Microsoft or Amazon: If I Could Only Own One for the Next 5 Years, It Would Be This One Alex Sirois Wed, October 7, 2026 at 12:45 PM EDT 4 min read AMZN +1.00% MSFT -0.27% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
MSFT's Azure grew 43% and AMZN's AWS grew 37%, but Microsoft generates $67 billion in free cash flow versus Amazon's negative $8 billion.
Microsoft's 47% operating margin versus Amazon's 11% means each AI dollar converts to profit faster, favoring it as the stronger five-year hold.
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Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) reported earnings on July 29 and July 30. Both showed cloud demand outpacing supply. Microsoft sells AI through software seats and Azure. Amazon combines AWS with retail, ads, and experimental projects. Over five years, that difference will decide which stock does better.
Microsoft's fiscal Q4 revenue reached $90.01 billion, up 17.8%, and Azure grew 43%. Growth that is speeding up at that size is rare. Microsoft 365 Copilot passed 30 million paid seats, and net new paid seats more than doubled sequentially. That suggests customers are moving beyond trial runs. Commercial remaining performance obligations (signed contracts not yet booked as revenue) hit $678 billion, up 84%. OpenAI commitments make that number look bigger, but it still rose 25% excluding OpenAI.
Amazon's revenue rose to $200.61 billion, up 19.6%. AWS grew 37% to $42.23 billion, and Andy Jassy said "AWS is booming right now." Retail margins stay thin. North America earned a 7.9% operating margin, and International earned just 4.1%.
Microsoft makes money from AI in several ways: Azure usage, Copilot seats, GitHub usage billing, Foundry and security. Its catalog offers over 11,000 models, so Azure wins no matter which model a customer picks. Satya Nadella put it simply: "Any given model at any given time is swappable."
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Amazon spreads its money wider. It plans about $200 billion in 2026 capital spending across AI, chips, robotics and satellites. Amazon Leo has close to 400 satellites in orbit. That ambition costs cash. Free cash flow over the past 12 months was -$7.6 billion, while Microsoft produced $66.99 billion in fiscal 2026.
Microsoft expects fiscal 2027 capital spending of about $175 billion, with operating margins down less than a point and free cash flow staying positive. I will be watching whether usage-based Copilot billing speeds up Microsoft 365 growth. At Amazon, management says servers pay for themselves in a little less than three years. Jassy thinks AWS could "very possibly be a trillion dollar annual revenue business for us in time." Free cash flow will have to back that up.
Microsoft has the stronger five-year profile. Its margins turn each AI dollar into profit faster, and its backlog gives me more visibility than Amazon's retail business can. At a forward P/E of 25 against Amazon's 24, I pay only a small premium for that. Microsoft has lagged over the past year, gaining 0.97% while Amazon gained 16.02%. Still, cash generation gives Microsoft the edge over a five-year horizon.
Amazon fits investors who want a wider range of results from Zoox, Leo and grocery. I'd change my mind if Amazon's free cash flow turns strongly positive while AWS keeps speeding up.
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