As the march of digitalization moves skyward, cloud computing has become one of the most relevant investment sectors. Essentially, businesses from across multiple industries are migrating their data streams to online networks. This framework presents a powerful opportunity for forward-thinking market participants, boding well for top-tier cloud-computing stocks.
The projected numbers really tell the tale. According to Grand View Research, the global cloud-computing market reached a valuation of $602.31 billion last year. Between 2024 to 2030, experts believe that the sector could expand at a compound annual growth rate (CAGR) of 21.2%. By the forecast culmination point, the arena could be worth $2.39 trillion.
The message? Get onboard cloud-computing stocks or get left behind.
Of course, there’s no guarantee when it comes to this ecosystem or any other market segment. Not every brand will make it to the top echelon. Therefore, by diversifying your holdings across a range of ideas, you can better improve your odds. Below are compelling cloud-computing stocks to consider.
Microsoft (MSFT)
Frankly, Microsoft (NASDAQ:MSFT) really needs no introduction to the field of cloud-computing stocks. Its Azure platform brings to the table a comprehensive suite of cloud services, covering infrastructural and software needs. One of the more distinct elements is that Azure seamlessly integrates with Microsoft’s enterprise software ecosystem, which also includes “fan” favorites like Office 365.
Personally, without Microsoft, I wouldn’t be able to do what I do. So, I admit a soft spot for the company. However, emotions can be completely set aside for investing in MSFT stock. Financially, it’s a consistent performer. In the past four quarters, the tech giant posted an average earnings per share of $2.82. In contrast, analysts were anticipating EPS of $2.64.
In the trailing 12 months (TTM), Microsoft posted EPS of $11.55 on sales of $236.58 billion. For fiscal 2024, covering experts believe that EPS may rise to $10.87 on revenue of $225.66 billion. Given the already robust performance, the estimate could be understated. Whatever the case, MSFT makes a strong argument for cloud-computing stocks to buy.
Amazon (AMZN)
Another possibly slam-dunk idea for cloud-computing stocks, Amazon (NASDAQ:AMZN) is well known in the space for AWS or Amazon Web Services. It offers a wide range of cloud-computing services, including computing power, storage and databases. AWS is also one of the market leaders in cloud infrastructure, commanding a global network of data centers.
Further, it’s a multi-variate opportunity, with Amazon also offering its mainline e-commerce business. It does so many things well, leading to an impressive financial print. In the past four quarters, the company posted an average EPS of 87.3 cents. However, analysts were only anticipating an average EPS of about 63 cents. Therefore, the earnings surprise came out to nearly 48%.
In the TTM period, Amazon generated EPS of $3.58 on sales of $590.74 billion. For the current year, experts project that EPS may rise to $4.19 on sales of $588.18 billion. That’s up 44.48% and 2.3%, respectively, against the prior year’s results. Moreover, in fiscal 2025, EPS could jump to $5.31 on revenue of $653.31 billion.
Alphabet (GOOG, GOOGL)
Another rather obvious but compelling idea among cloud-computing stocks, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) brings plenty to the digitalization table. Fundamentally, the company owns the Google ecosystem, which provides infrastructure, platform services and also serverless computing. One of the core features of the offering is the expertise in data analytics, machine learning and artificial intelligence.
Also, let’s be real here – Google practically owns the internet through its search engine. I know that other entities are trying to compete in this space but Google for now utterly dominates. Because of this dominance, the company managed to post an average EPS of $1.63 in the past four quarters. This handily beat out the average analysts’ estimate of $1.47. This print translated to an earnings surprise of almost 11%.
In the TTM period, Alphabet generated EPS of $6.52 on revenue of $318.15 billion. For fiscal 2024, covering experts believe that EPS could soar to $7.57 on sales of $346.78 billion. That comes out to a year-over-year performance of 30.52% and 12.8%, respectively.
Workday (WDAY)
One of the intriguing ideas among cloud-computing stocks, Workday (NASDAQ:WDAY) offers cloud-based software for human capital management. It also brings to the table financial management solutions. One of the core reasons why enterprise-level clients choose Workday is the underlying user-friendly interface. As well, the company effortlessly integrates HR and financial functionalities.
With the Covid-19 crisis imposing significant changes in the workforce, enterprises need to adjust. That’s where Workday could come in handy, making it a long-term idea for cloud-computing stocks. In the past four quarters, the company’s average EPS came out to almost $1.57. This easily beat out analysts’ average target of $1.43. Further, the earnings surprise landed at 9.7%.
What’s interesting about WDAY stock is that it presently trades at 8.1X trailing-year sales. In the past year, this metric averaged 9.03X. Thus, some room for growth exists. Enticingly, analysts project that EPS could rise to $6.83 on sales of $8.37 billion. On a YOY basis, this translates to 17% and 15.4% up, respectively.
ServiceNow (NOW)
Another intriguing idea for cloud-computing stocks to buy, ServiceNow (NYSE:NOW) provides cloud-based workflow automation software. Specifically, the company addresses needs that arise in information technology (IT) service management and enterprise operations. The company is distinct for its focus on IT efficiencies and workflow automation. Over the next several years, such acumen could be extraordinarily relevant for large enterprises.
Indeed, with the global economy still somewhat unbalanced from the Covid-19 recovery, every bit of revenue and market share count. Attractively, ServiceNow is delivering the goods. In the past four quarters, the company’s EPS averaged $2.95. This beat out the consensus average view of $2.64. When it came to the earnings surprise, the figure stood at 12.5%.
In the TTM period, ServiceNow generated EPS of $9.36 on revenue of $9.48 billion. For the current fiscal year, covering experts anticipate a big jump in EPS to $13.52 on sales of $10.89 billion. When stacked on a YOY basis, this projected performance comes out to 25.42% and 21.4% up, respectively.
Datadog (DDOG)
Headquartered in New York City, Datadog (NASDAQ:DDOG) falls under the application software segment. Primarily, the company operates as an observability and security platform for cloud applications. One of its distinct features is that the underlying offering integrates seamlessly across various cloud platforms. It also provides real-time visibility into application performance, providing enterprise clients with a key advantage.
What makes DDOG so attractive to investors of cloud-computing stocks is that it moves beyond mere narratives. In the past four quarters, the company posted an average EPS of 45 cents. This beat out the expected EPS of 35.3 cents. Further, the earnings surprise landed at a very stout 27.9%. The individual performances were also consistent, with the lowest surprise being 25%.
During the TTM period, Datadog posted net income of $115.28 million or 34 cents per share. Revenue in the period was $2.26 billion. For fiscal 2024, experts see a dip (about 4%) in EPS to $1.58. However, on the top line, revenue could rise to $2.61 billion. If so, that would translate to a 22.7% YOY growth rate.
Snowflake (SNOW)
Based in Bozeman, Montana, Snowflake (NYSE:SNOW) is one of the intriguing cloud-computing stocks as a possible discounted idea. Primarily, it offers a data cloud platform which enables customers to consolidate data into a single source of truth to drive meaningful business insights, according to its corporate profile. That sounds great and all but SNOW stock has courted some volatility.
Since the start of the year, SNOW has printed a large volume of red ink. Some of it is due to reduced IT spending in the sector. As well, a distracting data breach incident may have shaken confidence in the underlying enterprise. It’s important to note, though, that the breach is tied to Snowflake customers rather than Snowflake itself. Still, it’s not a good look.
However, up until the quarter ended April 30, 2024, Snowflake earnings had been destroying analysts’ projections. What makes SNOW stock enticing is that it currently trades at 15.69X trailing-year sales. But in the past year, the market accepted a revenue multiple of nearly 22X.
For the current year, analysts are targeting revenue of $3.48 billion. That would be up 24.2% from the prior year’s tally of $2.81 billion.
On the date of publication, Josh Enomoto 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.