Growth and Price: Alphabet Leads in Historical Performance

Looking at long-term stock performance, Alphabet delivered stronger and more impressive returns. Over the past five years (since 2020), Alphabet’s stock jumped +185%, while Microsoft increased by +142%. This gap reflects Google’s dominance in search and advertising during the major rally, as well as a strong recovery following a slowdown.

However, examining annual revenue growth reveals convergence between the two companies. Both experienced aggressive growth in 2021 (over 30%), followed by a sharp deceleration in 2022 and 2023. In the LTM (last twelve months) period, both companies now display steady but more moderate growth, around 15%.

Capital Policy and Dilution: Two Different Approaches

The difference in financial strategy is clear in the area of share dilution. Alphabet follows a policy that dilutes shareholders, with its outstanding shares increasing. In contrast, Microsoft executes an aggressive and consistent share buyback program, reducing the number of shares in circulation and positively impacting earnings per share (EPS). In many cases, the market interprets this as a signal of financial confidence and a focus on creating shareholder value.

Valuation and Efficiency: Microsoft Benefits from Higher Confidence

Regarding valuation and forward-looking metrics, the market currently assigns a significantly higher premium to Microsoft, primarily due to its dominance in cloud services (Azure) and leadership in AI infrastructure. Microsoft trades at a forward free cash flow (P/FCF) multiple of approximately 52x, while Alphabet trades around 42x. Nevertheless, both companies demonstrate impressive capital efficiency, with a Return on Capital of roughly 30%.

Conclusion: Peak Battle Between Innovation and Capital Efficiency

While Alphabet shows an advantage in historical returns and higher gross profitability, Microsoft enjoys exceptional market confidence, a stable balance sheet, and an aggressive policy for returning value to shareholders. The battle between these giants is far from over — it is merely changing form, with the next battlefield likely determined by the AI revolution.