Would I Rather Buy Microsoft Stock or Alphabet Stock in October? | GOOG Stock vs. MSFT Stock

Parkev Tatevosian, CFA•Oct 1, 2026

Summary

Parkev provides a comparative analysis of Alphabet and Microsoft to determine which stock offers a better buying opportunity in October. Parkev argues that Alphabet has a significant advantage in revenue growth and capital efficiency, noting its return on invested capital (ROIC) has improved to 46%. Parkev states that while Microsoft maintains a higher operating profit margin of 47%, its ROIC has been declining, and its heavy reliance on OpenAI is currently being discounted by the market. Parkev emphasizes that both companies are 'Hall of Fame' businesses that are utilizing AI to increase revenue per employee, but Alphabet's metrics in this area are notably stronger.

Regarding valuation, Parkev utilizes both forward price-to-earnings (P/E) ratios and a discounted cash flow (DCF) model. Parkev states that Alphabet is trading at a forward P/E of 22.4, while Microsoft is at 21.5, suggesting both are relatively undervalued based on future prospects. However, Parkev's DCF analysis reveals a discrepancy: Alphabet appears slightly undervalued with a fair value of $331 compared to its $343 market price, whereas Microsoft appears overvalued with a fair value of $420 against a $509 market price. Consequently, Parkev recommends Alphabet as the preferred choice for new capital.

Alphabet (GOOGL): Parkev argues that Alphabet is the better buy right now because its revenue growth is expected to outpace Microsoft's due to its advanced AI development and integration into products like Search and YouTube. Parkev notes that the company boasts a superior ROIC of 46% and a high revenue per employee of $2.15 million. Parkev calculates a fair value of $331 per share and considers the current market price of $343 to be within a comfortable margin of safety for investors.

Microsoft (MSFT): Parkev states that Microsoft is an excellent business with a dominant 47% operating profit margin, though its ROIC has dipped to 26%. Parkev points out that investors are currently cautious about Microsoft's financial exposure to OpenAI, which acts as a drag on the stock's valuation. Parkev calculates a DCF fair value of $420, suggesting the stock is roughly 17% overvalued at its current price of $509, leading Parkev to view it as fairly valued only when considering other metrics.

Mentioned Stocks

MSFT

Sentiment: HOLD

Reasoning: Parkev considers Microsoft an excellent company but views it as less attractive than Alphabet at current prices. Parkev notes that Microsoft's DCF fair value is $420, suggesting it is about 17% overvalued compared to its current market price of $509. While Parkev appreciates its 47% profit margin, he points out that its ROIC is declining and the market is penalizing the stock for its connection to OpenAI's financial situation.

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GOOGL

Sentiment: BUYAction: RECOMMENDED

Reasoning: Parkev identifies Alphabet as the better buying opportunity between the two stocks. Parkev highlights its superior ROIC of 46% and its higher revenue per employee of $2.15 million. Furthermore, Parkev's DCF model estimates a fair value of $331, which makes the current price of $343 attractive within a margin of safety. Parkev believes Alphabet's revenue growth will outpace Microsoft's due to its robust AI integration across its free product ecosystem.

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