Microsoft Outshining Apple – 2025 Outlook Will Microsoft Maintain Its Throne over Apple by 2025?

By: Alex Freidmen

Microsoft (NASDAQ: MSFT) recently swept past Apple (NASDAQ: AAPL) as the globe’s most valuable company. At present, Microsoft holds a market cap of $2.89 trillion, trumping Apple’s market cap of $2.87 trillion.

A happy person is showered with cash.

Image source: Getty Images.

Apple’s Struggle to Impress the Bulls

Apple’s stocks underwent a 4% decline in the past three months, with critics bemoaning its sluggish iPhone sales and absence of near-term catalysts. Notably, over half of its revenue in fiscal 2023 came from iPhones, with a 2% dip in sales due to the conclusion of the 5G upgrade cycle. The company’s Mac sales followed suit with a slip post-pandemic, leading to a 3% decrease in revenue and almost flat earnings per share for the year.

Analysts anticipate a 4% revenue and 8% earnings growth for Apple in fiscal 2024, as it confronts these challenges while striving to expand its services ecosystem, home to over 1 billion paid subscriptions. The launch of its Vision Pro headset could serve to diversify its hardware business, but its rather hefty $3,500 price tag may limit initial adoption.

Despite its $162 billion cash reserve, Apple faces restrictions due to its lack of major near-term catalysts and a stretched-forward price-to-earnings ratio of 28. This situation impedes its ability to appease the bulls, who are flocking towards more exciting growth prospects.

Microsoft’s Mark on the Market

In contrast, Microsoft’s stocks ascended by 19% in the past three months, with its cloud business growth, expansion of its AI ecosystem, and acquisition of Activision Blizzard garnering market acclaim. Azure, Microsoft’s flagship cloud infrastructure platform, experienced rapid growth, outpacing AWS, and even saw accelerated revenue growth due to the integration of OpenAI’s AI tools.

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The acquisition of Activision Blizzard is poised to fortify Microsoft’s gaming business, bolster Game Pass and Cloud Gaming libraries, and ensure its standing against rivals in the console race. While Microsoft’s PC-oriented businesses encounter tepid growth, its cloud, AI, and gaming sectors are generating robust excitement, fostering a 7% revenue and adjusted EPS growth in fiscal 2023.

Albeit trading at 35 times forward earnings, Microsoft’s stronger growth and AI market exposure seem to rationalize its loftier valuation when compared to Apple.

Predicting the Future

Looking ahead to fiscal 2025, analysts foresee a 6% revenue and 8% earnings growth for Apple. Similarly, they anticipate Microsoft to outperform with a projected 15% revenue and earnings surge in fiscal 2025. While these estimates warrant caution, Apple needs to demonstrate diversity beyond iPhones, whereas Microsoft holds the potential to dazzle investors further through its cloud and AI endeavors.

Assuming these trajectories hold, Microsoft appears primed to outshine Apple through 2025, solidifying its mantle as the world’s most valuable company.