Amazon.com, Inc. (AMZN)vs Microsoft Corporation (MSFT)

Quick verdict

Two of the largest companies listed in the US, but they answer to different economic forces: Amazon's fortunes ride on consumer spending, logistics costs and cloud demand, while Microsoft sells software subscriptions and Azure capacity largely to corporate IT budgets. On the scorecard our factors produce, Microsoft takes quality, balance sheet and income, Amazon takes valuation, and growth and momentum are genuinely too close to call — a 4-2 split to Microsoft. Amazon turned over $775.7bn in the twelve months to June 2026 against Microsoft's $331.8bn for the fiscal year to the same date, yet Microsoft earned more operating profit, $155.2bn versus $93.7bn. That single contrast frames everything below: scale and optionality on one side, margin and cash conversion on the other. Amazon's earnings-based ratios were withheld because reported net income of $135.3bn sits well above operating profit, so a P/E would not describe the business.

At-a-glance comparison

Business model and revenue mix

Amazon operates the largest online marketplace in the world, alongside AWS cloud infrastructure, Prime subscriptions and an advertising arm, and it is classified in Consumer Cyclical / Internet Retail — a reminder that retail economics still shape the group's consolidated gross margin of 50.8% and 12.1% operating margin. Microsoft sits in Technology / Software—Infrastructure, selling Azure, Microsoft 365, Windows, LinkedIn, GitHub and Xbox, a mix that delivered a 67.9% gross margin and a 46.8% operating margin in the year to June 2026. Both report operating profit on a reported basis, so no EBIT approximation is needed. The reporting calendars differ: Amazon's figures are trailing twelve months to 30 June 2026 combining its December 2025 fiscal year with year-to-date results, while Microsoft's are its full fiscal year ended June 2026. Both balance sheets are dated 30 June 2026.

Valuation

On the multiples available at the 4 September 2026 close, Amazon is the cheaper of the pair and wins this factor. It trades on 3.59 times trailing sales against Microsoft's 11.18, 5.05 times book against 8.39, and 16.83 times EV/EBITDA against 19.20. Those sales-based gaps partly reflect mix — retail revenue is inherently lower-margin than software licensing — so the price-to-sales comparison flatters Amazon in a way EV/EBITDA does not. Microsoft's 27.84 trailing P/E and PEG of 1.22 are the more informative earnings anchors here; Amazon has no comparable P/E in this data because reported net income of $135.3bn exceeds operating profit of $93.7bn, indicating substantial non-operating gains that would distort the ratio. Free cash flow yields also diverge sharply: Microsoft 1.81%, Amazon negative at -0.42%, reflecting Amazon's capital outflows.

Growth profile

Growth is where the two converge, and our verdict is a tie. Microsoft compounded revenue at 16.12% a year from fiscal 2023 to fiscal 2026 and 14.57% from fiscal 2021, with earnings per share growing 22.86% and 17.40% over the same two spans. Amazon grew revenue 11.73% annually from 2022 to 2025 and 13.18% from 2020 to 2025 — a shade slower on the top line, though from a base more than twice the size in absolute dollars. Amazon's five-year EPS CAGR of 27.96% from 2020 is the headline figure, but it should be read with care: it starts from a year when the retail business was carrying heavy pandemic-era costs, so the compounding is flattered by a depressed starting point, and no three-year EPS figure is available to cross-check it. Different shapes, similar destination.

Profitability and quality

Margins are Microsoft's clearest advantage and drive the quality verdict in its favour. Every layer is wider: 67.9% gross versus 50.8%, 46.8% operating versus 12.1%, and a 40.3% net margin that has no Amazon counterpart because the non-operating component of Amazon's reported profit makes a net margin uninformative here. Cash conversion tells the same story — Microsoft generated $67.0bn of free cash flow in fiscal 2026, while Amazon's trailing figure was negative $11.6bn, consistent with a period of heavy capital investment rather than an operating shortfall. On absolute profit the gap narrows: Amazon's reported net income of $135.3bn slightly exceeds Microsoft's $133.7bn, but Microsoft produced it on operating profit of $155.2bn against Amazon's $93.7bn, so the underlying earnings power is not comparable on the net line.

Balance-sheet risk

Both balance sheets, as at 30 June 2026, look comfortable, with Microsoft the stronger. Amazon holds $78.2bn of cash against $132.5bn of total debt, giving net debt of roughly a third of EBITDA (0.32x) and interest cover of 28.1 times. Microsoft carries far less gross leverage — $40.3bn of debt against $20.9bn of cash — for net debt to EBITDA of just 0.10x and interest cover of 50.9 times. Liquidity favours Microsoft too, with a current ratio of 1.23 against Amazon's 1.03, the latter sitting only marginally above one. Equity bases are large on both sides: $551.6bn at Amazon and $442.4bn at Microsoft, which is why price-to-book at 5.05 and 8.39 respectively is a usable sanity check on the valuations above. Neither company shows signs of balance-sheet strain on these measures.

Price performance and shareholder returns

Returns on capital separate the pair decisively. Microsoft earned a 27.1% return on invested capital and 34.0% on equity in the year to June 2026, more than double Amazon's 11.97% ROIC. Amazon's return on equity was withheld as not interpretable, since the same non-operating gains that inflate reported net income would flow straight into that ratio; ROIC is the fairer comparison and it still favours Microsoft by a wide margin. Shareholder distributions follow the same pattern. Microsoft pays a dividend of $3.64 per share for a 0.73% yield on a 19.77% payout ratio, leaving ample retained earnings, and adds a 0.60% buyback yield. Amazon pays no dividend and shows no buyback yield in this data, directing cash instead into the investment programme visible in its negative trailing free cash flow.

Which stock fits which investor

The style tags capture it: Amazon reads as a blend holding, Microsoft as high-quality compounding. An investor screening on valuation would favour Amazon, which is cheaper on all three available multiples — 3.59x sales, 5.05x book and 16.83x EV/EBITDA. Income and quality both point to Microsoft, which offers the only dividend of the two at 0.73% with a conservative 19.77% payout, plus buybacks, alongside 46.8% operating margins and 27.1% ROIC. Growth-oriented buyers get a genuine choice rather than an obvious answer: our growth verdict is a tie, with Microsoft compounding revenue faster (16.12% over three years) and Amazon working from a revenue base more than twice as large. Momentum is likewise too close to call. Overall the scorecard reads 4-2 to Microsoft, with Amazon's case resting squarely on price.

• Value: AMZN
• Growth: MSFT
• Income: MSFT
• Quality: MSFT

Frequently asked questions

Why is there no P/E ratio shown for Amazon?

Amazon's reported net income of $135.3bn for the twelve months to June 2026 sits well above its operating profit of $93.7bn, indicating material non-operating gains. A P/E built on that figure would not describe the operating business, so it was withheld — as were net margin and return on equity for the same reason. Microsoft's P/E of 27.84 is shown.•

Which company is larger?

It depends on the measure. Amazon generated far more revenue — $775.7bn in the twelve months to June 2026 against Microsoft's $331.8bn for its fiscal year to the same date, well over twice as much. But Microsoft carries the larger market capitalisation at $3.7tn versus Amazon's $2.8tn at the 4 September 2026 close, and earned more operating profit, $155.2bn against $93.7bn.

Why is Amazon's free cash flow negative?

Amazon's trailing twelve-month free cash flow to June 2026 was negative $11.6bn, producing a free cash flow yield of -0.42%, while it still reported $93.7bn of operating profit. That combination points to capital expenditure absorbing operating cash rather than an operating loss. Microsoft, by contrast, converted its fiscal 2026 results into $67.0bn of free cash flow, a 1.81% yield.

Does either company pay a dividend?

Only Microsoft. It paid $3.64 per share over fiscal 2026, a 0.73% yield at the 4 September 2026 price, on a payout ratio of 19.77%, and added a 0.60% buyback yield. Amazon pays no dividend and shows no buyback yield, which is consistent with its negative trailing free cash flow and heavy investment.

Which has the stronger balance sheet?

Microsoft, on the measures available at 30 June 2026. Its net debt equates to 0.10 times EBITDA against Amazon's 0.32 times, interest cover is 50.9 times versus 28.1 times, and the current ratio is 1.23 against Amazon's 1.03. Both are comfortable positions; Microsoft simply has more headroom.

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