By 2025, Will Microsoft Stock Have Surpassed Apple in Value?

Microsoft stock was at $239.05 as of 10:09 AM EDT, while Apple stock traded at $149.76 as of 10:11 AM EDT.

Can the industry leader in cloud software once more overtake the maker of the iPhone?

Under the leadership of innovative CEOs, Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) both had a resurgence in high growth. Satya Nadella, the CEO of Microsoft since 2014, put the computer behemoth on a new course by increasing the company’s reliance on cloud-based services while diminishing its reliance on desktop software. Microsoft grew its Xbox game business, released new Surface devices, created more iOS and Android mobile apps, and gave up on the failing Windows Phone platform.

The iMac, iPod, iPhone, and iPad were revolutionary products developed during Jobs’ reign, which spanned from 1997 until his passing in 2011. Tim Cook, who succeeded Jobs as Apple’s CEO, continued to grow the company’s hardware division with the introduction of the Apple Watch, AirPods, and HomePod, as well as its ecosystem of tethered services, which now includes Apple Pay, Apple Music, Apple TV+, Apple Arcade, and other new offerings.

Investors who believed in the changes made by Microsoft and Apple made a lot of profit. Since Nadella’s first day at Microsoft, the company’s stock has increased by almost 570%. However, since Jobs’ return to the CEO role, the price of Apple stock has soared by 78,770%.

Apple’s current market capitalization of $2.5 trillion is way above Microsoft’s valuation of $1.8 trillion. Throughout the rise, Microsoft’s value would overtake Apple on occasion but this has changed.  

Differences Between Microsoft Stock and Apple Stock

Microsoft’s cloud revenue increased from 32% to $91 billion in the fiscal year 2022 and representing 46%. This is a key performance indicator to keep an eye on (which ended in June). The second-largest cloud infrastructure platform, Azure, is housed in this section, along with Office 365, Dynamics, and AWS. The slower expansion of its desktop-based products and Windows licenses has recently been offset by the company.

Regarding Apple, most of its investors follow its sales of iPhones, which account for a large chunk of its revenue. The investors also observe its services income, which is 19% of its top line during that time, and had over 860 million paid memberships at the end of the third quarter. The bulls predict that as the network of services expands, people will become ensnared in Apple’s fortress and the company’s reliance on the iPhone would progressively decline.

Which Business Has Expanded the Fastest?

Compared to Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) has a wider range of businesses. Even while its Xbox and Surface businesses are cyclical, those two hardware divisions are much smaller than its main software and cloud-based service sectors. Apple’s growth, however, continues to be significantly dependent on its rigorous hardware upgrade cycles, which have progressively become longer with each new generation of speedier devices. More so than Microsoft, it is more vulnerable to chip shortages, supply-chain disruptions, tariffs, and rising labor costs.

Microsoft Stock Has A Desirable Risk-Reward Profile “Not Represented In Share.”

Because of this, experts predict that Microsoft’s sales will climb at a compound annual growth rate (CAGR) of 13% from fiscal 2022 to fiscal 2025, compared to Apple’s revenue, which they forecast will grow at a CAGR of just 5% from fiscal 2021 to fiscal 2024. In addition, they anticipate a CAGR of 13% in Microsoft’s earnings per share (EPS) growth over the forecast time frame. However, they anticipate a CAGR of 7% growth in Apple’s EPS.

We should be wary of those projections since they most likely don’t account for Apple’s long-rumored AR and VR products or Microsoft’s aggressive expansion ambitions for its gaming sector through other acquisitions. However, they obviate any doubt that Apple’s hardware sales would once more slow down, while Microsoft’s cloud business will continue to thrive.

Microsoft Stock is Likely to Soon Overtake Apple

Microsoft stock should trade above the stock of Apple as a result of such expectations. Though Apple’s forward price-to-earnings ratio is a little higher at 26x, Microsoft trades at a lower 25 times forward earnings.

While it’s possible to argue that investors’ flight to safer blue-chip tech stocks during the current terrible market has artificially inflated the values of both equities, it also appears that many of Apple’s rumored goods, such as AR devices and autonomous cars, are already being factored into the stock price.

Featured Image-  Megapixl @ Andreistanescu

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About the author: I'm a financial freelance writer keen on the latest market developments which i articulate with writing stock updates, press releases and investor news. As a person i live by the code of a sustainable human existence and a carbon neutral universe. When off work, i spend time reading non-fiction books, flying drones, and outdoor cycling.