Microsoft (MSFT) reported record cloud revenues of over $50 billion in Q2 FY2026, a 26% year-over-year increase, while total revenues grew 17% to $81.3 billion. The company’s Azure services saw a 39% growth, backed by a $625 billion commercial remaining performance obligation, signaling strong long-term demand. The Zacks Consensus Estimate for MSFT’s FY2026 earnings is $17.10 per share, indicating a projected growth of 25.37% year-over-year.
In contrast, Alibaba (BABA) experienced a mere 2% revenue growth to RMB 284.8 billion ($40.7 billion) in Q3 FY2026, with net income plunging 66%. The company is facing significant pressures, including a 57% decline in adjusted EBITA and a substantial drop in free cash flow. Despite ambitious goals to exceed $100 billion in combined cloud and AI revenues, the ongoing competitive landscape and internal restructuring raise concerns about its future profitability. The Zacks Consensus Estimate for BABA’s FY2026 earnings stands at $5.08 per share, reflecting a 43.62% year-over-year decline.
As of recent share performance, MSFT shares have fallen 7.3% over the past three months, while BABA shares declined by 20.9%. Both companies currently show overvalued status; MSFT trades at an 8.49x forward price-to-sales multiple versus BABA’s 2.01x. Microsoft’s solid fundamentals and growth prospects position it favorably over Alibaba, which faces regulatory hurdles and declining profitability.
