The cloud computing arena is an emerging battleground among technology stocks, and two of the biggest players in this space are Oracle (NYSE:ORCL) and Microsoft (NASDAQ:MSFT). Both software companies existed long before cloud computing emerged, and both are transitioning their pre-cloud lines of business to increase focus on this growth area.

Which of these tech stalwarts is the more attractive buying opportunity? Let's put them head-to-head to determine the winner for your investing dollars. 

Cloud computing diagram of data from around the globe feeding into a database at the center of the image.

Image source: Getty Images.

The case for Oracle

One benefit to investing in Oracle is reliable performance. The company generated over $9 billion in revenue and over $2 billion in net income every quarter for the past year. It's also met or beaten analyst expectations for EPS over the same time period. 

Oracle's revenue stability comes from its cloud computing and licensing services, which account for over 70% of company revenue, most of which is recurring revenue, according to CEO Safra Catz. With this reliable revenue stream, it's no wonder Oracle can deliver consistent results.

Its balance sheet is solid as well. In its last quarterly earnings report for the quarter ended Nov. 30, 2019, Oracle had over $24 billion in cash alone, more than enough to cover the entirety of its $14.6 billion in current liabilities. The company is also trading near its 52-week low as of this writing and provides a 1.8% dividend yield that won't be going anywhere in the near term given Oracle's stockpile of cash.

Aside from its healthy financials, Oracle is, according to CTO Larry Ellison, the leader in providing autonomous databases. This type of database uses artificial intelligence to automate database management, which is critical given the vast amounts of data being collected by corporations. And without a database, no software system can operate. This capability, along with Oracle's brand recognition in the space, puts the company in a strong position against competitors. 

Oracle's reliability is reassuring for investors who seek to avoid volatility in their portfolios. The flip side is that the stock price has traded within a narrow band between a low of $49.19 and high of $60.50 over the past 12 months.

That won't change any time soon. Catz stated non-GAAP (adjusted) revenue guidance for the next earnings report is expected to come in between a negligible 1% to 3% year-over-year increase. Those interested in the large price gains experienced by other cloud computing tech stocks, like Alphabet, should look elsewhere.

Aside from its modest growth, the company's other challenge is the competitive nature of the cloud computing space. Oracle is battling for customers against powerful competitors like Amazon.com in addition to Alphabet and Microsoft. As a result, it will be tough going for Oracle to grow market share, particularly when the competition can deliver products and services that complement cloud computing capabilities. Microsoft is a perfect example of this.

What makes Microsoft compelling 

Like Oracle, Microsoft possesses healthy financials and offers a dividend. That's where similarities end. Microsoft's revenue and net income numbers over the last four quarters tower above Oracle's. Microsoft garnered more than $30 billion in revenue per quarter over this time period, and its net income ranged between $8.4 billion to $13.2 billion. 

It's not surprising that Microsoft can generate far greater revenue numbers. Its cloud computing business, Azure, is second in the market behind Amazon. Aside from this offering, the company's famed Windows and Office product suite continues its dominance as it transitions into cloud-based applications rather than the traditional software installed on computers. And that's just the start.

Microsoft owns the professional social media site LinkedIn, which boasts over 660 million users and double-digit revenue growth year-over-year. It acquired GitHub, the popular site for software developers, which is used by over two million organizations, including most of the Fortune 50, according to CEO Satya Nadella. It operates Dynamics, a customer relationship management software platform that also experienced double-digit revenue growth. And Microsoft's gaming division, powered by its popular Xbox product, will see its next-generation gaming console launch in 2020.

These lines of business and financial success have powered Microsoft stock to a 52-week high of $168.19, and shares continue to hover near the high as of this writing. Considering its 52-week low was $102.17, Microsoft's share price has done well.

Which company wins?

From a price perspective, a case can be made for Oracle shares to rise from their current level. Yet while Oracle shares are about a third the price of Microsoft stock, the better buy remains Microsoft. The advent of its latest Xbox product alone introduces revenue upside that can outpace Oracle's.

Combine this with the continued success Microsoft has enjoyed with Azure along with its other lines of business, and Microsoft is well-positioned for continued growth, even in a recession. That's why Microsoft wins in this battle of cloud computing titans.