Apple reported a fourth quarter profit of $7.5bn (£4.6bn), a 9% fall, beating analysts’ expectations, but reported margins fell because of rising production costs.

Annual profits dropped to $37bn from $41.7bn the previous year, its first earnings decline in 11 years, although iPhone sales rose 26% to 33.8 million.

Chief executive Tim Cook insisted the business is “stronger than ever” on an earnings call, and predicted an “iPad Christmas”.

However, analysts were disappointed by forward guidance given by the company, indicating future profits might continue to slide.

Apple said it expects revenue next year to be somewhere between $55bn and $58bn.

It reported a gross margin of 36.5% to 37.5%, less than analysts were expecting.

Apple said it has $146.8bn in cash on hand, some of which it will return to shareholders in the coming weeks.

Apple returned to the dividend register in 2012 for the first time since 1995, revealing plans to return $45bn to shareholders over the next three years.