Comparing the Top Cloud Stocks: Amazon, Microsoft, and Alphabet

Key Points

• Alphabet’s Google Cloud reported a year-over-year revenue growth of 82% in Q2 2023, significantly surpassing Amazon Web Services (37%) and Microsoft Azure (43%).

• Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), and Alphabet (NASDAQ: GOOGL, GOOG) all showed accelerating sales growth in their cloud divisions, with Alphabet’s growth rate improving from 63% in Q1 2023.

• Alphabet projected capital expenditures for FY 2026 between $195 billion and $205 billion, leading to negative free cash flow in Q2 2023 for the first time since it became publicly traded.

In their latest earnings reports, the cloud computing giants Amazon, Microsoft, and Alphabet all demonstrated robust sales growth, with Alphabet’s Google Cloud taking the lead. This growth trajectory is partly fueled by its focus on artificial intelligence applications, positioning Alphabet as a key player in the AI boom. Despite experiencing a stock dip post-earnings, Alphabet offers a favorable valuation compared to its peers, making it an attractive investment option.

For context, the average forward price-to-earnings ratio in the S&P 500 is currently 19.4. Alphabet remains competitively priced, especially as it maintains a substantial cloud backlog of $514 billion, bolstered by its AI services. The continued investment into AI and cloud infrastructure underscores Alphabet’s strategy to enhance its growth potential in the competitive landscape.