Microsoft (NASDAQ: MSFT) recently claimed the title of the world’s most valuable company, surpassing Apple (NASDAQ: AAPL). As of now, Microsoft’s market cap sits at $2.89 trillion, edging past Apple’s market cap of $2.87 trillion.
This isn’t uncharted territory for Microsoft, but can it hold onto this lead through 2025? Let’s delve into the current state of these tech titans to find out.
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Assessment of Apple’s Performance
Over the past three months, Apple’s stock has dipped by 4%. Critics have expressed disappointment over its sluggish iPhone sales and a lack of near-term catalysts. Notably, over half of its revenue in fiscal 2023 was derived from iPhone sales, which declined by 2% due to the conclusion of the 5G upgrade cycle. Given China’s sluggish economic recovery and currency headwinds, the pressure on iPhone sales intensified.
Furthermore, post-pandemic market conditions led to a decline in Mac sales as fewer consumers upgraded their laptops and desktops. Consequently, Apple’s revenue witnessed a 3% drop, and its earnings per share remained almost stagnant for the entire year.
Despite hosting over 1 billion paid subscriptions, Apple’s services ecosystem expansion might amplify its recovery and with the gradual rollout of its Vision Pro headset could diversify its hardware business. Nevertheless, with its stretched-forward price-to-earnings ratio of 28 and the absence of significant near-term catalysts, its growth potential remains constrained compared to more dynamic growth plays.
Analysis of Microsoft’s Performance
In contrast, Microsoft’s stock surged by 19% over the last three months, driven by robust growth in its cloud business, the expansion of its AI ecosystem, and its acquisition of Activision Blizzard.
Microsoft boasts Azure, the world’s second-largest cloud infrastructure platform after Amazon Web Services (AWS). Intriguingly, Azure experienced faster growth than AWS in its latest quarter, while the integration of OpenAI’s AI tools into Azure and other cloud services contributed to an acceleration in its revenue growth, surpassing AWS’ performance.
Microsoft’s acquisition of Activision Blizzard is set to bolster its Xbox business, enhance its Game Pass and Cloud Gaming libraries, and ensure its competitiveness in the console market vis-à-vis Sony and Nintendo.
The substantial expansion of Microsoft’s cloud, AI, and gaming businesses has effectively offset the slower growth of its PC-oriented operations, positioning it as a more enticing investment prospect than Apple. Despite facing challenges such as tough currency headwinds and slower enterprise spending, Microsoft exhibited 7% growth in both revenue and adjusted EPS in fiscal 2023. Analysts are bullish on its potential, with an anticipated 15% growth in both revenue and adjusted EPS in fiscal 2024.
Predictions for 2025
Looking ahead, analysts envision a 6% revenue growth and an 8% earnings growth for Apple in fiscal 2025. In contrast, Microsoft is expected to maintain its momentum with a projected 15% expansion in both revenue and earnings for the same period.
While these are projections and should be taken with caution, the onus is on Apple to demonstrate its ability to diversify beyond the iPhone. On the other hand, Microsoft continues to impress investors with the development of its cloud and AI businesses. Consequently, Microsoft appears poised to outshine Apple in 2025 and solidify its position as the world’s most valuable company.
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