Both Amazon (AMZN 1.19%) And Microsoft (MSFT 0.62%) experienced strong growth in their cloud computing businesses in 2024. While Microsoft’s Azure posted the higher revenue growth, it was Amazon’s stock that outperformed in 2024.

Let’s see which stock could be the bigger winner this year.

Cloud computing growth

Cloud computing is one of the biggest growth areas due to the rise of artificial intelligence (AI), as companies use the services of these companies to help develop their own AI models and applications.

Amazon founded the cloud computing industry in 2006 when it launched Amazon Web Services (AWS) to accelerate the infrastructure development it had begun for partners and affiliates. Today, this infrastructure-as-a-service business is Amazon’s most profitable segment, significantly outperforming its retail operations. Based on the trailing 12 months, AWS generated operating income of $36.4 billion, while Amazon’s North American and international operations generated operating income of $24.3 billion.

Today the company has a market share of around 31% in the cloud computing sector, well ahead of Microsoft’s Azure with a share of 20%. In the most recent quarter, the segment’s revenue increased 19% while operating income rose 49%. The increase was driven by AI-related revenue, which increased by triple digits.

Amazon benefits from AI in its AWS segment through a range of services, including its Bedrock and SageMaker solutions. With Bedrock, the company provides its customers with a selection of basic AI models that they can use as a starting point for developing AI applications. It offers models not only of itself, but also of Anthropic, Cohere, MetaplatformsMistral and others. SageMaker, on the other hand, is a solution that helps customers create and train their AI models and then push them into production.

Amazon also makes custom AI chips called Graviton and Trainium, specifically designed for training large language models (LLMs) and AI inference, developed through its previous acquisition of Annapurna Labs. It has several notable customers using its chips including AppleAnthropocene and JUICE.

Meanwhile, Azure is one of the fastest-growing parts of Microsoft’s business, with revenue increasing 33% in the most recent quarter. Azure is a consumption-based service that benefits significantly from Microsoft’s ability to help customers build their own AI agents and co-pilots. The company said Azure’s OpenAI usage doubled in the last quarter as a number of customers began moving apps from testing to production. It also noted that Azure AI is helping to increase usage of its data and analytics services, Azure Cosmos DB and Azure SQL DB.

Currently, growth is being held back by a lack of capacity as Microsoft continues to expand its AI infrastructure to keep up with demand. Azure revenue was forecast to rise 31% to 32% on a constant currency basis in the second fiscal quarter (ended in December) and then accelerate in the second half of the fiscal year as previous capital expenditures (capex) drive further increases in capacity .

Beyond the cloud

Of course, Amazon and Microsoft are more than just their cloud companies. Amazon is still the world’s largest e-commerce and logistics company. It also owns the Prime Video streaming service.

Amazon’s retail division is seeing solid growth: North American sales rose 9% last quarter, while international sales rose 12%. The company uses AI and robotics to reduce costs by increasing warehouse and logistics efficiency.

Amazon is also seeing strong growth in its higher-margin sponsored ads business. This resulted in operating income growth significantly outpacing revenue growth in the quarter, with the North American segment reporting a 33% increase in operating income to $5.7 billion and the International segment reporting operating income of $1.3 billion, compared to a small loss a year ago.

Meanwhile, Microsoft is still the leader in workplace productivity tools with its Microsoft Office 365 suite of tools, which includes programs like Word, Excel and Powerpoint. The personal computing operating system Windows is also big business. In addition, it owns LinkedIn, Xbox, GitHub and other companies.

The company has solid growth opportunities with its Copilot 365 AI agents. Microsoft continues to push the capabilities of these AI pilots, including the ability to use Python in Excel with only natural language prompts. At $30 per enterprise user per month along with a 365 subscription, this is a big revenue opportunity for the company in the future.

Image source: Getty Images.

Evaluation and judgment

When considering future valuations, it’s important to remember that Microsoft and Amazon are in different fiscal years. Amazon is currently trading at a forward price-to-earnings (P/E) ratio just under 36 times next year’s analyst estimates (ending December 2025), while Microsoft is trading at just under 32.5 times this year’s analyst estimates (end-December 2025). Traded at the end of June 2025). So Microsoft is the cheaper stock. Additionally, sales are growing slightly faster (16% last quarter versus 11% for Amazon).

Overall, I like both stocks heading into 2025 and believe both will prove to be long-term winners. However, I slightly prefer Microsoft for 2025 due to a cheaper valuation, faster revenue growth, and a large potential opportunity with its AI co-pilots.