Will the king of the market cap hill be decapitated? Apple Inc. is the most richly valued public company on Earth ($2.77 trillion). But its quarterly earnings report out Thursday at market close showed a revenue downturn and leaves it vulnerable to replacement by a surging Microsoft Corp. ($2.58 trillion).
After a general market advance fueled by the Federal Reserve’s indication it might be done with tightening, both stocks were higher Thursday, although Apple fell in after-hours trading upon the release of its report. But the Apple-Microsoft cap gap has narrowed to just $185 billion.
Both companies, founded in the 1970s, have enjoyed massive advances as the leaders of the Magnificent Seven, the cohort of Big Tech names that have dominated the market in recent years. Apple passed the $1 trillion mark in 2018, and Microsoft briefly overtook it in November 2021.
Microsoft currently boasts a momentum that Apple lacks: Bill Gates’ creation now has a large focus on two hot areas, cloud computing and artificial intelligence. Steve Jobs’s brainchild is largely hardware-oriented, with much of that concentrated in the iPhone.
Microsoft is the best of the two in revenue growth, the most prized characteristic in tech stocks. In its September-ending quarter, the company expanded revenue by 7% year-over-year (earnings increased 9%). At Apple, by contrast, revenue was down 1%, its fourth consecutive quarter of shrinkage, with earnings ahead 13%.
“Microsoft has more of what the market wants right now, and given where we stand on the pair’s growth prospects, we wouldn’t be surprised to see it overtake Apple,” David Klink, a senior equities analyst at Huntington Private Bank, told Bloomberg.
Over the past 12 months, Microsoft’s stock rose at almost double the pace of Apple, 56% versus 28%. Since the entire market slipped in mid-2023, the two companies’ trajectories have also been much different: Apple is still down 10% from its all-time high in July, while Microsoft has recovered to just a few dollars short of its zenith.
Apple has encountered major problems with China, where most iPhones are made. The demand for the devices in China is in question, as the Beijing regime is considering a ban on Apple products for government use and is investigating the firm’s largest manufacturer in the country, FoxConn, over land use and tax payments, according to media reports.
On the earnings call, Apple CEO Tim Cook emphasized higher sales of iPhones, helped by the new 15 model. The phone segment is half of the company’s revenues. “Customers are loving iPhone 15,” he said. An analyst on the call noted that the iPhone 14’s year-before sales were artificially depressed because of supply disruptions from China’s lockdown then. Meanwhile, sales of Mac computers (10% of revenue) and iPads (7%) were off.
Tags: Microsoft, Apple, tech, market cap, Magnificent Seven, revenue, earnings, China, iPhone, cloud computing, artificial intelligence
Tags: Apple, Artificial Intelligence, China, cloud computing, Earnings, iPhone, Magnificent Seven, market cap, Microsoft, revenue, Tech
