Microsoft vs. Alphabet: Which Stock to Choose?
Both Microsoft and Alphabet have certainly created millionaires among investors. But if you’re just starting and looking to invest, which of the two could potentially yield the same outcome for newcomers?
It seems Alphabet might be the better option. Here’s a closer look at the reasons why.
Firstly, if you already hold Microsoft stock, you’re not in a terrible position. Windows continues to dominate the operating system market, and Microsoft’s cloud services play a significant role in its revenue as well. But, I think it’s worth noting that Microsoft is falling behind in crucial sectors—one of which is artificial intelligence.
The buzz surrounding Microsoft’s AI tool, Copilot, emphasizes this point. While around 450 million individuals pay for Microsoft 365, only about 15 million have opted for the premium version of Copilot. That’s not disastrous, but it does seem underwhelming when you consider the vast number of potential users.
Moreover, it’s interesting to see that even the free version of Copilot only captures about 1% of the market share among AI chat assistants, as reported by SimilarWeb. In comparison, ChatGPT commands nearly two-thirds of the market, while Google’s AI, Gemini, claims around one-fifth of the requests.
It’s not entirely about AI, though. The cloud sector still contributes significantly to Microsoft’s revenue. Yet, recent figures from Synergy Research Group point out that despite revenue growth, Microsoft’s share in the cloud market is declining. This is concerning, especially since outperforming competitors is vital for maintaining stock value.
In a more philosophical context, this all suggests that several of Microsoft’s offerings might be losing relevance. It’s a challenge companies face, but fixing this takes time and effort.
So, whom is Microsoft losing its cloud market share to? If you guessed Alphabet’s Google, you’re likely spot on. Data from Synergy shows Google’s cloud division expanded its share, reaching a record 21% of global sales in the last quarter of the previous year.
That’s quite impressive, but what really stands out is how this growth is boosting Alphabet’s financial performance. Its cloud revenue surged by an astonishing 48% year-over-year in that same quarter, resulting in operating income doubling to $5.3 billion.
Granted, this is just a slice of Alphabet’s overall profits, which reached $35.9 billion in the last quarter of the year. However, it firmly establishes cloud computing as Alphabet’s fastest-growing sector, which could become even more crucial as the global cloud market is projected to grow nearly 19% annually through 2033.
On the other hand, Alphabet’s traditional business seems to remain robust. Despite economic challenges and stiff competition from companies like Amazon, Google’s advertising revenue climbed over 13% year-on-year in the last quarter of 2025, with annual growth reaching 11.4%. In contrast to Microsoft, Alphabet’s trajectory suggests its services are gaining traction.
Of course, future dynamics can shift at any moment. Still, given the solid reputation of each company’s products, any substantial change might take a while. Consequently, Alphabet could continue to outperform Microsoft for the foreseeable future.
Before you consider investing in Microsoft, you might want to take note of other stocks as well. Reports indicate that various investments show promise, indicating Microsoft may not be on any top lists. It might be wise to explore those alternatives that could provide better returns.
