Better Stock to Buy Now: Amazon vs. Microsoft
Written by Keithen Drury for The Motley Fool -> Amazon is more leveraged to cloud computing than Microsoft is. Both companies are growing and are valued similarly. Two of the largest and most important companies in the world are Microsoft (NASDAQ: MSFT) and Amazon (NASDAQ: AMZ
Amazon is more leveraged to cloud computing than Microsoft is.
Two of the largest and most important companies in the world are Microsoft (NASDAQ: MSFT) and Amazon (NASDAQ: AMZN) . Both companies rank among the top five largest companies in the world, coming in at fourth and fifth, respectively. However, investors may be torn between which is the better choice.
On the surface, they look like completely different businesses, but the more you dig, the more you'll find they have in common. But which is the better buy? Let's find out.
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Ask your average person what each company does, and you'd likely get a response along the lines of: "Microsoft makes computer software, and Amazon sells goods and delivers them." While those two statements aren't wrong, they ignore the most important part of each business: cloud computing.
Both Microsoft and Amazon have major cloud computing divisions, with Microsoft Azure and Amazon Web Services (AWS) integral to their businesses. The effect cloud computing has on their businesses is impressive, especially with Amazon. AWS accounted for 59% of operating profits in Q1 despite generating only 21% of total revenue. Microsoft is less granular with its cloud reporting, and we only know that it grew 40% year over year -- Microsoft's fastest-growing individual unit.
These two are very similar businesses and are the primary reasons to invest in the stock, but you're not going to find much difference between the two, so let's look at their other business segments.
For Microsoft, a significant chunk of its sales comes from business productivity software, a high-margin business that's pretty safe during a downturn. Amazon's commerce business is also solid, but it operates on a low-margin model (sometimes at a loss) and can be impacted by consumer sentiment.
