Amazon, Alphabet, and Microsoft All Delivered Soaring Cloud Growth Thanks to AI. Here's the 1 I'd Buy Right Now

Microsoft generated $19.6 billion in free cash flow during Q2 despite elevated capital expenditures tied to AI infrastructure, separating itself from Amazon and Alphabet in the latest cloud earnings cycle. All three hyperscalers posted double-digit growth in their cloud divisions—Amazon Web Services, Google Cloud, and Microsoft Azure—fueled by enterprise AI adoption.

The free cash flow figure gives Microsoft operational breathing room that matters as the AI buildout extends into 2024 and beyond. Microsoft trades at 21x forward earnings, a discount to the 25-26x multiples assigned to Amazon and Alphabet, according to analysis from The Motley Fool. That valuation gap exists even as Azure's growth rate remains competitive with AWS and Google Cloud.

Amazon and Alphabet are plowing comparable sums into data center expansion and GPU procurement, but neither matched Microsoft's ability to convert AI-driven revenue into positive cash generation at this scale during the quarter.