Alphabet Overtakes Microsoft in Revenue Growth

Alphabet and Microsoft are two of the largest tech companies in the world, but which one is doing better? Alphabet's revenue and profits are increasing faster than Microsoft's, with a 24% year-over-year increase in revenue and a 30% operating income growth in the second quarter. In comparison, Microsoft saw an 18% revenue growth and 18% operating income growth.

Both companies have a strong cloud computing business unit, which is driving their growth. Alphabet's Google Cloud division saw an impressive 82% revenue growth, while Microsoft's Azure division had a 43% revenue growth. However, Alphabet's operating profits are higher than Microsoft's, making it the winner in terms of profit and revenue growth.

When it comes to valuing these stocks, using operating profits is a better metric than price-to-earnings ratio or free cash flow. Microsoft has historically been cheaper than Alphabet, but now Alphabet is trading at an elevated valuation. Despite this, Alphabet's cloud computing division is growing faster and accelerating rapidly, making it the better stock to buy in the next five years.