Dell vs. Microsoft: Which Cloud Stock Is the Better Buy Now?

Dell Technologies DELL and Microsoft MSFT are major players in the cloud computing domain, offering infrastructure, software, and services to enterprise clients. DELL, through its infrastructure solutions and rich partner base, provides essential hardware and services that support cloud environments. Microsoft, with its Azure platform, offers a comprehensive suite of cloud services that includes AI and machine learning capabilities.According to the Grandview Research report, the global cloud computing market size was valued at $752.44 billion in 2024 and is expected to witness a CAGR of 20.4% from 2025 to 2030. Both DELL and MSFT are likely to gain from the massive growth opportunity highlighted by the growth pace.So, DELL or MSFT — Which of these cloud stocks has the greater upside potential? Let’s find out.The Case of DELL TechnologiesDELL is expanding its cloud services through its APEX platform, offering multi-cloud solutions and AI infrastructure.In the fourth quarter of fiscal 2025, Infrastructure Solutions Group (ISG) revenues, which include its cloud offerings, increased 22% year over year to $11.35 billion. The upside can be attributed to servers and networking revenues of $6.63 billion, which grew 37% year over year, driven by demand strength across both AI and traditional servers. Dell’s AI prospects remain strong, with AI expanding from major cloud service providers to large-scale enterprise deployments and edge computing with PCs. Dell is benefiting from the strong demand for AI servers, which are driven by ongoing digital transformation and heightened interest in generative AI applications. Its PowerEdge XE9680L AI-optimized server is in high demand. Strong demand from enterprises for AI-optimized servers is driving growth for Dell.The company’s expanding portfolio has been noteworthy. In March 2025, Dell partnered with Singapore’s Institute of Technical Education to launch a hybrid cloud VDI Centre powered by Dell VxRail, aimed at closing the AI skills gap and enhancing digital learning through accessible, flexible, and scalable infrastructure.The Case of MicrosoftMicrosoft is benefiting from strong demand for cloud and AI offerings. Microsoft Cloud revenues reached $42.4 billion, growing 21% year over year and 22% in constant currency, in the third quarter of fiscal 2025. Azure, in particular, experienced strong demand, especially for AI services, which significantly contributed to the cloud’s performance.  In the fiscal third quarter, Azure and other cloud services revenues grew 33% (up 35% in cc), including 16 points from AI services.The increasing demand across industries, with major customers like Abercrombie & Fitch, Coca-Cola, and ServiceNow expanding their use of Azure, has been a key catalyst. Microsoft remains the cloud of choice for customers’ mission-critical VMware, SAP, and Oracle workloads, with more regional availability than any other hyperscaler.The company also expanded its footprint in its cloud offerings, including scaling data centers, optimizing hardware, and reducing costs in AI workloads. Key AI capabilities, including the Foundry platform, GitHub Copilot, and M365 Copilot, have driven increasing customer adoption, contributing to Microsoft’s cloud and AI-driven growth.Price Performance and Valuation of DELL and MSFTYear to Date, Dell Technologies shares have lost 11.4%, while Microsoft shares have gained 6.5%. The decline in Dell Technologies' shares is attributed to higher U.S. tariffs, particularly those imposed on China, and the associated risk of a recession. This factor has negatively impacted the company’s performance.The outperformance of Microsoft can be attributed to the strength of its AI business and the adoption of Copilot, backed by accelerating growth in its Azure cloud infrastructure unit.DELL and MSFT Stock's PerformanceImage Source: Zacks Investment ResearchValuation-wise, DELL and MSFT’s shares are currently overvalued, as suggested by a Value Score of C and D, respectively.In terms of forward 12-month Price/Sales, DELL’s shares are trading at 0.7X, lower than MSFT’s 10.82X.DELL and MSFT ValuationImage Source: Zacks Investment ResearchHow Do Earnings Estimates Compare for DELL & MSFT?The Zacks Consensus Estimate for DELL’s fiscal 2026 earnings is pegged at $8.90 per share, which has declined 0.7% over the past 30 days. This indicates a 9.34% increase year over year.Dell Technologies Inc. Price and Consensus Dell Technologies Inc. price-consensus-chart | Dell Technologies Inc. QuoteHowever, the Zacks Consensus Estimate for MSFT’s fiscal 2025 earnings is pegged at $13.30 per share, which has increased 1.83% over the past 30 days. This indicates a 12.71% increase year over year.Microsoft Corporation Price and Consensus Microsoft Corporation price-consensus-chart | Microsoft Corporation QuoteDELL and MSFT’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters. However, DELL’s average surprise of 5.13% is lower than MSFT’s surprise of 5.21%.ConclusionWhile both Dell Technologies and Microsoft are well-positioned to benefit from the robust growth of the cloud computing market, Microsoft stands out as the stronger investment opportunity.Microsoft offers greater upside potential due to its strong AI-driven cloud growth with Azure, consistent earnings momentum, and expanding enterprise adoption. While Dell is making strides in AI infrastructure, its performance and growth prospects lag behind Microsoft in the cloud computing space.Currently, Microsoft has a Zacks Rank #2 (Buy), making the stock a stronger pick than Dell Technologies, which has a Zacks Rank #5 (Strong Sell).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Microsoft Corporation (MSFT): Free Stock Analysis Report Dell Technologies Inc. (DELL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks