After becoming the first publicly traded U.S. company to reach $1 trillion in market value last year, Apple cut its first-quarter revenue guidance mid-quarter citing headwinds in China causing weaker sales and longer upgrade cycles. Apple ended 2018 on a devastating note, its stock losing $450 billion in market value.

In line with analyst estimates, Apple (APPL) reported its first holiday-quarter sales decline Tuesday since its iPhone launch in 2001. Total sales of $84.3 billion marked a 5 percent year-over-year decline. China sales for the quarter came in at $13.2 billion, plunging 27 percent year-over-year. Declining sales were also attributed to less iPhone carrier subsidies in certain developed countries and an unexpectedly strong U.S. dollar on the earnings call.

While iPhone sales fell 15 percent to $52 billion, revenue from other segments grew. Year-over-year, Mac sales grew 8.7 percent to $7.4 billion, and iPad sales increased 17 percent to $6.7 billion. For the first time, the company reported “wearables, home and accessories” as a product category (previously Other Products), jumping 33 percent to $7.3 billion.

Resetting expectations, Apple’s stock rose 7 percent to a monthly high of $165.52 in extended trading Tuesday after closing at $154.68 in New York.

Net profit remained flat at $20 billion, down from $20.1 billion year-over-year. Earnings per share (EPS) came in strong at $4.18, analysts had forecast $4.17 a share. The company issued $3.89 a share in Q1 2018.

“We generated a very strong operating cash flow of $26.7 billion during the December quarter and set an all-time EPS record of $4.18,” Apple CFO Luca Maestri said on the call.

The company reported guidance for the current March quarter between $55 billion and $59 billion, missing analyst expectations of $58.97 billion.

Nomura research analysts noted that Apple’s March quarter guidance likely implies a further deterioration of iPhone year-over-year revenue decline. The weak outlook is largely anticipated by investors and limited positive catalysts for iPhone sales are expected in the next few months.

Apple reported first-quarter numbers under a new structure for the first time, offering gross margin figures for its products and services segment, and withholding product unit sales. This reflects Apple’s shift in focus towards services as its next growth driver.

Apple’s services segment includes the App Store, Apple Care, Apple Music, and iCloud storage fees. Revenue for this segment grew 19 percent year-over-year to $10.9 billion, with a strong gross margin of 62.8 percent.

Apple’s product margin was 34.3 percent; its overall gross margin was 38 percent.

Maestri said on the call that the company expects its services segment to grow alongside a growing installed base of devices. He noted that Apple currently has 1.4 billion installed devices globally, of which 900 million are iPhones.

“The percentage of users who pay for at least one service is growing,” Maestri said. “We are launching more services and making it easier for customers to transact on digital stores.”

Bank of America’s Wamsi Mohan said that more time is needed before investors develop confidence that Apple can sustain a strong services margin over the long term.

Apple did not report March quarter guidance for its services segment.

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