Amazon vs. Alphabet: Which Magnificent Stock Is the Better Buy?

Amazon (AMZN +0.05%) and Alphabet (GOOG +1.19%) (GOOGL +1.10%) are two of the most iconic companies that defined how consumers use the internet. They both branched off into multiple business opportunities instead of sticking exclusively with their original service. It's been a good ride for long-term investors, but if you can only buy one of these tech stocks, here's what you should consider. Image source: Getty Images. Amazon and Alphabet are both well-diversified Both corporations have a sea of smaller businesses that push their overall revenue numbers to new highs. Amazon has its online marketplace, advertising, cloud platform, streaming, subscription plans, and other businesses. Alphabet has several businesses of its own, including Google Search, YouTube, Google Cloud, Waymo, Google Maps, and others. Today's Change(0.05%) $0.12Current Price$246.14 While these tech conglomerates have a lot of pieces, the main focus is on artificial intelligence. Both companies have cloud platforms that are growing rapidly thanks to the demand for enterprise AI. Google Cloud revenue was up by 63% year over year in the first quarter, while Amazon Web Services sales increased by 28% year over year. Amazon's new AI chip business reached a $20 billion annual revenue run rate. It's a quickly growing part of the business. Alphabet also reported 40% sequential growth in Gemini Enterprise's paid monthly active users and crossed 500,000 fully autonomous Waymo rides per week. Both companies have exciting AI initiatives, but Google Cloud is growing faster than Amazon Web Services. That is the most important takeaway when comparing each company's AI investments. The other AI segments are high-potential opportunities that make up a small slice of total revenue. They don't meaningfully move the needle yet, but can become tremendous long-term compounders. Alphabet is growing faster and has higher margins Alphabet's lead in cloud computing growth rates has translated into faster revenue and net income growth than Amazon. Alphabet's 22% year-over-year revenue growth in Q1 outpaced the 17% year-over-year growth Amazon showcased in its Q1 results. Today's Change(1.10%) $4.07Current Price$373.42 However, the big separator between these two companies is their net profit margins. Amazon has managed to boost its margins by focusing on high-margin opportunities like cloud computing and online advertising. Amazon frequently delivers low double-digit profit margins, a testament to how it has distanced itself from giant retailers like Walmart and Costco. The retail business model often comes with low single-digit profit margins. Alphabet routinely delivers 30% net profit margins for investors. This quarter featured a net profit margin closer to 60%, but that figure is skewed since it includes a $36.9 billion gain from early investments in SpaceX and Anthropic. Amazon had a similar situation, with $16.8 billion of its $30.3 billion Q1 net income coming from an early Anthropic investment. Looking at operating margins lets investors ignore how early investments in SpaceX and Anthropic impacted financials. Alphabet is still the clear winner with a 46.3% operating margin over the past 12 months. Amazon only has a 13.6% operating margin over that same stretch. This shows that Alphabet is better at retaining money than Amazon. That gives Alphabet the flexibility to accelerate AI investments and stock buybacks faster than Amazon. The final verdict Both growth stocks are great, but Alphabet wins this one by a lot. Google Cloud is growing at a faster rate than Amazon Web Services, and it's even accelerating at a faster rate. Google Cloud's growth rate jumped from 48% year over year in Q4 2025 to 63% year-over-year growth in Q1. Amazon only increased from a Q4 2025 growth rate of 24% to a growth rate of 28% year over year in Q1. Both companies have a bunch of other businesses, but cloud growth is the main story. Alphabet also manages to deliver higher margins since it heavily focuses on online advertising, while Amazon still makes most of its money from its online marketplace. Amazon is up 12% over the past year, trailing the S&P 500. Meanwhile, Alphabet has more than doubled over the same stretch. The gap between Alphabet and Amazon is likely to expand in future quarters, but it is shocking to see Amazon underperforming the S&P 500 given its strong fundamentals.