Microsoft and Amazon both strong in cloud computing, but Microsoft favored due to AI potential

From Nasdaq: 2025-01-03 05:45:00

Amazon and Microsoft both experienced strong growth in their cloud-computing business units in 2024. While Microsoft’s Azure saw higher revenue growth, Amazon’s stock outperformed. Cloud computing is a key area of growth due to the rise in AI, with Amazon leading the market share at 31%. Microsoft’s Azure saw revenue jump 33% last quarter. Both companies offer AI solutions and have other successful business segments.

Amazon’s AWS is its most profitable segment, generating $36.4 billion in operating income. The company leads in cloud-computing with AI-related revenue growing triple digits. Amazon offers AI services like Bedrock and SageMaker. Microsoft’s Azure is growing rapidly, with customers moving apps from test to production. Azure AI is increasing usage of data and analytics services.

Amazon and Microsoft have other successful segments beyond cloud computing. Amazon’s retail sales are growing with the help of AI and robotics, while its sponsored ad business is flourishing. Microsoft dominates in workplace productivity tools and owns LinkedIn, Xbox, and other businesses. Microsoft’s Copilot 365 AI agents present a significant revenue opportunity.

Looking at forward valuations, Amazon trades at a forward P/E ratio of 36, while Microsoft trades at 32.5 times this year’s analyst estimates. Microsoft has faster revenue growth and a cheaper valuation. Both stocks are poised for success in 2025, but Microsoft’s potential with AI copilots makes it slightly more favorable.



Read more at Nasdaq: Microsoft vs. Amazon: Which Cloud-Computing Stock Will Outperform in 2025?