By Daisuke Wakabayashi 

Apple Inc., in a nod to restive shareholders, added $30 billion to its stock-buyback plan, raised its dividend about 8% and declared an unusually large 7-for-1 stock split Wednesday as it reported strong iPhone sales that defied expectations of a slowdown.

The pending stock split--Apple's first since 2005--and the stronger-than-expected results the gadget maker drove the gadget maker's stock up 8% in after-hours trading to their highest level since December. The stock changed hands at $564.99, after closing at $524.75 in 4 p.m. trading on the Nasdaq Stock Market.

In an interview with The Wall Street Journal, Chief Executive Tim Cook said Apple expanded its buyback program to $90 billion from $60 billion because it views its shares as undervalued.

"That should show you how much confidence we have in the future of the company," Mr. Cook said.

Altogether, the company said it would return more than $130 billion to shareholders by the end of 2015, up from its previous target of $100 billion.

The company's quarterly results eased concerns that Apple's best days were behind it. The biggest reason: the iPhone, which accounts for more than half Apple's revenue.

Apple reported a profit of $10.22 billion for the second quarter ended March 29, up 7% from $9.55 billion in the year-earlier period. Apple's earnings per share rose by 15% to $11.62 from $10.09, because the company's stock repurchase program decreased the pool of total shares.

Revenue rose to $45.6 billion from $43.60 billion in the same period a year earlier.

Analysts, on average, had estimated that Apple would post earnings of $10.18 per share on revenue of $43.53 billion, according to Thomson Reuters. That would have marked the first time in 11 years that Apple's quarterly revenue declined from a year earlier. But it didn't happen.

For the current quarter, Apple said it expects revenue of between $36 billion and $38 billion.

Apple said it sold 43.7 million iPhones in the quarter, far surpassing analysts' expectation of 38.2 million units.

Mr. Cook said the strength extended to all models, including the less-expensive 5C. He said iPhone sales were bolstered by strength in emerging markets.

Globally, the iPhone has been steadily losing market share against smartphones running on Google Inc.'s Android operating system.

But Apple did particularly well in China during the quarter. Revenue from Greater China, which includes Hong Kong and Taiwan, rose 13% from a year earlier to $9.3 billion. China is Apple's third-biggest market after the Americas and Europe.

In January, Apple started selling iPhones through China Mobile, the world's largest carrier, with more than 770 million subscribers. Mr. Cook said the China Mobile deal helped, but the company's improvement in China reached across its entire range of businesses.

Mr. Cook said both the iPhone and iPad gained market share in China during the quarter, while Mac sales increased by more than 10% and App Store revenue in China doubled. "China was exceptional," Mr. Cook said.

The strong iPhone sales boosted Apple's closely watched gross margin, which measures the percentage of revenue that remains after manufacturing costs, to 39.3% in the March quarter from 37.5% a year earlier. The gross margin exceeded Apple's estimated range of 37% to 38%. For the June quarter, Apple again forecast a gross margin of between 37% and 38%.

IPad sales, meanwhile, came in below analysts' expectations. Apple said sales of the device fell 16% to 16.4 million units, far below analysts' forecasts of 19.3 million units. Mr. Cook said analysts had forecast incorrectly because the year-earlier quarter included a large inventory increase tied to delays in getting the iPad Mini to market at the end of 2012.

Mr. Cook reiterated Apple's pledge to break into new product categories this year. Apple's last major new product was the iPad, introduced in 2010.

Apple will "take the time to get it right," Mr. Cook said. "Our objective is not to be first, but to be the best." Without naming names, he said some companies rush into new product categories, leading to weak sales.

Apple reported holding roughly $151 billion in cash and securities, down from about $159 billion three months earlier. In early February, the company said it bought back about $14 billion in shares after its stock fell on disappointing quarterly earnings.

Nonetheless, the company said it would fund the stepped-up capital return program by issuing debt, rather than repatriating profits from abroad that would be taxed at a high rate.

Stock splits are common. In the past year, MasterCard Inc. did a 10-for-1 split, and VF Group executed a 4-for-1 split.

S&P 500 companies have been splitting around a dozen times annually in recent years, down from 100 or more at the heights of the 1980s and 1990s stock bull markets, according to Howard Silverblatt of S&P Dow Jones Indices.

But a 7-for-1 split is rare. An S&P 500 company hasn't done one in at least 34 years, he said.

A stock split increases the number of shares outstanding while reducing the price of each share. The move doesn't affect the value of the company, but it does put the shares within reach of more individual investors, potentially boosting demand for the stock.

As Apple's shares soared above $500 in recent years, market players chattered about a possible Apple split. Last year, Laurence Balter, an analyst at Oracle Investment Research, predicted the company would split 10 for 1, arguing that retail investors would be "attracted to a reachable and cheaper share price."

Mr. Cook said the stock split would make Apple shares accessible to a wider range of investors.

Matt Jarzemsky and Chris Dieterich contributed to this article.

Write to Daisuke Wakabayashi at Daisuke.Wakabayashi@wsj.com

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