Microsoft Corporation (MSFT)vs Alphabet Inc. (GOOGL)

Quick verdict

Two of the largest companies listed in the United States, but they earn their money in different ways: Microsoft sells cloud capacity, subscription software and gaming to businesses and consumers, while Alphabet is fundamentally an advertising business wrapped around Search, YouTube and Android, with a cloud arm attached. That difference shows up in the numbers. In the twelve months to June 2026 Alphabet booked $445.9bn of revenue against Microsoft's $331.8bn for its fiscal year to the same date, yet Microsoft converted more of each dollar into operating profit — a 46.8% operating margin versus 33.1%. Our factor scores finish level at three apiece. Microsoft takes quality and shareholder income, Alphabet takes growth and balance-sheet strength, and valuation and momentum are genuinely too close to call. Which one reads better depends entirely on which of those four factors you weight most heavily.

At-a-glance comparison

Business model and revenue mix

Microsoft's revenue comes from Azure cloud infrastructure, Microsoft 365 productivity subscriptions, Windows, LinkedIn, GitHub and Xbox — a mix weighted towards contracted enterprise spending, and classified under Technology, industry Software—Infrastructure. Alphabet sits in Communication Services as an Internet Content & Information business: Google Search, YouTube, Android and Google Cloud, with advertising the main source of revenue. The economic forces acting on each therefore differ. Enterprise IT budgets and seat counts drive one; advertiser demand, which moves with the broader consumer economy, drives the other. Scale is comparable but not identical — Alphabet's $445.9bn of revenue in the twelve months to June 2026 exceeds Microsoft's $331.8bn fiscal-year figure by roughly a third. Reporting calendars differ too: Microsoft's year ends in June and its figures are full-year FY2026, while Alphabet's are trailing twelve months built on fiscal 2025 plus year-to-date.

Valuation

Our verdict here is a tie, and the multiples explain why they point in opposite directions. At the 4 September 2026 close Microsoft traded on 11.2 times sales and 8.4 times book, both above Alphabet's 9.3 and 6.5. Flip to enterprise value against EBITDA and the ranking reverses: Microsoft at 19.2 times, Alphabet at 24.4. Free cash flow yield favours Microsoft at 1.81% against 1.28%. Microsoft's P/E of 27.8 and PEG of 1.22 have no counterpart — Alphabet's earnings-based multiples were withheld because its $244.2bn of trailing net income sits far above its $147.6bn of operating profit, so a P/E built on it would not describe the operating business. On the measures that are comparable, neither name is consistently cheaper.

Growth profile

On growth the edge goes to Alphabet, though the comparison needs care because the two base years differ. Alphabet's revenue compounded at 17.2% a year from fiscal 2020 to fiscal 2025 and at 12.5% from fiscal 2022, so its longer run is the stronger one. Microsoft's is the steadier profile: 14.6% annually from fiscal 2021 to fiscal 2026 and 16.1% from fiscal 2023, with the shorter window running faster. Earnings per share tell a wider story — Alphabet compounded at 29.8% over five years and 33.3% over three, against Microsoft's 17.4% and 22.9%. Treat Alphabet's EPS figures with the same caution as its multiples: they end on a period whose net income is lifted well above operating profit by non-operating items, which flatters the compound rate.

Profitability and quality

Quality is where Microsoft separates itself. Gross margin ran at 67.9% in the year to June 2026 against Alphabet's 60.9%, and the gap widens further down: a 46.8% operating margin versus 33.1%, measured on reported operating-income lines at both companies. Return on invested capital tells the same story — 27.1% for Microsoft, 17.6% for Alphabet. Alphabet's net margin and return on equity were withheld because trailing net income of $244.2bn exceeds operating profit of $147.6bn, a gap attributable to non-operating gains rather than trading performance; quoting either would overstate the business. Microsoft's own net margin of 40.3% and ROE of 34.0% are therefore shown without a peer to sit alongside. On the operating measures that are directly comparable, Microsoft converts revenue and capital into profit more efficiently.

Balance-sheet risk

Alphabet carries the stronger position, mainly on liquidity. It held $55.9bn of cash at 30 June 2026 against Microsoft's $20.9bn, and its current ratio of 2.72 is more than double Microsoft's 1.23 — a meaningful cushion for near-term obligations. Alphabet also carries more gross debt, $100.2bn against $40.3bn, but both are trivially geared against earnings: net debt to EBITDA of 0.26 times for Alphabet and 0.10 times for Microsoft. Interest cover runs at 65.6 times and 50.9 times respectively, so neither faces a servicing question. Microsoft's leaner cash balance is a working-capital choice rather than a warning sign given how lightly indebted it is. The verdict rests on Alphabet's larger liquid buffer and wider current ratio rather than on any weakness at Microsoft.

Price performance and shareholder returns

For shareholder income Microsoft is the clearer choice, though neither is a yield stock. Microsoft paid $3.64 per share over its fiscal year to June 2026, a 0.73% yield at the 4 September 2026 price, absorbing 19.8% of earnings. Alphabet's $0.85 per share works out at 0.25% and a 4.2% payout ratio — a recently established, deliberately small distribution with substantial room to grow. Buybacks narrow the gap only slightly: a 0.6% buyback yield at Microsoft against 0.42% at Alphabet. Combining the two, Microsoft returns roughly 1.3% of its market value annually versus under 0.7% at Alphabet. Both retain the large majority of profits, which is consistent with the capital demands of cloud and AI infrastructure, but Microsoft's dividend is the more established commitment.

Which stock fits which investor

The scoring finishes three-all, so the split is about emphasis rather than a winner. An investor prioritising operating quality and cash returns has the case for Microsoft: a 46.8% operating margin, 27.1% return on invested capital, a 0.73% dividend yield and a 19.8% payout ratio give it both the better unit economics and the more developed distribution policy. Someone weighting growth and balance-sheet resilience has the case for Alphabet: 17.2% five-year revenue compounding, $55.9bn of cash, a 2.72 current ratio and 65.6 times interest cover. Both carry a high-quality style tag. Neither is obviously the cheaper share — Microsoft trades on lower EV/EBITDA, Alphabet on lower price-to-sales and price-to-book — and momentum is level. On the evidence here, the choice turns on whether margin quality or growth and liquidity matters more to you.

• Value: Too close to call
• Growth: GOOGL
• Income: MSFT
• Quality: MSFT

Frequently asked questions

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

Alphabet's trailing net income of $244.2bn sits far above its operating profit of $147.6bn for the twelve months to June 2026, a gap driven by non-operating gains. A P/E built on that earnings figure would not describe the underlying business, so it was withheld — along with net margin, return on equity and PEG. Microsoft's P/E of 27.8 is shown because no comparable distortion applies.

Which company is more profitable?

On operating measures, Microsoft. Its gross margin was 67.9% and operating margin 46.8% in the fiscal year to June 2026, against 60.9% and 33.1% at Alphabet. Return on invested capital was 27.1% versus 17.6%. This is the factor where the two separate most clearly.

Which is growing faster?

Alphabet, on our reading. Its revenue compounded at 17.2% a year from fiscal 2020 to fiscal 2025, ahead of Microsoft's 14.6% from fiscal 2021 to fiscal 2026. Over three years the ranking flips — 16.1% for Microsoft against 12.5% for Alphabet — so the longer window does the work.

Which pays the better dividend?

Microsoft, by a clear margin. It yielded 0.73% at the 4 September 2026 close from $3.64 per share, with a 19.8% payout ratio. Alphabet yielded 0.25% from $0.85 per share and paid out just 4.2% of earnings, leaving it far more scope to raise the distribution from a low base.

Is either balance sheet a concern?

No. Net debt to EBITDA was 0.10 times at Microsoft and 0.26 times at Alphabet as at 30 June 2026, with interest cover of 50.9 and 65.6 times respectively. Alphabet's $55.9bn cash pile and 2.72 current ratio give it the stronger liquidity position against Microsoft's $20.9bn and 1.23.

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