Wall Street was disappointed after Apple (AAPL 0.06%) reported below-par quarterly results for the first time in five years, with its fiscal 2021 fourth-quarter revenue missing consensus estimates on the back of supply chain constraints that hurt sales. The stock lost 1.8% of its value on the day of earnings release, Oct. 28.

However, there was actually a lot to like about Apple's latest results, including terrific growth in iPhone revenue that demonstrates the company's dominant position in the 5G era. Let's look at the company's latest numbers and see why it remains a top tech stock to buy despite near-term challenges.

Person holding a smartphone in one hand.

Image source: Getty Images

Apple's results were great

Apple's Q4 revenue increased 29% year over year to a quarterly record of $83.4 billion, while adjusted earnings increased to $1.24 per share from $0.73 per share in the prior-year period. Analysts were looking for stronger sales growth, and expected Apple to post $84.8 billion in revenue. The tech giant's earnings matched the consensus estimate.

Apple management pointed out that supply chain constraints caused by the global semiconductor shortage and COVID-related manufacturing disruptions hurt Apple's revenue to the tune of $6 billion during the quarter. CEO Tim Cook added that the impact of the supply constraints on Apple's revenue for the current quarter that ends in December -- and coincides with the crucial holiday sales season -- could be worse than in Q4.

Apple didn't provide revenue guidance for the current quarter, citing near-term uncertainty, so it is not surprising that the stock dipped after the report. But a closer look at Apple's iPhone sales data from last quarter indicates that it remains one of the best bets on the growing demand for 5G smartphones, which makes its latest pullback an opportunity in disguise for investors looking to add a 5G stock to their portfolios.

The iPhone is dominating in the 5G smartphone era

Apple's iPhone revenue increased 47% year over year to $38.9 billion in the fiscal fourth quarter, which fell short of the $41.5 billion Wall Street expectation. However, it is worth noting that Apple achieved this impressive jump in iPhone revenue with a much smaller increase in shipments.

Though Apple doesn't reveal iPhone unit shipments, data from research firm IDC states that Apple's shipments in the third quarter of calendar 2021 (which coincides with Apple's fiscal fourth quarter) came in at 50.4 million units. This propelled Apple to second place in global smartphone sales rankings with a share of 15.2%.

Apple controlled an 11.7% share of the global smartphone market in the prior-year period, when it was third behind Samsung and Xiaomi. The iPhone maker shipped 41.7 million devices in the third quarter of 2020, which means that its shipments jumped nearly 21% year over year. What's more, Apple recorded such impressive growth at a time when rivals Samsung and Xiaomi saw declines in shipments, while the overall smartphone market contracted 6.7% during the quarter.

At the same time, Apple's terrific iPhone revenue growth last quarter suggests that its pricing power has increased in the 5G smartphone era. Apple generated $26.4 billion in iPhone revenue in the third quarter of 2020, which translates into an average selling price (ASP) of $634 based on IDC's shipment data from last year. The ASP for the third quarter of 2021 -- based on IDC's latest shipment figures and Apple's iPhone revenue for last quarter -- was $771, which means that iPhone ASP shot up 21.6% year over year.

It is worth noting that Apple didn't launch the iPhone 12, its first 5G-enabled device, until October 2020. This clearly indicates that the arrival of the new wireless connectivity standard has turned out to be a big tailwind for the company's biggest product line -- the iPhone.

The reason why Apple is witnessing a jump in shipments and enjoying stronger pricing power is that millions of users are upgrading to its 5G phones. There are hundreds of millions of iPhone users who have yet to upgrade to 5G devices, considering that the iPhone 12 hit 100 million units in shipments in April this year, seven months after launch.

Apple shipped nearly 95 million iPhones in the second and third quarters of 2021, according to IDC. If all the devices that Apple has sold in the past six months are 5G-enabled, its overall 5G installed base would now stand at around 200 million iPhones. Given that Apple had an installed base of more than 1 billion users at the beginning of 2021, it can be assumed that there are still 800 million users that have yet to upgrade to its 5G offerings.

As a result, the iPhone looks set to enjoy strong volume and pricing growth as the adoption of 5G smartphones increases. What's more, Apple's share of the 5G smartphone market is expected to jump to 40% as per Strategy Analytics. Such robust market share could send Apple's iPhone shipments soaring, as global 5G smartphone shipments are expected to hit 707 million units next year, according to Credit Suisse. Additionally, 5G devices are expected to account for half of the overall smartphone market next year, which means that the 5G smartphone space still has a lot of room for growth.

Room to run

Apple's solid position in the 5G smartphone market and the fact that it is already taking advantage of the same makes it a top 5G play to buy right now, especially considering that it is trading at 26 times earnings, which makes it cheaper than the tech-heavy NASDAQ-100's earnings multiple of 35.