E-commerce giant Amazon.com (NASDAQ:AMZN) has just hit a momentous milestone: Its market cap just surpassed Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) for the first time ever. At the close, Amazon's market cap was about $5 billion greater than Alphabet's. In doing so, Amazon is now the second most valuable company in the world behind Apple.

AMZN Market Cap Chart

AMZN Market Cap data by YCharts.

While the two companies' market caps are comparable, it's worth remembering that Amazon and the Google parent are still worlds apart in fundamentals.

A tale of two tech giants

For starters, here are some fundamental metrics for how Amazon and Alphabet fared last year.

Metric (TTM)

Amazon

Alphabet

Revenue

$177.9 billion

$110.9 billion

Operating income

$4.1 billion

$26.1 billion

Net income

$3 billion

$12.7 billion

Operating margin

2.3%

23.6%

Net margin

1.7%

11.4%

Free cash flow

$8.4 billion

$23.9 billion

Data source: SEC filings. TTM = trailing 12 month.

Amazon has long had notoriously thin margins, due to the fact that e-commerce is inherently less profitable combined with Amazon's unrivaled willingness to reinvest in its business. That explains why its margins are so low, as well as why its free cash flow is substantially less than Alphabet's. Amazon's capital expenditures are primarily related to fulfillment infrastructure like warehouses and distribution facilities, while Alphabet's spending includes a lot of network infrastructure like data centers.

Jeff Bezos

Amazon CEO Jeff Bezos. Image source: Amazon.

The differences in key fundamental metrics point to vastly different valuation ratios, as investors are pricing in much more optimistic expectations into Amazon's future.

Valuation Metric

Amazon

Alphabet

P/E (TTM)

337.5

34.3

P/S (TTM)

4.2

6.9

P/FCF (TTM)

54.5

26

P/B (MRQ)

27

5

Data source: Reuters. TTM = trailing 12 month. MRQ = most recent quarter.

There are also major differences in terms of where each company is looking to expand going forward.

Amazon appears to want to disrupt every conceivable industry on Earth, from grocery shopping to healthcare to banking. There are even rumors that the company is preparing to become a major hospital supplier. Whether or not Amazon will be profitable in those endeavors is a different question altogether, and investors may have to wait years for those moves to pay off, if they do at all. But that's par for the course when it comes to Amazon.

Meanwhile, Google is expected to start seeing its share of the U.S. ad market slip in the years ahead, although the company is also pushing deeper into hardware in order to better compete with Apple by using the same strategy of integrating hardware and software. That includes its lineup of smart speakers, which looks like an increasingly important battleground.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of AAPL. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and AAPL. The Motley Fool has the following options: long January 2020 $150 calls on AAPL and short January 2020 $155 calls on AAPL. The Motley Fool has a disclosure policy.