Amazon vs. Microsoft: Which Stock Is a Better Buy for 2026 and Beyond?

Core Viewpoint - Amazon and Microsoft are both heavily investing in AI infrastructure, positioning themselves as attractive investments amid the AI boom, but there are nuances in their growth and valuation that may influence investor decisions [1][2]. Amazon - Amazon's Q3 net sales increased by 13% year over year to $180.2 billion, with operating income at $17.4 billion, of which AWS contributed $11.4 billion [4]. - AWS revenue grew by 20% year over year to $33.0 billion in Q3, up from 17.5% growth in the previous quarter [5]. - Advertising services revenue rose by 24% year over year in Q3, indicating another strong profit driver beyond e-commerce [6]. - Despite a trailing 12-month operating cash flow of $130.7 billion, free cash flow decreased from $47.7 billion to $14.8 billion due to increased capital spending [7]. Microsoft - Microsoft's overall revenue grew by 18% year over year to $77.7 billion, with operating income rising by 24% to $38.0 billion [8]. - The cloud segment, including Azure, Microsoft 365, and other services, saw a 26% year-over-year revenue increase to $49.1 billion, with Azure revenue specifically increasing by 40% year over year [9]. - Microsoft is heavily investing in AI-capable cloud computing, integrating AI across its products and services to meet growing demand [11]. Comparative Analysis - While Microsoft is experiencing faster overall growth, Amazon's AWS remains the leading cloud infrastructure platform, which may provide a more stable investment outlook [12]. - Amazon's forward price-to-earnings ratio is approximately 28, slightly lower than Microsoft's 31, giving Amazon a small edge in valuation [13].