The Showdown: Will Microsoft Surpass Apple's Market Value by 2025?

Microsoft has recently surpassed Apple in terms of market capitalization, hitting a whopping $2.89 trillion compared to Apple's $2.87 trillion. This isn't the first time Microsoft has edged out Apple, but the big question is whether Microsoft can hold onto its lead until 2025.

Apple Faces Challenges

In the face of underwhelming iPhone sales and a lack of immediate growth drivers, Apple's stock has seen a 4% drop over three months. Over half of Apple's fiscal 2023 revenue came from its iPhone business, which saw a 2% decline partly due to the end of the 5G upgrade cycle and economic slowdowns in China. Additionally, fewer people are buying new computers post-pandemic, causing Mac sales to falter, Apple's overall revenue to drop by 3%, and earnings to stay relatively the same.

Despite these setbacks, expectations point towards an upward trajectory for Apple, with projected revenue and earnings increases in fiscal 2024. The company's comprehensive services ecosystem, boasting over a billion paid subscriptions, could play a big role in its recovery. Furthermore, Apple has an extensive cash reserve for strategic investments and the highly anticipated but pricey Vision Pro headset could diversify its hardware lineup.

Microsoft's Winning Streak

Conversely, Microsoft's stock showed an impressive 19% surge, buoyed by its booming cloud business, AI advancements, and the Activision Blizzard acquisition. Azure, Microsoft's cloud platform and second only to Amazon Web Services, is outpacing its rival in terms of growth rate. Microsoft's deep ties to OpenAI and the integration of AI tools into its services are solidifying its position in the industry. The gaming department also sees a boost with the Activision acquisition propelling its Xbox, Game Pass, and Cloud Gaming offerings.

Despite the headwinds of a tough macro environment, Microsoft's revenue and earnings grew 7% in fiscal 2023, with analysts anticipating even stronger growth in fiscal 2024. With a forward earnings multiple of 35, Microsoft's shares are priced higher than Apple's, but its robust growth rates and AI industry involvement could substantiate these prices.

Looking Ahead to 2025

Analysts forecast a steady, though modest, revenue and earnings increase for Apple by fiscal 2025. On the other hand, Microsoft is expected to continue its 15% growth in both areas into 2025. It's no guarantee, but Microsoft's expansion in cloud services and AI may continue to captivate investors, giving it a solid chance to outpace Apple in market value as we approach 2025.

Microsoft, Apple, Market