Written by Norman Isaac Mwambazi

Move over Apple; Microsoft becomes the largest company in the world by market cap

Tech giants Apple Inc. (ticker: AAPL) and Microsoft Corporation (ticker: MSFT) have had a competition and fight for the top …

Tech giants Apple Inc. (ticker: AAPL) and Microsoft Corporation (ticker: MSFT) have had a competition and fight for the top spot dating back to their inception years, and they have designed and released game-changing tech products and services over the years that have made them industry leaders. Apple’s flagship product, the iPhone, is arguably the most high-end smartphone in the world, and Microsoft’s Windows operating system is without a doubt the most widely used in the world. Its cloud computing services are going toe to toe with Amazon’s for the most widely used in the world.

These two companies that had humble beginnings in the ‘70s have expanded over the years through ground-breaking technology inventions and record-setting mergers and acquisitions that have made them mega-cap companies. In this race, Apple won when it became the first company to cross $1 trillion in market value in August 2018, but Microsoft joined the trillion-dollar club soon after, crossing the commendable mark in April 2019.

The two companies kept growing, and without changing positions, their market capitalisation crossed $2 trillion in 2020 and 2021, respectively, the only companies to do so. Apple has held on to the top spot until today, when Microsoft surpassed it. This is the first time in 16 months that Microsoft has become the largest company by market capitalisation in the world.

Apple shares opened today’s morning trading session 3.6% down, a drop that took its market capitalisation to $2.413 trillion. According to Apple’s latest 10-K filing to the Securities and Exchange Commission (SEC), the company has 16.406 billion shares. Apple shares are currently trading at $147.32 a share, representing a drop of 3.44% from yesterday’s close.

On the other hand, Microsoft shares opened today’s trading session 0.7% up, taking its market value to $2.453 trillion. According to the company’s latest filing of the quarter that ended on September 30, 2021, Microsoft has 7.508 shares. Microsoft stock is currently trading at $328.70 a share, posting a gain of 1.31% today. The company has a market cap of $2.47 trillion, according to data from Google Finance. According to Dow Jones Market Data, the last time Microsoft was larger than Apple was July 2, 2020.

The fall in Apple stock is attributed to a Q3 FY2021 earnings report the company reported yesterday, October 28, 2021, after a market close that showed the company did not meet analysts’ revenue expectations. This is the first time that Apple has not matched or beaten Wall Street expectations since 2018. The company blamed its lower-than-expected Q3 FY2021 performance on supply chain disruptions and chip shortage that has hit the tech sector worldwide. Since Apple does more hardware (re: smartphones and Macs), a chip shortage affected it more than it affected its rival Microsoft, which is more of a software company than hardware, although it also cited this shortage as a challenge to its Xbox game console business segment in its Q1 FY2022 earnings report released early this week.

At the height of the pandemic, Apple was one of the companies that refrained from issuing guidance for the preceding quarter in their quarterly report, but it issued one this time, and it is not what analysts and investors were anticipating. Even with the iPhone 13 still fresh on the market as we are heading into the holiday season that is usually characterised by big spending on shopping, Apple’s Q4 guidance shows that the company expects to post sales of $6 billion between October and December 31, 2021, which is lower than what consensus analysts expect the company to make in the same period. Apple cited supply chain issues as the reason for this dull guidance.

While speaking at the earnings call that was webcast live from the company’s headquarters, Apple Chief Executive Officer (CEO) Tim Cook said that “the chip shortages are still affecting pretty much most of our products currently” even though COVID-19-induced manufacturing constraints have eased around the world over the past few months.

On the other hand, Microsoft’s guidance was more optimistic than pessimistic, even in light of chip shortages. The company’s guidance for the sales expected from its personal-computing business segment in its Q2 FY2022 quarter that will end on December 31, 2021, easily exceeded analysts’ expectations.  

Speaking during the earnings call on Tuesday, October 26, 2021, Microsoft Corp. Chief Financial Officer (CFO) Amy Hood said that she believes the demand for their products and services in this quarter will be “strong”, and the only drawback the company will face is how to match that demand with supply for what she sees as a “growing market.”

This year alone, Apple stock has gained 14.70%, which is way lower than Microsoft’s growth of 50.54% in the same period. Both companies are components of the Dow Jones Industrial Average (DJIA), and this index has gained 17% in the same period, according to data from Market Watch.