ever, defying expectations that the iPhone 16's sales would be sluggish. However, the company's sales in China, one of its key markets, declined.

The tech giant announced on Monday that it had generated $94.9 billion in revenue during the third quarter, marking a 6% increase year-over-year and surpassing Wall Street's estimates. While net income dipped 36% to $14.7 billion due to a one-time tax payment in Ireland, the company's core business remained strong.

The strong performance was primarily driven by iPhone sales, which reached $46.3 billion, a 6% increase compared to the same period last year. This exceeded analysts' expectations and was attributed to the strong demand for the recently launched iPhone 16.

Apple CEO Tim Cook attributed the success to the strong performance of both the iPhone 15 and the iPhone 16. This comes as a surprise, as some analysts had predicted that the iPhone 16 would face challenges due to the delayed rollout of its AI features.

However, the impact of Apple's new AI feature, "Apple Intelligence," which was released in late September, is not reflected in the latest quarterly results. While the feature has been well-received, its full impact on sales is expected to be seen in future quarters.

Despite the overall positive results, Apple's revenue in China, Taiwan, and Hong Kong declined slightly to $15.03 billion, falling short of analyst expectations. While China remains Apple's third-largest market, its market share has been steadily declining due to intense competition from local brands like Xiaomi, Huawei, and Vivo.

Bloomberg News noted that while Apple remains the most valuable company globally, it faces challenges such as a slowing smartphone market, increasing competition in China, and growing regulatory scrutiny worldwide.