Despite attaining a market capitalization value of over $500 billion, a feat which it last achieved in March 2000, Microsoft Corporation (NASDAQ:MSFT) is yet to reach the market value of Apple Inc. (NASDAQ:AAPL) which currently stands at $642 billion. And with Apple posting strong results in the last quarter, Microsoft is not looking like it will catch up anytime soon.
iPhone 7 a hit
In the recently-released quarterly results, the Cupertino, California-based tech giant recorded strong sales of the iPhone 7 thereby forcefully demonstrating its dominance of the smartphone market. Revenues generated stood at $78.4 billion which was an increase of 3.3% from last year when the figure was $75.9 billion. This even beat the estimates of analysts as they had been expecting sales of $77.38. A new record of iPhone sales was also witnessed with the company managing to sell 78.29 million iPhones thereby beating a previous record by 4 million units.
“iPhone had a tremendous quarter,” Apple CEO said.
The $78.4 billion revenue was also a record. Profit, however, fell. This was an indication that the company co-founded by Steve Jobs is witnessing declining margins. But the positive results saw shares of Apple shoot up by approximately 3.25 percent in after-hours trading nevertheless.
The gap between Apple’s market capitalization and that of Microsoft can only grow owing to the fact that Apple has more firepower, especially in the smartphone segment. The iPhone maker also seems to have stemmed the decline in iPhone sales that had been witnessed in the previous quarter.
Service business the future
Another factor that is likely to contribute in the market value gap between Apple and Microsoft is the fact that Apple’s service business is also witnessing healthy growth. The service business which includes apps, games, movies, music and cloud services grew by 18% year-on-year. This makes it the fastest growing segment of the tech giant. The chief executive officer of Apple, Tim Cook, revealed in an earnings call that the company intended to double the business in the coming four years to grow it to the size of a standalone Fortune 100 company. This will be aided by the ecosystem that Apple has built around the Mac computers and now mobile devices, something Microsoft cannot boast of.
Shares of Apple Inc shot up by 6.10% in Wednesday’s trading to close the day at $128.75.