Today: Apple (AAPL) announces steep drop in profits and margin, but promises to ship $100 billion back to investors. Also: Netflix (NFLX) skyrockets, helping Wall Street gain, but VMware and Juniper fall in late trading.

Apple's profits fall, but it's offering cash to investors

Apple's Tuesday earnings report shows a company that has both positive and negative indicators in its performance, and investors will be left to figure out which one they want to believe in.

The Apple logo is displayed on the exterior of an Apple Store on April 23, 2013 in San Francisco.  (Photo by Justin Sullivan/Getty Images)
The Apple logo is displayed on the exterior of an Apple Store on April 23, 2013 in San Francisco. (Photo by Justin Sullivan/Getty Images) ( Justin Sullivan )

On the positive side, Apple again pulled in record sales in the first quarter of the calendar year 2013, while beating analyst expectations for profit and announcing a plan to push $100 billion in cash back to shareholders. On the negative side, its profits were down sharply from the same quarter last year -- beating expectations only because those forecasts were pulled down in the past week -- while the company's legendary growth margins are rapidly diminishing, and its forecast for the future are for an even steeper decline.

Apple announced a net profit of $9.5 billion in the quarter, or $10.09 per share, on revenues of $43.6 billion, a record for Apple in the January-March quarter. According to Thomson Reuters, analysts expected profits of $9.98 on revenues of $42.3 billion.

However, analysts' forecast declined in the past week -- it was around $10.13 a share at the beginning of last week and $10.07 Friday. The profit was also far below the same quarter last year, when Apple brought in $12.30 a share, showing off a glaring drop in profit margin: Apple's gross margin was 47.4 last year at this time, but only 37.5 percent in the first three months of 2013.

Apple's outlook for the current quarter isn't going to cheer investors, either: The company's forecast calls for revenues of between $33.5 billion and $35.5 billion with another decline in gross margin, to between 36 percent and 37 percent.

The weakness is likely attributable to Apple's apparent plan to wait to announce new products until the fall, which CEO Tim Cook hinted at in the company's conference call.

"Our teams are hard at work on some amazing new hardware, software and services we can't wait to introduce this fall and throughout 2014," Cook told analysts and journalists Tuesday.

Until that announcement a few months from now, Apple investors can focus on continuing strong sales of mobile devices and a renewed push to return cash to investors. Apple announced sales of 37.4 million iPhones in the quarter, up from 35.1 million last year, and 19.5 million iPads vs. 11.8 million, showing the strength of the iPad Mini. Mac sales were stagnant -- a decent result as PC sales were reportedly horrible in the quarter -- and iPod sales took a big drop.

More important for shareholders who were cheering on David Einhorn's one-man campaign to force Apple to return more cash to shareholders, the Cupertino tech giant announced in a separate release that it plans to return $100 billion to investors. The announcement came the same day Apple said its cash on hand had increased to $145 billion.

"We continue to generate cash in excess of our needs to operate the business, invest in our future, and maintain flexibility to take advantage of strategic opportunities," Chief Financial Officer Peter Oppenheimer said in the news release.

Apple increased the size of its dividend 15 percent to $3.05 per share and will spend $60 billion buying back shares through the end of 2015.

As if planned to show the up-and-down nature of Apple's announcements, shares shot up more than 5 percent directly after Apple announced a beat on profits and the plans for its cash Tuesday afternoon, then that gain disappeared after Cook said no new products were on the menu until fall, highlighting the poor forecast. The stock closed up 1.9 percent at $406.13 Tuesday, and was trading flat in after-hours action at 3:30 p.m. Pacific time.

Netflix shoots higher in good day for Wall Street

There was no ambivalence from investors after Netflix's earnings report, but analysts still had differing opinions on the Los Gatos video-on-demand company's future. Netflix stock shot higher than $200 a share for the first time in more than a year and a half Tuesday, closing with a 24.4 percent gain at $216.99 after Monday's earnings report showed a gain of 2 million subscribers in the same quarter the company debuted its most high-profile original program to date, "House of Cards."

Still, many analysts are wary of the stock at its current price, and with good reason: As Reuters pointed out, only three stocks in the Standard &Poor's 500 have higher price-to-earnings ratios, with one of those being competitor Amazon.

"Netflix is seeing a bit of an extreme reaction today," Jeff Morris, head of U.S. equities at Standard Life Investments, told Reuters, though he later added Netflix is "putting up good subscriber growth and seems to be delivering on original content."

Other analysts were more effusive, however, with BMO Capital Markets noting that "the company's subscriber base is increasingly using Netflix for a growing share of their viewing trends," and Morgan Stanley concluding that "Netflix is in an enviable position." Even Wedbush Securities analyst Michael Pachter, a noted Netflix bear, increased his price target: It went from $55 a share to $65, however, calling the subscriber growth "an acceleration of subscriptions that would have been sold later in the year."

The rest of the market also succeeded Tuesday, with all three major U.S. indexes gaining more than 1 percent. The SV150 index of Silicon Valley's largest technology stocks outperformed them all, with a gain of 1.4 percent that included LinkedIn advancing 5 percent and establishing a new all-time high.

VMware, Juniper descend after weak forecasts

Wednesday may not be as good for Silicon Valley, however, as two large companies took a dive in after-hours trading following earnings reports outshined by Apple.

Palo Alto software company VMware's earnings report showed falling profits and a weak forecast for the current quarter, pushing stocks down nearly 7 percent in late trading.

Sunnyvale networking company Juniper announced better earnings growth, but also had a gloomy outlook for the current quarter, and its share price fell by more than 6 percent in after-hours action.

Silicon Valley tech stocks

Up: Netflix, SolarCity, SunPower (SPWRA), LinkedIn, AMD, Nvidia, Workday, Intel (INTC), Apple, Yahoo (YHOO), eBay (EBAY), Tesla, Cisco (CSCO), Go

Down: Zynga, Gilead, HP, Oracle (ORCL), Yelp

The tech-heavy Nasdaq composite index: Up 35.78, or 1.11 percent, to 3,269.33

The blue chip Dow Jones industrial average: Up 152.29, or 1.05 percent, to 14,719.46

And the widely watched Standard & Poor's 500 index: Up 16.28, or 1.04 percent, to 1,578.78

Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.