Apple (AAPL -0.07%) stock has been a blockbuster winner for long-term investors. However, the company is now hitting a rough patch. The stock is barely up over the past year, with revenue only slightly up from 2022. This has caused the stock to be dethroned as the largest company in the world by market cap by Nvidia and Microsoft, which are growing much faster than the iPhone maker.
By the end of this year, I believe another big tech stock will surpass Apple in market capitalization. Amazon (AMZN 0.18%) looks poised to leapfrog Apple due to its margin expansion, growth of artificial intelligence (AI), and Apple’s looming lawsuits. Here’s why I predict Amazon stock will finish 2025 ahead of Apple in market capitalization.
Data by YCharts.
Amazon is recording faster revenue growth
One notch in Amazon’s belt compared to Apple is revenue growth. The company has grown its revenue by 102% in the last five years, compared to 46% for Apple, which mostly came during the post-pandemic surge. Amazon is growing faster than Apple at a larger revenue base, too, generating $650 billion in revenue over the last 12 months vs. $400 billion at Apple.
Image source: Getty Images.
How is Amazon’s revenue growing so quickly at such a large scale? It plays in two huge addressable markets: e-commerce and cloud computing. Online shopping is still (slowly) overtaking traditional retail in consumer wallet share, which will drive even further growth for Amazon in 2025. AI has become a boon for Amazon’s cloud computing division in Amazon Web Services (AWS), which accelerated revenue growth to 17% year over year last quarter. This segment has sky-high profit margins.
Apple does not have this tailwind at its back, while Amazon will keep benefiting throughout the rest of the year.
More profit margin expansion, government lawsuits
Moving down the income statement, Amazon should have an easier time than Apple expanding its profit margin over the rest of this year and beyond. The stock market is forward-looking and will place a continued premium on Amazon’s operating leverage potential. Apple’s profit margins may move in the other direction if it gets hurt by tariff costs on imports to the United States from China. Its supply chain is already optimized to the gills, posting 32% operating margins over the last 12 months compared to 11% at Amazon.
Another factor that could hurt Apple’s profitability is the looming lawsuits coming for its default search engine payment and App Store fees. A remedy in Google Search’s monopoly lawsuit could be to prevent its $20 billion (or more) annual payment to Apple for making Google Search the default engine on the Safari browser. This is a huge percentage of Apple’s $127 billion in annual operating income that could evaporate overnight.
A judge already ruled that Apple will need to let developers offer other payment methods within their applications, letting them bypass Apple’s 30% fee on in-app purchases. If applications sidestep these payments, another huge cash cow for Apple will disappear.
Data by YCharts.
Amazon has a cheaper holistic valuation
Apple stock looks slightly cheaper than Amazon when defined by trailing earnings, with a price-to-earnings ratio (P/E) of 33 compared to 34 for Amazon. However, when we factor in Amazon’s growth potential and the risks facing Apple’s business, the future looks much brighter for Amazon’s stock.
By the end of this year, it should be clear that Amazon’s operating margin will keep expanding along with its durable revenue growth. Apple’s business is at risk of losing two huge cash cows that will dampen its overall profitability.
Today, Apple’s operating income of $127 billion greatly surpasses Amazon’s $72 billion over the past 12 months. This gap today is why Amazon stock has a market cap of $2.18 trillion vs. Apple’s $3.15 trillion. Through the rest of 2025, I expect this earnings gap to keep closing, which will cause investors to value Amazon more than Apple, and is why it will finish the year ahead in market capitalization.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Brett Schafer has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
