Apple Inc. (AAPL)vs Microsoft Corporation (MSFT)

Quick verdict

The widest gap on this page is not valuation or growth — it is capital efficiency. Apple earned a return on invested capital of 84.1% against Microsoft's 27.1%, and a return on equity of 148.8% against 34.0%, though Apple's equity base of just $107.5bn at 27 June 2026 (versus Microsoft's $442.4bn) flatters that second figure considerably. Microsoft is the faster grower: revenue compounded 16.1% a year from fiscal 2023 to fiscal 2026 while Apple managed 1.8% from fiscal 2022 to fiscal 2025. Our factor scores land at 3.5 for Apple and 2.5 for Microsoft, with Apple taking quality and income, Microsoft taking growth, and valuation, balance sheet and momentum all too close to call. The choice reduces to whether extraordinary returns on a mature revenue base outrank slower-compounding but faster-growing cloud economics.

At-a-glance comparison

Business model and revenue mix

Two very different routes to roughly comparable profit pools. Apple designs and sells iPhone, Mac, iPad and wearables, with a services layer spanning the App Store, iCloud, Apple Music and Apple Pay; hardware scale drives $466.8bn of revenue in the twelve months to 27 June 2026, the larger top line of the pair. Microsoft sells Azure cloud infrastructure, Microsoft 365, Windows, LinkedIn, GitHub and Xbox, generating $331.8bn in fiscal 2026 to 30 June. Yet net income is close: $128.9bn for Apple against $133.7bn for Microsoft, and operating profit is almost identical at $154.9bn and $155.2bn respectively. The difference is mix — Microsoft converts a smaller revenue base into slightly more profit, while Apple's consumer-electronics model carries far more volume at thinner margins. Note the different reporting windows: Apple's figures are trailing twelve months, Microsoft's a completed fiscal year.

Valuation

Neither name looks cheap, and the multiples point in opposite directions, which is why this factor is a genuine tie. On earnings, Microsoft is the lower-rated: a P/E of 27.8 at the 4 September 2026 close against Apple's 36.7, and an EV/EBITDA of 19.2 against 28.1. Adjust for growth and the gap widens — a PEG of 1.2 for Microsoft against 5.3 for Apple. But on sales Apple is marginally cheaper at 10.0 times against 11.2, and its free cash flow yield of 2.9% beats Microsoft's 1.8%. Price-to-book is not a useful discriminator here: Apple's 43.4 times reflects an equity base shrunk by years of buybacks rather than any economic premium, against Microsoft's 8.4 times. Cheap on cash flow, expensive on earnings — that is the trade.

Growth profile

Microsoft wins this factor on every horizon shown. Revenue compounded at 16.1% a year from fiscal 2023 to fiscal 2026 and 14.6% a year from fiscal 2021, while earnings per share grew at 22.9% and 17.4% over the same two spans. Apple's three-year record is much flatter: revenue up 1.8% a year from fiscal 2022 to fiscal 2025 and EPS up 6.9%. Stretch to five years, from fiscal 2020, and Apple looks better — 8.7% revenue growth and 17.9% EPS growth, the latter essentially matching Microsoft's five-year figure. The distinction matters: Apple's five-year EPS number captures the post-2020 demand surge, while its recent three-year trend has decelerated sharply. Microsoft's growth has instead accelerated, with its three-year rates ahead of its five-year rates on both lines.

Profitability and quality

On margins the ranking reverses. Microsoft reported a 67.9% gross margin in fiscal 2026 against Apple's 48.7%, a 46.8% operating margin against 33.2%, and a 40.3% net margin against 27.6% — the predictable consequence of selling software rather than devices. Both companies report an operating-income line, so these are reported operating margins, not estimates. Where Apple pulls decisively ahead is on the capital required to earn those profits: ROIC of 84.1% versus 27.1%. Apple's 148.8% ROE should be read with care, since sustained buybacks have left shareholders' equity at only $107.5bn; ROIC is the fairer read and it still shows a threefold advantage. Free cash flow reinforces the point — Apple converted its revenue into $136.7bn of free cash flow against Microsoft's $67.0bn, despite Microsoft's higher reported margins.

Balance-sheet risk

Both balance sheets are comfortable, and the factor is a tie. As at 27 June 2026 Apple held $39.5bn of cash against $84.3bn of total debt, leaving net debt at 0.27 times EBITDA. Microsoft, at 30 June 2026, held $20.9bn of cash against $40.3bn of debt, for net debt of 0.10 times EBITDA — nominally the stronger position, and its interest coverage of 50.9 times confirms borrowing costs are trivial against operating profit. An equivalent coverage figure is not available for Apple. On liquidity, Microsoft's current ratio of 1.23 edges Apple's 1.00, a level that is unremarkable for Apple given its working-capital model and heavy payables. Neither company's leverage is close to constraining; the differences here are too small to separate them.

Price performance and shareholder returns

Apple is the better income proposition of the two, though neither is a yield stock. Apple paid $1.05 per share over the twelve months to 27 June 2026 for a 0.33% yield at the September 2026 price, from a payout ratio of just 12.1%. Microsoft's $3.64 per share yields more at 0.73%, on a payout ratio of 19.8%. The reason Apple takes the income factor is the buyback: a 1.76% buyback yield against Microsoft's 0.60%, so total shareholder return through distributions is materially wider at Apple. That repurchase programme is also what has compressed Apple's equity base and inflated its ROE. Both payout ratios leave substantial room for increases, with Apple retaining close to nine-tenths of earnings.

Which stock fits which investor

Investors focused on quality and capital efficiency have the clearer case in Apple: 84.1% ROIC, $136.7bn of free cash flow and the stronger shareholder distribution profile at a 1.76% buyback yield. Those prioritising growth should look to Microsoft, with 16.1% three-year revenue compounding and a PEG of 1.2 against Apple's 5.3. Income seekers also lean Apple, though a 0.33% dividend yield means the buyback does the work. On value the two are genuinely inseparable — Microsoft is cheaper on earnings and EV/EBITDA, Apple on sales and free cash flow yield. Our composite lands at 3.5 for Apple against 2.5 for Microsoft, reflecting quality and income offsetting a growth deficit. Apple reads as mature and high-quality; Microsoft as high-quality with the growth still in evidence.

• Value: Too close to call
• Growth: MSFT
• Income: AAPL
• Quality: AAPL

Frequently asked questions

Why is Apple's return on equity so much higher than Microsoft's?

Apple's ROE of 148.8% compares with Microsoft's 34.0%, but the gap is exaggerated by the denominator: Apple's shareholders' equity stood at only $107.5bn at 27 June 2026 after years of buybacks, against Microsoft's $442.4bn. Return on invested capital is the fairer comparison, and Apple still leads there at 84.1% versus 27.1%.

Which stock is cheaper, AAPL or MSFT?

It depends on the measure, which is why our valuation verdict is a tie. At the 4 September 2026 close Microsoft traded on 27.8 times earnings and 19.2 times EV/EBITDA against Apple's 36.7 and 28.1, but Apple was cheaper on sales at 10.0 times versus 11.2 and offered a higher free cash flow yield at 2.93% against 1.81%.

Who is growing faster?

Microsoft, clearly. Its revenue compounded 16.1% a year from fiscal 2023 to fiscal 2026 and EPS 22.9%, against Apple's 1.8% revenue and 6.9% EPS growth from fiscal 2022 to fiscal 2025. Over five years the EPS gap closes — 17.9% for Apple from fiscal 2020 against 17.4% for Microsoft from fiscal 2021.

Which pays more to shareholders?

Microsoft's dividend yield of 0.73% is higher than Apple's 0.33%, but Apple's buyback yield of 1.76% far exceeds Microsoft's 0.60%, giving Apple the larger total distribution. Payout ratios are modest at both: 12.1% for Apple and 19.8% for Microsoft.

Is either balance sheet a concern?

Neither. Net debt to EBITDA was 0.27 times for Apple at 27 June 2026 and 0.10 times for Microsoft at 30 June 2026, with Microsoft's interest coverage at 50.9 times. Apple's current ratio of 1.00 is tighter than Microsoft's 1.23, but the difference is not material at these leverage levels.

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