Alphabet Surges Ahead of Microsoft in Quarterly Growth
Two of the world's largest tech giants, Alphabet and Microsoft, have reported strong quarterly results. However, when it comes to growth, Alphabet has the edge.
Alphabet's revenue increased by 24% year over year in the second quarter, with its Google Cloud division leading the charge at an impressive 82% revenue growth. Microsoft's revenue, on the other hand, rose by 18%, with Azure growing by 43%.
When it comes to operating income growth, Alphabet again takes the lead, with a 30% increase compared to Microsoft's 18%. This is a key metric for evaluating these companies, as it accounts for their massive investments in data centers and cloud computing.
Despite its strong growth, Alphabet's price-to-earnings ratio is not an accurate measure of its value due to the company's SpaceX investment gains. Instead, using operating profits as a valuation metric shows that Microsoft has historically maintained a premium over Alphabet, but this flipped last year, making Alphabet the more expensive stock.
Despite its higher valuation, Alphabet is considered the better stock to buy by some analysts. Its cloud computing division is growing at an incredible rate, outpacing Microsoft's Azure. With Google Cloud's growth accelerating rapidly, Alphabet's stock performance is expected to surpass that of Microsoft over the next five years.