In the past, investors measured Apple’s (NasdaqGS: AAPL) earnings not by if but by how much they would beat expectations. For example, a year and a half ago, the company posted profits of $13.87 a share for its fiscal 2012 first quarter, leaving the consensus forecast of $10.08 in the dust.

Back then, surging sales of iPads and iPhones were a huge part of Apple’s growth story. During the quarter, iPhone unit sales skyrocketed 128% from the first quarter of 2011, and the company moved 111% more iPads. The results sent the stock up 6.2% the following day, January 25, 2012, to close at $446.66.

Rising Competition Has Brought Apple Back to Earth 

The shares broke over the $700 mark in mid-September, but concerns about rising competition and slackening demand for the company’s tablets and smartphones dragged it down over the following months. Today, Apple trades at around $443, not far off its January 25, 2012, close.

Big earnings beats are much harder to come by: in its fiscal 2013 second quarter, which ended April 23, Apple squeaked by the Street’s forecast by just $0.02 a share as it continued to fend off competing devices powered by Google’s (NasdaqGS: GOOG) Android software. 

According to the latest figures from Kantar Worldpanel, Android accounted for 52.0% of U.S. smartphone sales in the three months ended May 2013, compared to 41.9% for Apple’s iOS operating system. However, Apple did show some momentum, rising 3.5% from a year earlier, compared to just a 0.1% gain for Android.

All of this added to investor anxiety ahead of the company’s fiscal 2013 third quarter results, which it reported on Tuesday. 

During the quarter, Apple’s sales rose 0.9% from a year ago, to $35.3 billion. Net income fell 21.8%, to $6.90 billion, while per-share profits declined 19.8%, to $7.47 from $9.32, on a lower share count due to the company’s buyback program. Even so, Apple topped the Street’s expectation of $7.32 a share in profits on $35.0 billion of revenue.

The main reason? An unexpected surge in iPhone sales: Apple sold 31.2 million of the devices in the quarter, up from 26 million a year ago. Wall Street expected iPhone sales to be about flat. 

The gain is particularly significant because the device accounted for 51% of the company’s total revenue in the quarter. Apple also saw a 24.6% year-over-year increase in revenue from iTunes content, software and services, which combined accounted for 11% of its overall sales in the latest quarter.

These increases offset slowing sales of the company’s other main products: Apple sold 14.6 million iPads (18% of revenue), down from 17 million, and 3.8 million Mac computers (14%), down from 4.0 million. 

Gross margin also narrowed to 36.9% from 42.8% a year ago, marking the fifth consecutive quarterly decline. Strong iPhone sales were partly offset by lower revenue per unit as more consumers opted for older versions of the device.

Earth-Shattering New Products Needed 

The investment community was guardedly optimistic following the results, though agreement was largely unanimous that Apple needs to release some dazzling new technology—and soon—to arrest its slide.

“It’s pretty remarkable that they are selling as many phones as they are, given that it’s not a new product,” Destination Wealth CEO Michael Yoshikami told CNBC “That’s really the key for them; they’ve got to come up with a new product.” 

Apple said little about new devices in the press release or post-earnings conference call, but the company is rumored to be developing new iterations of the iPad and iPhone, as well as a lower-priced iPhone aimed at emerging markets. As we reported on July 9, the iPhone is an also-ran in China, coming in sixth by number of units shipped in 2012. An Apple television and wristwatch are other products thought to be under development.

“The longer they go without anything of consequence that is new, the more the pressure is on them to really hit a home run,” Gartner analyst Van Baker told USA Today. 

Walter Piecyk of BTIG research has September circled as a time to watch for product launches: “After delivering $35 billion in revenue in the June quarter, management guided to $34 billion to $37 billion next quarter. Revenue would more typically drop multiple billions if the company had no new products planned. With September quickly approaching, this could be the start of a string of new product announcements that increase investor confidence in Apple’s ability to return to EPS growth next year.”

A Ripening Apple?

Edward Parker of Lazard Capital Markets was less focused on the company’s product cycle: “Although a new product category is needed for material upside to the stock, we believe even with the current product portfolio, the company is an attractive asset for value investors looking for strong yield, a healthy balance sheet, a sticky customer base and strong cash flows,” he wrote in a note quoted by the Wall Street Journal.

Investing Daily Managing Director John Persinos picked up on that sentiment in a recent article in our Personal Finance newsletter. “Apple should remain a strong company over the long haul, but it appears to be making a transition to a more conservative growth stock,” he wrote.

Persinos also highlighted the fact that the company has expanded its share buyback program, authorizing $60 billion for repurchases, which it expects to complete by the end of 2015. It also recently boosted its dividend by 15%, to a quarterly rate of $3.05 a share. The stock now yields 2.8%.

Soaring R&D Spending Bolsters Optimism

This doesn’t mean the company is shying away from its history of launching innovative products. Persinos points to Apple’s soaring R&D spending, which is backed by a strong balance sheet, as proof that it is more than prepared to face down the competition:

“The company plans to spend over $3 billion in research and devel­opment (R&D) in 2013, a 40% increase over last year’s R&D budget, to develop a host of new products such as a smart watch and a smart television that are compatible with the Internet,” he wrote in a July 5, 2013, Personal Finance article.

“Apple has no debt and over $100 billion in cash on its balance sheet,” he added. “Management intends to spend this ample cash on R&D, acquisitions, share buybacks, and dividend in­creases, all good news for sharehold­ers.”