Apple, Losing World's Largest Market Cap? MS Chase Within Sight

Apple Shows Weakness Over Three Quarters, MS Remains Strong
Apple's Q3 Earnings on the 2nd Expected to Set the Tone

Microsoft (MS) is aiming to surpass Apple as the "world's most valuable company" for the first time in two years.

According to the New York Stock Exchange on the 28th (local time), as of the previous day, MS's market capitalization was $2.45 trillion, closing the gap with Apple, which stands at $2.63 trillion, by $180 billion (7.3%), putting MS within sight of reclaiming the top spot. The last time MS's market cap exceeded Apple's was in November 2021.

As recently as the 19th of last month, the difference between the two companies was about $400 billion, meaning the gap has shrunk to less than half in about a month.

Apple's market cap soared to $3.1 trillion but has since seen sales decline for three consecutive quarters due to recession concerns and poor performance. This is interpreted as being caused by a longer replacement cycle for smartphones amid the global economic downturn and weak sales of the recently released iPhone 15 series in China.

In contrast, MS showed relatively solid performance.

MS's revenue and net income announced on the 24th both exceeded market expectations. Revenue increased by 13% compared to a year ago, and net income rose by 27%.

On the day following the Q3 earnings announcement, the 25th, MS's stock rose more than 3%, further narrowing the gap with Apple, whose stock fell by more than 1%.

MS's cloud service, Azure, notably surprised the market with a 29% increase in revenue. Wall Street had expected a 26% growth rate.

This contrasts with Amazon Web Services (AWS) and Google Cloud, whose revenue growth rates of 12% and 22%, respectively, fell short of market expectations.

According to market research firm Synergy Research Group, as of Q2, MS holds a 22% share of the cloud market, ranking second behind AWS's 32%. Google holds 11%.

This growth in Azure is analyzed to be the result of focused investments in generative artificial intelligence (AI) since early this year.

MS has been quicker than its competitors to integrate generative AI into its products and deliver it through cloud services. MS also stated that 3 percentage points of the 29% growth rate are related to AI.

As a result, there is speculation that MS could reclaim the top market cap spot as early as the beginning of next month, since Apple's Q3 earnings will be announced on the 2nd.

The market estimates that Apple's Q3 revenue will decrease by about 1% year-over-year, similar to Q2.

Depending on the actual Apple earnings figures and outlook, MS could become the "world's most valuable company."

Meanwhile, a foreign media outlet reported that investors are paying more attention to Apple's Q3 earnings this week than to the upcoming monetary policy meeting of the U.S. Federal Reserve (Fed).

The outlet explained, "The Fed's policy decisions are also significant news, and investors will listen closely to Chairman Jerome Powell's remarks for clues about future policy direction and economic outlook," but added, "Recently, the earnings of tech companies have had a major impact on stock price movements."