What's going on?

Apple�s stock rose 3% on Tuesday immediately after its latest financial results showed improving iPhone sales, which helped it make more money than Wall Street expected in its most recent quarter.

What does this mean?

In each of 2016�s first three quarters, Apple�s revenue declined compared to a year earlier, but it returned to growth in the fourth quarter. Increasing iPhone sales, which were helped by the highest number of switchers from other smartphones versus any previous quarter (tweet this), get most of the credit for the renewed growth; but revenue from its increasingly important �services� business (e.g. Apple Pay, Apple Music and the App Store) also grew faster than expected.

Why should I care?

For the stock: Apple steadied the ship this quarter � and there are some important catalysts for the stock price ahead.

It was a tumultuous 2016 for Apple with declining iPhone sales and problems in China taking a toll on its stock price � it fell to $90 at one point last year. But better growth prospects have, among other things, helped the stock rebound to over $120. Looking ahead, research analysts are generally positive on the prospects for the iPhone 8 (which is due to launch later this year) as there is a buildup of people due for an upgrade. The stock could also receive a boost if the US government changes the tax code to encourage companies to bring their overseas cash back to America � some of which Apple could then return to shareholders.

The bigger picture: Apple is facing a battle for your ecosystem.

The iPhone and other Apple products have tied many people into Apple�s ecosystem: in terms of the perceived hassle, switching costs are high. That gives Apple a huge base from which to make revenue beyond hardware sales (e.g. the App store). But Apple�s ecosystem is not sacrosanct: if it doesn�t continue to build innovative products, it will, eventually, lose its hardware customers � and the valuable �services� revenue stream that comes with them.