Russ Cohen

Microsoft vs Apple: The Race to the Top Microsoft vs Apple: The Race to the Top

As of now, Apple is the only company valued above $3 trillion, making it the world’s most valuable business. However, Microsoft, a fellow “Magnificent Seven” member, is hot on the tech giant’s heels with a market cap of $2.73 trillion. Despite Apple’s impressive standing, it appears likely that it will be dethroned as the “World’s Most Valuable Company” by Microsoft in 2024. Here’s why.

Microsoft Outpacing Apple in Growth

Apple reports revenue of $89.5 billion and net income of roughly $23 billion, while Microsoft has posted sales of $56.5 billion and net income of $22.3 billion. Although Apple generates higher revenue, Microsoft’s more software-focused business model allows it to enjoy superior margins. Given their recent trajectories, Microsoft could surpass Apple’s profits in the near future, as demonstrated by the chart below tracking both companies’ sales and earnings growth.

A chart tracking Apple's quarterly sales and earnings growth.

Chart by author; Data source: Apple.

Apple has experienced a decline in sales for four consecutive quarters, while Microsoft’s recent business momentum has been notably more impressive. This trend is likely to continue in the near future.

Apple Lags Behind Microsoft’s Innovation

Over the last five years, Apple’s technological and product advancements have been more iterative than revolutionary. While the iPhone’s improvements revolve around 5G compatibility and camera technology enhancements, the adoption of 5G technology is still in its early stages, limiting the availability of applications tailored for this next-generation network. On the other hand, Microsoft continues to deliver significant advancements for its Azure cloud infrastructure platform, positioning itself as a key player in the era of artificial intelligence (AI).

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In addition to Azure’s strong momentum, Microsoft has established a leading position in AI-powered personal assistants and integrated artificial intelligence into various products. With its more software-focused nature, Microsoft is primed to achieve better margins than Apple, which is more hardware-oriented.

While Apple undoubtedly excels in artificial intelligence and will likely release influential products in the future, the recent progress by Microsoft places it on track to become the world’s most valuable company, with a superior-performing stock over the next five years.

*Stock Advisor returns as of December 18, 2023.