Not Microsoft. Not Alphabet. Here's the Cloud Giant I'm Most Bullish About.
2026-10-14 15:23
•Keithen Drury •The Motley Fool
••••• •••••• Axe Cap view
Why AWS Beats Azure and Google Cloud for Long-Term Profit Growth
Amazon's AWS offers stronger profit leverage than Microsoft or Alphabet, signaling a more potent cloud growth story.
Amazon’s AWS stands out because it generates operating margins near 40% and accounts for 60% of Amazon's total operating income. That means every incremental dollar of AWS revenue flows robustly to the bottom line—something Microsoft’s Azure and Alphabet’s Google Cloud can't match, due to their smaller slice of overall profit. AWS’s 37% revenue growth this year and Amazon’s $220 billion data centre investment underline the company’s commitment to scaling cloud infrastructure profitably. For South African investors, this growth narrative indirectly supports the rand, as tech demand fuels USD inflows. In contrast, Microsoft and Alphabet’s cloud segments, while growing, have less relative impact on their overall profitability, diluting operational leverage. Keep an eye on USD/ZAR: continued USD strength from global tech demand could pressure the rand but AWS’s dominance offers exposure to the cloud sector’s profit engine. this is just our opinion and not financial advice
Buy Amazon for pure cloud profit leverage exposure, trim tech holdings like Microsoft and Alphabet unless you want broader software and ad exposure. Consider USD/ZAR moves as a macro hedge given Amazon’s USD earnings dominance.
- AMZN
- USD/ZAR
- AWS capex may not deliver expected returns if cloud market saturates
- USD strength could weigh on rand and local currency returns
6/10
The article argues that Amazon is a better cloud computing investment than Microsoft and Alphabet because AWS generates significantly higher operating margins (39%) and accounts for 60% of Amazon's total operating income. With AWS revenue accelerating to 37% year-over-year growth and the company investing $220 billion in data center capital expenditures, AWS provides substantial operating leverage that will drive Amazon's overall profit growth faster than cloud segments benefit their competitors.
Our take is based on reporting first published by The Motley Fool.