Google’s parent company Alphabet has officially taken a big bite out of Apple, knocking the tech firm off its pillar as the most valuable company in the world. News of Alphabet’s ascension broke as fourth quarter earnings from 2015 showed Alphabet’s market cap had climbed to an estimated $547.1 billion compared with Apple’s $529.3 billion.
The battle lines between the two technology giants have been in place for the past few years. Alphabet’s victory came on the heels of several smart plays by that firm and a few perceived fumbles from Apple.
Alphabet’s surge to the top was fueled by a changing of its structure and name in 2015. The company has experienced strong growth in advertising and mobile search while also gaining a major boost from its ownership of YouTube, which has enjoyed a 40% increase in the number of videos watched on the site per day since March 2014. Add, the continued popularity of Gmail to those already positive numbers and Alphabet put together a recipe for success. In creating Alphabet as its parent company in October 2015, Google also took the time to separate out its riskier projects, such as the Project Loon Internet balloon system and self-driving cars, essentially pulling numbers from those ventures away from more profitable pursuits.
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While Google repositioned itself for success in 2015, Apple managed to lose some of its shine with investors. Slower growth in China has complicated matters as has a visible slow-down in iPhone sales. Apple, in fact, is likely to post its first revenue decline in 15 years while Alphabet sales are anticipated to grow by as much as 16% in 2016.
The news isn’t all bad for Apple. Alphabet might have beaten it out as the S&P 500’s largest company by market capitalization, but Apple still holds the largest weight in the index. This is largely due to the S&P’s 2005 change in its index methodology. That change gives more weight to companies based on shares available to investors rather than all shares outstanding. Since Alphabet has a large percentage of stock held exclusively by its founders, Apple’s more investor-friendly model wins out on the weighting.
How long Alphabet will hold its top spot remains unclear as Apple is reportedly preparing to roll out a number of new product iterations in March. Industry watchers anticipate seeing a new iPad Air 3, new Apple Watch models and an iPhone 5se that includes an improved camera, Apple Pay functionality and an A9 chip. Apple, however, has declined to comment so far.