Cloud Computing Stocks

The Covid-19 crisis changed many things around us. While the global health crisis severely hurt many industries, several others thrived. Among the markets that benefitted from the pandemic, cloud computing was on the top of the list.

Cloud computing refers to the delivery of different services over the internet. Those services range from data storage and servers to networking and software.

Before cloud computing, enterprises had to own and maintain expensive IT infrastructure to support their day-to-day operations. However, businesses can now save money and expand their operations by migrating to the cloud and only paying for what they use.

Moreover, it also eliminates the headache of maintaining the IT infrastructure and allows companies to concentrate on their core business.

The work-from-home trend fueled digitalization in almost every sector. An increasing number of enterprises worldwide shifted their operations to the cloud to support remote working following the Covid-19 outbreak. As a result, the demand for cloud services rose sharply. This helped cloud computing stocks gain substantial value.

Many industry experts believe that the demand for cloud services will stay elevated even after the pandemic is over. According to research firm Gartner, global cloud-computing spending will increase from more than $250 billion in 2020 to at least $360 billion in 2022. Some research firms are even calling for global cloud spending of $1 trillion per annum by the end of this decade.

Top Cloud Computing Stocks to Invest in 

Cloud-based digital solutions have become critical for nearly every industry in the post-pandemic world. The growth prospects of cloud computing stocks look bright, with more businesses trying to boost their online presence. The list of cloud computing stocks is long and includes both big and small players. However, we have picked the top cloud computing stocks based on their performance, size, and future growth potential.

Amazon (AMZN)

E-commerce giant Amazon is the clear leader in the global cloud computing space. Its cloud-computing platform Amazon Web Services (AWS) generated revenue of $13.5 billion in the first quarter ended March 31.

The figure represented a year-over-year surge of 32 percent and accounted for 12 percent of the company’s total quarterly revenue. AWS performance indicates that the demand for cloud computing services hasn’t slowed down in 2021.

AWS currently has a market share of around 32 percent in the cloud market. That’s more than the collective market share of its two biggest rivals, including Microsoft Azure and Google Cloud.

Andy Jassy is currently leading AWS. The success of AWS is one of the reasons Jassy will replace Jeff Bezos as the next CEO of Amazon by the end of this quarter. Rumors are that Amazon might consider spinning off AWS into a separate entity to avoid any potential antitrust issues from regulators.

Nevertheless, industry experts believe that AWS will continue to dominate the cloud space at least in the near future. Therefore, those looking to capitalize on the cloud boom can consider investing in the stock. So keep Amazon on your cloud computing stocks list.

Microsoft (MSFT)

Software maker giant Microsoft has been trying to catch up with Amazon in the cloud space. The company, under the leadership of CEO Satya Nadella, has shifted its focus towards its cloud computing platform Azure.

Microsoft Azure is the second biggest player in the cloud space. It currently holds 20 percent share in the cloud market. The company doesn’t reveal the exact revenue generated by the segment. However, it did announce that revenue from Azure climbed 48 percent on a year-over-year basis in the first quarter of 2021.

Microsoft has a massive customer base due to its wide product portfolio that ranges from office productivity applications to game consoles and artificial intelligence. The company is using its extensive reach to boost Azure’s market share by integrating its cloud services with products like Office 365. This is a part of its broader strategy to become a leader in the cloud computing market. So far, the company has been successful in increasing its market share amid its strong SaaS foundation.

Azure share in the cloud computing space increased from 15 percent in 2018 to 20 percent at the end of 2020. During the same time, AWS share dropped from 33 percent to 32 percent, suggesting that Azure has the potential to beat AWS in the coming years. In short, the rapidly growing market share of Azure will certainly benefit Microsoft stock in the coming quarters.

Google (GOOGL)

Search engine giant Google is third in the list of top cloud computing stocks. Google Cloud Platform currently owns a 9 percent share in the cloud market. The platform is a top choice for businesses looking for cloud-based artificial intelligence (AI) and machine learning services.

Google’s cloud unit is also doing pretty well in terms of sales. Revenue from Google Cloud Platform climbed 46 percent on a year-over-year basis to $4.04 billion in the first quarter ended March 31. The strong performance helped the company beat analysts’ expectations for total quarterly revenue.

Google currently generates most of its revenue from the advertising business. However, the management wants to diversify its revenue streams to limit its dependence on any one segment. This is another reason the company wants to strengthen its cloud unit to compete head-to-head with Azure and AWS. Nevertheless, it would be too early to predict whether Google Cloud can grow into a serious threat to rivals’ services in the coming years so they’re a part of great cloud computing stocks.

Chinese Cloud Computing Stocks (BABA)

Chinese e-commerce giant Alibaba dominates the online shopping space in the world’s most populous country. However, it also has a presence in segments such as entertainment, digital payments, and cloud computing. Industry experts believe that Alibaba’s cloud services could become a key growth driver for the company in the future.  

Alibaba Cloud recently became profitable for the first time in more than a decade. Yet, it stills accounts for just 9 percent of the total revenue. In its latest quarterly financial report, revenue from Alibaba Cloud climbed 50 percent on a year-over-year basis to $9.2 billion. China is one of the biggest cloud computing markets in the world.

A large percentage of businesses have yet to shift their operations to the cloud. That means Alibaba Cloud has still got plenty of room to grow, given the massive size of the cloud computing space in the country.

Cloud-computing spending in China jumped 62 percent on a year-over-year basis to $5.8 billion in the fourth quarter of 2020, according to market research firm Canalys. Moreover, cloud computing is also a strategic priority of the Chinese government.

In short, Alibaba is well set to capitalize on the increasing demand for cloud services in the region. The company recently announced its plans to establish a new data center in Philippines by the end of 2021. Meanwhile, it has already launched its third data center in Indonesia, as a part of its strategy to boost its cloud share in the region.

Alibaba Cloud currently dominated the Asia-Pacific region with a market share of around 19 percent, according to research firm IDC. However, it is still far behind Amazon, Microsoft, and Google in the global cloud-computing market. But they do make a great addition to cloud computing stocks.

International Business Machines (IBM)

Armonk, New York-based tech giant IBM is in the middle of a restructuring. It has been trying to transform itself as a leading cloud-computing and AI company for many years. Those efforts have somewhat started paying off.

IBM’s cloud revenue jumped 21 percent to $6.5 billion in the first quarter of 2021, accounting for nearly 35 percent of the total revenue. The company is primarily competing in the market with its hybrid cloud services, which is a mixture of on-premises and public cloud solutions. The hybrid-solution model is enticing for customers who are looking for some data privacy and cost saving at the same time.

Those customers include enterprises in the financial and healthcare industries. IBM has spent a hefty amount to strengthen its foothold in the cloud space. For instance, the company bought software company Red Hat in 2019 in a transaction valued at $34 billion. Those investments have been turning fruitful. Industry experts think that IBM’s cloud strategy is sound and will significantly contribute to its overall success in the longer run.

Oracle (ORCL)

Santa Clara, California-based Oracle has also been expanding its cloud services over the last few years to limit its dependence on its core software business. The company mainly relied on acquisitions to increase its presence in the cloud market. For instance, it bought NetSuite in 2016 for $9.3 billion.

Oracle’s cloud initiatives are helping it to offset the weak performance of its on-premises business. Meanwhile, the company has been trying to attract more developers to its cloud platform by offering free services under its Oracle Cloud Free Tier. The company recently added several new “Always Free” services in infrastructure, storage, networking, observability, and security.

While Oracle’s shift to the cloud has been relatively slow, it is still a lucrative investment for those looking to benefit from the cloud computing boom. Oracle shares are already up nearly 30 percent so far in 2021. The latest stock momentum and initiatives like free cloud services are expected to further drive the stock’s value in the coming quarters.

Final Thoughts

Cloud computing stocks are here to stay. And these companies are all great ones. Amazon, BABA, Microsoft and IBM are looked at in our large cap trade room on a daily basis because of their liquidity. And highly liquid stocks make for great movers.