By Daisuke Wakabayashi 

Apple Inc. reported a 7% increase in quarterly profit, amid intensifying competition for mobile devices, and announced increases to its stock buyback and dividend programs.

Chief Executive Tim Cook said the company chose to expand its stock-buyback program by $30 billion because it views the company's shares as undervalued.

"That should show you how much confidence we have in the future of the company," Mr. Cook said in an interview with The Wall Street Journal.

During the interview, Mr. Cook also reiterated plans for new product categories this year and said that the company remains on the prowl for acquisitions.

Apple on Wednesday raised its share repurchase authorization to $90 billion from the $60 billion level announced last year. The company also lifted its quarterly dividend by about 8% and said it would split its stock 7-for-1 in June.

Following the news, Apple shares jumped more than 7% in after-hours trading. Investor Carl Icahn, who has been pushing the company to share more of its cash holdings with shareholders, tweeted that he was "extremely pleased."

In all, the company is boosting the size of its capital return program to more than $130 billion by the end of 2015, up from its previous $100 billion plan.

After more than a decade of remarkable earnings growth, the Cupertino, Calif., technology giant's revenue and profit are flattening and the company is fighting the perception that its best days are behind it. It has promised to expand its product lineup and drive growth as it did with the iPhone and iPad.

Mr. Cook's remarks came as Apple release first-quarter financial results that exceeded analysts' expectation. Mr. Cook pointed to the iPhone as an area of strength for the company.

Apple said it sold 43.7 million iPhone units in the three months ended March 29, far surpassing analysts' expectations for sales of 38.2 million units. He said the company saw strength across its entire lineup of phone models including the less-expensive 5C and that it was bolstered by strength across many markets, including China, Vietnam and Poland.

Overall, for the second quarter, Apple's net income rose to $10.22 billion from $9.55 billion in the year-ago period. However, Apple's per-share earnings jumped 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, estimated that Apple would post earnings of $10.18 per share on revenue of $43.53 billion, according to Thomson Reuters.

Apple said its gross margin, a closely watched indicator measuring the percentage of revenue that remains after manufacturing costs, was 39.3% in the March quarter, compared with 37.5% in the year-ago period. The gross margin was higher than the company's estimated range of 37% to 38%.

For the June quarter, Apple again forecast a gross margin between 37% to 38%. Apple also projects third-quarter revenue between $36 billion and $38 billion; analysts, on average, had forecast revenue of $37.87 billion.

The iPhone remains Apple's most important product. It is the largest contributor to revenue and is its most profitable hardware product. However, the iPhone is steadily losing market share to smartphones running on Google Inc.'s Android operating system.

In recent years, as rivals rolled out larger-screen displays and lower-price offerings, Apple has held the line on iPhone prices while keeping the screen size relatively small compared with the competition. The Journal has reported that Apple is working on a larger-screen iPhone for release later this year.

The growing competition for smartphones is also hurting Apple's main rival, Samsung Electronics Co. When the company reports earnings next week, Samsung is expected to report a second straight year-over-year decline in quarterly operating profit as demand for its Galaxy smartphones has started to slow.

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

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