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Cloud computing is a huge growth driver.
Amazon Web Services (AWS) had a very strong quarter, delivering 37% growth against Wall Street's expectation of 31%. Microsoft Azure's revenue rose 43%, though its growth rate isn't accelerating compared to the previous quarter. Alphabet's Google Cloud posted an impressive 82% revenue growth rate in Q2, partly benefiting from the sale of its custom AI chips to external customers. AWS and Google Cloud are highlighted as the primary winners in cloud computing performance, with Microsoft still showing solid, albeit less rapidly accelerating, results.
Valuations are assessed using the price-to-operating income ratio, as net income metrics are skewed by investment gains. Microsoft is noted as the cheapest of the three from a cloud perspective, while Alphabet and Amazon have nearly identical valuations, making them comparable investment options. All three are considered excellent long-term buys: Microsoft as a value play, Alphabet as a rapidly growing market share leader, and Amazon as a stalwart with accelerating growth. Given the expected growth in AI workloads over the next decade, these stocks are anticipated to deliver strong returns.