Amazon vs. Microsoft: Which Cloud Empire Is the Better Buy Now?

Amazon (NASDAQ: AMZN) and Microsoft (NASDAQ: MSFT) are the two biggest names in cloud computing. Their computing platforms have attracted a ton of new clients and are expanding their agreements with many established ones. This is leading to soaring revenue growth for both companies, but which one makes for the better investment now?

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Each company is widely diversified

Both Amazon and Microsoft have legacy businesses that have gotten them to this point, but cloud computing may be what takes them into the future. Amazon is the biggest name in e-commerce and has built an impressive reputation for its wide product selection, rapid delivery, and fair prices. This created a strong base business that allowed it to rapidly expand its cloud computing footprint, and led to it becoming the world's top cloud infrastructure provider. One interesting thing to note is that Amazon Web Services (AWS), its cloud computing platform, actually generates more operating profits than its commerce divisions, accounting for 59% of the bottom line during Q1. One could consider AWS to be Amazon's primary business, especially when the company is spending $200 billion on data center capital expenditures this year.

Microsoft is mostly a software company, and it gets a ton of revenue from its business productivity software. However, its cloud segment, Azure, is becoming an increasingly larger part of its business. Microsoft doesn't publicly break out the individual operating characteristics of each segment, so investors can't know precisely how profitable Azure is. But we know that it's growing at a 40% clip -- faster than AWS' 28% pace. Still, AWS is a larger service than Azure, which could account for that growth mismatch.

These companies' core businesses are highly regarded and pretty safe. It would be splitting hairs to declare a winner here, so I'm calling it a tie.

Winner: Tie

Similar growth rates

During their most recently reported quarters, Amazon's overall revenue rose at a 17% pace, while Microsoft's grew at an 18% clip. That tracks with a historical trend of Microsoft growing ever so slightly faster than Amazon. However, that's only from a revenue growth standpoint.

AMZN Revenue (Quarterly YoY Growth) data by YCharts

Both have made significant investments and had one-time events that have affected their earnings per share, making it a harder metric to analyze. However, operating cash flow gives investors a good measure of a company's profit growth potential, and Amazon has jumped ahead of Microsoft in that category as of late.

AMZN Cash from Operations (Quarterly YoY Growth) data by YCharts.

At the end of the day, these two are remarkably close from a growth standpoint, so I have to call this category another tie.

Winner: Tie

Will valuation break the tie?

This whole comparison cannot end in a tie, so I'm looking at valuation to determine a final winner. Fortunately, there's a clear winner here.

For some time, Amazon and Microsoft traded within similar valuation ranges. However, they've diverged throughout 2026.

AMZN PE Ratio (Forward) data by YCharts.

Microsoft has fallen well below its normal trading range, making it much cheaper than Amazon. Considering how close in performance these two are from a financial standpoint, I think that Microsoft's lower valuation of 20.5 times forward earnings makes it a better buy. That's a ridiculously low price to pay for the stock, especially considering that the S&P 500 (SNPINDEX: ^GSPC) trades for 21.5 times forward earnings.

I'm still bullish on Amazon's stock, too, but Microsoft is the better buy right now.

Winner: Microsoft

Keithen Drury has positions in Amazon and Microsoft. The Motley Fool has positions in and recommends Amazon and Microsoft. The Motley Fool has a disclosure policy.