Apple shares jumped in after-hours trading on Tuesday after its latest earnings report fueled optimism that the company is making progress in finding a way to prosper without blockbuster iPhone sales.

Apple reported that revenue for the second quarter fell 5% to $58 billion from a year earlier, with iPhone sales declining 17%. It had warned investors at the beginning of the year that iPhone sales had taken a hit from a slowdown in China.

Revenue, though, beat analysts’ estimates of $57.37 billion amid across-the-board growth in Apple’s other businesses, highlighted by the digital services segment. Products such as Apple Pay, Apple Care, and Apple Music generated a record $11.5 billion in revenue during the quarter, a 16% increase from a year ago.

“Our March quarter results show the continued strength of our installed base of over 1.4 billion active devices, as we set an all-time record for services, and the strong momentum of our wearables, home, and accessories category, which set a new March quarter record,” CEO Tim Cook said in a news release.

He also told analysts that the worst of the iPhone slump may be over as Apple sees signs of improvement in China.

Apple shares rose 5% to in the extended trading session to $210.79 as the company also raised its guidance for the third quarter, citing strong revenue growth from non-iPhone categories.

“The June guidance was a jaw-dropper in terms of strength and speaks to Cook and Cupertino getting back their sea legs” after the weak holiday season, Wedbush analyst Dan Ives wrote in a client note.

The second-quarter provided further evidence of Apple’s changing revenue mix as the iPhone’s share of total sales declined to 53.5% from 61.4% in the year-ago period. “The smaller share of iPhone revenue indicates that Apple is getting more skilled at selling other hardware and software products to its installed base of 900 million iPhone users,” CNBC said.

In March, Apple previewed the launch of four new services, including the Apple Arcade and Apple TV+ video services and a credit card.

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