On January 3rd, 2022, Apple Inc. made history by becoming the world’s most valuable company ever. Shares in the American technology firm hit a split-adjusted all-time high of $182.94, bringing its total market capitalization to a staggering $3 trillion.
And whilst this was obviously great news for CEO Tim Cook and all of Apple’s shareholders, it did raise the question as to whether any other business could match that feat in the coming years.
Here we’ll take a look at 3 of the hottest contenders vying for Apple’s valuation crown, and ask just what it would take to knock the king of companies off of its lofty throne.
Alphabet
Sometimes better known by its more famous subsidiary brands Google and YouTube, Alphabet Inc. is a tech conglomerate overseeing businesses in a vast array of differing industries. Alongside its core work within the Internet services sector, the business also has interests in drug discovery (Isomorphic Labs), autonomous driving (Waymo), and artificial intelligence research (DeepMind).
But despite the wide range of companies it has under its metaphorical umbrella, Alphabet still makes the majority of its revenues from just two segments: advertising and cloud computing.
This isn’t a bad thing – the firm is utterly dominant when it comes to generating Internet ad revenue, and its Google Cloud Platform is a rapidly expanding infrastructure service that promises plenty of growth further down the line.
For example, GOOGL’s revenue for the fourth quarter 2021 totaled $75.3 billion, of which $61.2 billion – or 81% – came directly from advertising.
In fact, its Google Services segment- which includes Google advertising and YouTube ads, as well as other products such as Google Maps, Android, Search, Chrome, hardware and Google Play – accounted for 92% of its entire top-line, and 100% of its operating income too.
And while it looks like Alphabet’s advertising efforts will generate the lion’s share of its profits for quite some time to come, there’s little doubt that its cloud operations will play an increasingly important role in the firm’s long-term growth strategy.
Indeed, if GOOGL should come to rival Apple’s No. 1 slot in the next decade, it will likely be because this segment expands as rapidly as Alphabet’s management is hoping it will.
Revenues from Google Cloud were up 45% year-on-year during the last quarter, bringing in $5.54 billion. This is a significantly higher growth rate than its Google Services revenue, which “only” grew at 31% through Q4.
That said, Alphabet’s cloud operations aren’t yet profitable, delivering an $890 million operating loss for the three months ended Dec. 31, 2021. But it’s surely only a matter of time until the segment does turn net positive – and when it does, it’s probably time for Tim Cook to start worrying that Apple will lose the most valuable company in the world mantle.
Amazon
Despite being the least valuable enterprise on our list of Apple competitors, Amazon.com, Inc. is arguably the company most equipped to challenge the iPhone manufacturer’s position as the richest firm in the world.
What first started out as little more than a humble online book retailer has now morphed into a highly-diversified giant of an operation, encompassing multiple businesses in the e-commerce, digital streaming and cloud computing sectors.
Interestingly, Apple actually brings in less cash revenues than Amazon, with the e-commerce company’s trailing twelve month sales figure of $458 billion outpacing AAPL’s $366 billion by quite some margin. However, Amazon falls short when it comes to earnings, making just $33 billion against its rival’s $112 billion.
So, why’s this important in relation to the two companies’ total market capitalization?
It’s important because, notwithstanding Amazon’s superior ability to bring in the money, Apple’s healthier profit margin seems to attract more interest from investors, pushing up the latter’s stock valuation to the commanding position it retains today.
But this could easily change.
Amazon has just come through a pretty difficult year, yet its financial metrics are still holding strong. For instance, the company faced increased operating costs of 23% over the past twelve months – due to a competitive labor market and ongoing supply chain issues – and its operating income for the fourth quarter essentially halved, from $6.9 billion in 2020 to $3.5 billion in 2021.
However, despite these set backs, AMZN still managed to deliver double digit growth in its most critical segments: digital ad revenue was up 32%; net income for the year grew 57% to $37 billion; and AWS managed to clock in a total of $62 billion for the firm in revenue during 2021.
Moreover, Amazon remains the leader for e-commerce in the US with a 40% share of the market, while AWS takes top spot in the cloud computing space with 33% globally.
Its Prime membership product also boasts 200 million users worldwide, and earnings spiked in the last quarter of 2021, beating Wall Street estimates by $24.09 to come in at $27.75 per share.
Source: Unsplash
Microsoft
Microsoft Corporation was the company that Apple leapfrogged over in 2021 to become the most valuable publicly traded business in the world, with the Bill Gates-founded software and electronics firm having occupied that position for the previous two years.
And with just half-a-billion dollars separating the two companies, Microsoft might be thinking it can retake first place fairly soon.
But why not?
MSFT is one of the vanguard companies pioneering in the emerging Metaverse, a disruptive industry that some analysts believe will be worth $828.95 billion by 2028. If Microsoft manages to exploit its first-mover advantage here, then there’s no telling what kind of revenue opportunities this new technology will bring.
In addition to its speculative Metaverse play, Microsoft has also got some well-established business segments already generating profits for the company right now.
After Amazon, Microsoft Azure takes second place in the $180 billion cloud industry with a 21% share of the market. The company’s cloud offerings are growing at a breakneck speed too, with its multicloud solutions proving especially popular – which has no doubt helped drive overall cloud revenues up 32% to $22.1 billion.
The company also broke the record books recently when it sought to acquire the video game publisher Activision for the largest all-cash transaction the sector had ever seen. The deal is expected to be finalized next year, which, if all goes to plan, will make MSFT the third-biggest video games company in the world.
With the gaming market projected to be worth $217 billion by 2023 – and its cloud computing business thriving – there’s a good chance Microsoft might soon be knocking shoulders with Apple in the race to be top dog of the Nasdaq Stock Exchange…that is, if Amazon or Google don’t get there first.
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