Microsoft vs. Amazon: Which Cloud Computing Stock Will Outperform in 2026?

Core Insights - Both Amazon and Microsoft are expected to perform well in 2026, with Amazon having a larger growth opportunity in its cloud computing segment [1][16]. Amazon - Amazon's most profitable segment is its cloud computing unit, Amazon Web Services (AWS), which leads the market share [5]. - The driving force for cloud computing is AI, with Amazon providing solutions like Bedrock and SageMaker to help customers develop AI models [6]. - AWS revenue growth accelerated to 20% in Q3, with the company indicating potential for more growth if not for capacity constraints [8]. - Amazon has launched Project Rainier, a significant data center cluster for AI research, and signed a $38 billion deal with OpenAI for computing power [9]. - Amazon's e-commerce business is leveraging AI and robotics for operational efficiency and is experiencing growth in its high-gross-margin sponsored ad business [10]. Microsoft - Microsoft's Azure is the fastest-growing cloud computing service, with a revenue increase of 40% last quarter, marking the ninth consecutive quarter of over 30% growth [11]. - Microsoft has a strategic partnership with OpenAI, securing a 27% stake and exclusive access to its AI models, which is expected to drive growth [12]. - Microsoft has also partnered with Nvidia and Anthropic, committing to $30 billion of compute capacity from Azure [14]. - Other segments of Microsoft, such as productivity and business processes, have seen revenue growth of 17%, while the "intelligent cloud" segment grew by 28% year over year [15]. Conclusion - The demand for cloud computing is expected to remain strong, with both companies positioned for growth. However, Amazon is seen as having a greater opportunity to accelerate growth in AWS, which could positively impact its stock narrative [16].