Cloud computing stocks will continue soaring as businesses go digital.
The profound shift toward cloud migration among global businesses makes it almost a no-brainer to bet on the best cloud computing stocks. Cloud computing is a boon for companies looking to replace costly in-house servers with more scalable, remote data center solutions.
Moreover, as we look towards an AI-powered world, we expect cloud computing technology to continue growing rapidly. Advanced computing chips and robust servers are critical in powering the generative AI revolution, adding to the allure of cloud computing stocks.
According to a recent Gartner study, 85% of organizations will adopt a cloud-first strategy by 2025. Therefore, reliance on cloud-native architectures will only become more important over time. With that in mind, here are three cloud computing stocks not only riding the AI wave but also flaunting superb fundamentals and experiencing rapid growth.
Cloud Computing Stocks to Buy: Amazon (AMZN)
Amazon’s (NASDAQ:AMZN) cloud computing arm has evolved into the company’s biggest growth driver.
Amazon Web Services (AWS) has established itself as a true juggernaut in its niche, commanding a 31% slice of the global cloud infrastructure market. What separates AWS is the diversity and depth of its offerings, which span storage, computing power, databases and more. Consequently, AWS’s sales have skyrocketed from $3.1 billion to an astonishing $90.76 billion over the past decade, representing a 2,820% increase.
Kicking off the first quarter (Q1) of the year, AMZN reported a stellar 13% jump in Q1 sales to $143.3 billion, with AWS leading the charge. The cloud segment’s revenues were up a spectacular 17% to reach $25 billion, comfortably outperforming the overall business’ growth. The trend will likely persist, especially as AWS zeroes in on AI-driven services as it looks to continue pouncing on the burgeoning demand for powerful cloud solutions.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) Azure is the biggest needle-mover for Microsoft these days, much like AWS is for Amazon.
Azure’s suite of cloud solutions, from virtual machines to AI tools, has become a smash hit among its clientele. Moreover, in recent quarters, Azure has been effectively closing the gap with AWS in the cloud computing race. In Q1, Azure’s market share surged to an all-time high of 25%, underscoring Microsoft’s leadership role in cloud computing.
The superb growth from Azure contributed significantly to MSFT’s fiscal third-quarter (Q3) performance. Revenues were up 17% year-over-year (YOY), reaching $61.9 billion. The impressive jump was mostly fueled by a 23% jump in revenue from Microsoft Cloud services, totaling $35.1 billion. Additionally, MSFT witnessed a spectacular improvement in its bottom-line, with net income and diluted earnings per share climbing 20%, to $21.9 billion and $2.94, respectively. Thus, these figures underscore Microsoft’s robust strategy and highlight Azure’s powerful impact on the evolving digital landscape.
ServiceNow (NOW)
ServiceNow (NYSE:NOW) has carved a unique niche in the cloud space through its specialized software-as-a-service (SaaS) platform for enterprise workflow management. Unlike traditional cloud infrastructure providers, ServiceNow helps streamline digital workflows across multiple IT management functions. This approach helps substantially boost efficiency while ensuring real-time visibility into IT operations.
Due to the mission-critical nature of its service, the company has grown impressively over the years. In its most recent quarterly showing, ServiceNow posted a 24% YOY increase in sales, reaching $2.6 billion. Moreover, net income jumped to $707 million, while its diluted EPS hit $3.41.
The stickiness of its offerings is shown by its strong customer commitments, with over 8,100 customers and a 98% renewal rate. Nearly 2,000 of those customers boast annual contract values exceeding the $1 million mark. Moreover, during Q1, it clinched eight new deals, each above $8 million.
Furthermore, it recently strengthened its alliance with Microsoft, layering generative AI capabilities into its platforms. This partnership melds ServiceNow’s Now Assist with Microsoft’s Copilot, improving user support while strengthening ServiceNow’s digital workflow prowess.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a long position in AMZN.