So much for those lousy iPhone sales.

Apple Inc. (NASDAQ:AAPL) just reported widely anticipated first-quarter numbers on the heels of sizable iPhone demand concerns which had dragged Apple stock lower into the print.

The numbers were much better than expected. Revenues came in higher than expectations. As did earnings. The guide was above consensus, too.

All that happened despite the iPhone not having a great quarter. iPhone shipments in the quarter missed depressed estimates — 52.2 million versus 52.3 million – while average selling price on those iPhones also missed expectations  — $728 versus $742.

In other words, Apple just reported a fantastic quarter despite missing on iPhone expectations.

How is that possible?

Because AAPL is turning into something much more than just an iPhone company. This new company, led by a burgeoning Services segment, has higher margins with more revenue streams.

This transition will continue over the next several quarters and years, and will lead Apple stock to new highs.

Here’s a deeper look:

Forget the iPhone X

Everyone wants to talk about the iPhone X.

Analysts want to call out the lower average selling price in the quarter as proof that consumers aren’t willing to pay $1,000 for a phone. Meanwhile, Apple CEO Tim Cook is quick to point out that the iPhone X is the most popular iPhone ever.

But all this is just background noise.

The truth about Apple’s iPhone business is that we are all trapped in Apple’s iPhone ecosystem. Most of us own an iPhone, and if we do, chances are pretty high that when we upgrade, we are going to get another iPhone. It might not be the latest and greatest iPhone, but it will be an iPhone.

Consequently, AAPL will sell a ton of iPhones next quarter, the quarter after that, next year, the year after that, and so on. All this near-term noise around iPhone X demand is just that — noise.

Focus On Everything Else AAPL

Meanwhile, while we are still buying iPhones, we are also buying a bunch of other stuff from AAPL.

The Apple Watch is on fire. Beats dominate the trend-oriented demographic in the headphone market. AirPods are the newest innovation in that headphone market and appear to be doing quite well. HomePods are also selling quite well.

All together, Apple’s Other Products category reported revenue of nearly $4 billion this quarter, up 38% year-over-year. Three years ago, Apple’s other products accounted for just $1.7 billion in revenue.

This business has come a long ways in a short amount of time. That is a big deal. The more demand for products like the Apple Watch and HomePod ramp, the less Apple is reliant on selling you $1,000 iPhones. Therefore, overall hardware product demand, revenue and margins should be more stable.

The big kicker is that Apple’s Other Products business isn’t even the company’s most exciting growth segment. Apple is finally figuring out how to monetize its massive iPhone ecosystem through high-margin subscription services. These subscription services are tied together under the Services umbrella, and that business grew by 30% year-over-year to $9.2 billion last quarter.

Again, three years ago, the Services business was under $5 billion.

The best part is that big growth in AAPL’s Services business is improving the company’s overall profitability since Services is inherently a high-margin business. Thus, as goes the Service business, so goes the company’s profitability.

Bottom Line on Apple Stock

First-quarter earnings prove that AAPL is much more than just an iPhone company. It is an increasingly multi-faceted hardware company with a burgeoning software segment. This new Apple has higher margins, more steady demand, and more predictable revenue and profits.

Consequently, Apple stock should head higher as this transition plays out. This is especially true considering Apple stock remains remarkably cheap, and that the growth narrative has $270 billion in additional firepower from the balance sheet unwinding to net cash neutral.

Overall, now feels like a good time to own AAPL stock. Valuation is reasonable, fundamentals are improving, and sentiment is rebounding.

As of this writing, Luke Lango was long AAPL.