Great 7 stocks Alphabet (NASDAQ: GOOG) i Microsoft (NASDAQ: MSFT) have had very different years. While the former is up about 22% year-to-date, the latter is down about 16%.

The question is – which is the better option to consider when buying an ISA these days? Is it wiser to bet on high-flying Alphabet or beaten Microsoft?

Which tech company is doing better?

Both companies published good financial results reports at the beginning of the week. However, Alphabet was the stronger of the two.

In the quarter he published:

• Total revenues were $109.9 billion, up 22% (19% at constant currency).
• Cloud revenues of $20 billion, up 63%.
• Earnings per share (EPS) were $5.11, an augment of 82%.

One of the company’s most significant achievements was the fact that Gemini Enterprise saw a 40% augment in the number of monthly lively users quarter over quarter. This shows that institutions are increasingly using Alphabet’s AI services.

Addressing Microsoft, he wrote:

• Revenues of $82.9 billion, up 18% (15% in constant currency).
• Cloud revenues of $54.4 billion, up 29%.
• EPS of $4.27, up 21%.

In an earnings call, CEO Satya Nadella said Microsoft Copilot currently has 20 million paid enterprise seats. This suggests that AI services are also gaining popularity in the business world.

Looking at the numbers, both companies are doing well. However, it’s strenuous to ignore Alphabet’s cloud development – it’s impressive.

What do analysts like more?

Following the results, Wall Street analysts scrambled to update their price targets for Alphabet. I counted raises from 23 different companies. The average price target for these companies is $427. That’s about 17% higher than the current share price.

As for Microsoft, broker activity has not been as bullish. Some analysts raised their price targets, others lowered them. That said, the average price target here is still well above the current share price of $569 (about 40% above). Analysts therefore remain generally confident.

Which stocks are cheaper?

Focusing on valuations, Microsoft is the clear winner here. Following its recent rally, Alphabet is currently quite high-priced – its forward-looking price-to-earnings (P/E) ratio is around 29.

Looking at Microsoft, its earnings forecast for the fiscal year ending June 30, 2027 is around 21. So, it is significantly cheaper than its rival Mag 7.

What’s riskier?

In terms of risk, both companies face it. For Alphabet, the main risk is a slowdown in advertising spending. From an investment perspective, valuation is also subject to risk – this leaves no room for slowing down.

For Microsoft, the key risk is the loss of white-collar jobs – this could lead to lower software licensing revenues. Another is the company’s exposure to OpenAI – losing ChatGPT market share to Gemini and Claude.

My call

Taking all this into account, it’s really strenuous to pick a winner. Alphabet currently has more momentum, both operationally and commercially, but Microsoft is much cheaper.

Ultimately, I believe the best stocks to consider depend on your individual approach to investing. If we focus more on momentum, Alphabet is in a robust uptrend. However, when the focus is more on value, Microsoft looks budget-friendly.