Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) both generated big gains for investors this year. Amazon’s stock soared more than 80% as its e-commerce and cloud businesses shone throughout the COVID-19 crisis, and Microsoft’s stock rallied nearly 50% as its cloud growth offset weaker demand for its enterprise-oriented products.
Can Amazon and Microsoft maintain those big gains? Let’s dig deeper into both tech giants to see which tech giant is the better overall investment.
The key differences between Amazon and Microsoft
Amazon generates most of its revenue from its online marketplaces, but most of its profits come from AWS (Amazon Web Services), the world’s largest cloud infrastructure platform.
Amazon subsidizes the growth of its lower-margin marketplaces, and their respective hardware and software ecosystems, with profits from AWS. That’s why Amazon can consistently sell products at low prices, launch new hardware devices at low margins, and offer more digital content and perks to expand its Prime ecosystem — which surpassed 150 million paid subscribers last year.
Microsoft’s business consists of three main segments: Productivity and Business Processes, which provides productivity software like Office and Dynamics; the Intelligent Cloud, which includes Azure and its server products; and More Personal Computing, which sells Windows licenses, Xbox consoles and games, and Surface devices.
Last year, Microsoft’s “commercial cloud” revenue, which include all its public cloud services, accounted for 40% of its top line. Microsoft’s expansion