Next Question: Did Apple Surpass Microsoft In Profit Last Quarter? Or Will It Be Next Quarter?

Next Question: Did Apple Surpass Microsoft In Profit Last Quarter? Or Will It Be Next Quarter?

Earlier today, Apple announced their earnings for Q1 2011. The record-breaking numbers saw revenue surge to $26.7 billion — over $6 billion ahead of their previous best quarter (which wasQ4 2010). But even more impressive may have been how much profit grew. Apple’s net income was also a new record for them at $6 billion for the quarter. That’s a full $1.7 billion above their previous record (again, Q4 2010). And it begs the question: could Apple have passed Microsoft in the one remaining financial stronghold this quarter as well?

For years, we’ve all heard how Apple was so pitifully small compared to the behemoth that is Microsoft. Then something funny started happening: Apple started growing. Fast. But instead of focusing on market share growth, Applefocused on bottom-line growth. And soon Microsoft wasn’t laughing anymore.

Last March, when I predicted that Apple would soon pass Microsoft in market cap, initial reactions were “it will never happen” (they were over $50 billion behind at the time). Then when it became clear that not only was it going to happen, but that it would happen soon, the defense shifted. By the time it did happen in May, the defense became “so what? Microsoft still makes so much more money than Apple.”

By October, that argument went out the window too. Apple’s revenues rocketed past Microsoft’s — and it wasn’t even close. So the defense shifted again. “Who cares about revenues. Look at the profits.” It’s true that Microsoft still did hold an edge last quarter in profits: $5.41 billion to $4.31 billion. Despite Apple’s higher revenue, the margins are much better in software, obviously. But still, it’s only a matter of time.

With the $6 billion profit posted today by Apple, they’re ahead of the $5.41 billion Microsoft posted last quarter. But Microsoft hasn’t yet announced their most recent earnings (they will next Thursday). And like Apple, Microsoft should see a healthy jump in both revenues and profits because it’s their holiday quarter (technically Q2 2011 for them). But will it be enough to once again hold off Apple?

It seems pretty likely. Looking over Microsoft’s previous results, their Q2′s are typically their strongest quarters (again, holiday time). From Q1 2010 to Q2 2010, profit jumped from $3.57 billion to $6.66 billion, for example. Yes, it almost doubled. But that was a bit of an odd quarter as Microsoft recognized a ton of Windows 7 upgrade revenue after much of it was deferred after launch. In other words, it was an abnormally strong quarter.

Two years ago, Microsoft actually saw a modest decline from Q1 to Q2. But the entire country was in an economic meltdown at that point too.

Still, even with a relatively modest quarter, Microsoft should be able to add a few billion to the bottom line. They’d only have to add $700 million to surpass Apple’s $6 billion profit. So again, it shouldn’t be an issue. …This quarter.

The real test will come next quarter (Apple’s Q2 2011 and Microsoft’s Q3 2011 — confusing, I know). While Apple CEO Steve Jobs will still presumably be on sick leave, Apple is poised to unleash the Verizon iPhone and the iPad 2. Both could mean new bonanzas for the company. And while revenues and profits typically fall after holiday quarters, those two products could be enough to blunt the fall enough that Apple could well surpass the also falling Microsoft.

I just wonder when Apple has passed Microsoft in market cap, revenue, and profit, what the next defense is going to be? I suspect market share. That’s just about the only thing left.