The Best Cloud Computing Stocks to Watch
Investing in the tech industry has never been more interesting than today. Consider all the various technologies set to make huge breakthroughs in the coming years, promising to revolutionize everything from the way we do business to the way we live our day-to-day lives. These type of shifts in the past only come along once in a generation, but with our accelerated development and adaptation of new tech, we’re seeing these paradigm-altering events with more regularity. And that’s what makes cloud computing stocks so intriguing.
Alongside Big Data, the Internet of Things, augmented and virtual reality, the cloud computing industry could be one of the best investment opportunities for those looking to get a head start on future trends.
After all, we’re already witnessing a mass migration of businesses into data-centric analytics and the online capabilities of cloud computing.
What makes cloud computing one of the most exciting industries is the sheer ability for growth.
With three distinct areas in cloud computing—Platform as a Service (PaaS), Software as a Service (SaaS), and Infrastructure as a Service (IaaS)—available to users, there is a lot of opportunity for cloud computing stocks to see huge growth in the coming years due to the sheer variety of services offered.
Consider that the market growth for public cloud services worldwide grew by nearly 20% in 2016 and is projected to show gains of over 15% each year until 2020. (Source: “Market growth forecast for public cloud services worldwide from 2011 to 2020,” Statista, 2017.)
Revenue is also expected to see massive gains, with public cloud SaaS revenue worldwide estimated to hit $328.4 billion by 2026, up from $49.9 billion in 2015. (Source: “Public cloud Software as a Service revenue worldwide from 2012 to 2026 (in billion U.S. dollars),” Statista, 2017.)
The cloud computing market as a whole was valued at $109.0 billion in 2015. With already strong numbers alongside increasing demand and, in some industries, the mandate that companies migrate to the cloud, you have what could amount to be of one of the best tech investments in 2017.
With that industry layout in mind, let’s get to the top three cloud computing stocks to watch.
Top Three Cloud Computing Stocks List
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1. Amazon.com, Inc. (NASDAQ:AMZN)
Amazon.com, Inc. (NASDAQ:AMZN) is one of the most powerful tech companies in the world for a variety of reasons, but one of its fastest growing products in terms of both revenue and demand is “Amazon Web Services” (AWS).
AWS, which runs Amazon’s cloud computing platform, took in $14.0 billion in revenue last year. It registered a 46% growth rate year-over-year, which then accounted for nearly nine percent of Amazon’s total revenue in 2016. (Source: “Amazon.com Announces Fourth Quarter Sales up 22% to $43.7 Billion,” Amazon.com, Inc., February 2, 2017.)
And even with these strong numbers, it still fell short of its projected $3.6 billion in revenue—just shy with $3.56 billion. (Source: “Amazon sinks as revenue misses, guidance disappoints,” CNBC, February 2, 2017.)
That just goes to show you that there is a strong feeling among analysts that AWS and the cloud computing industry on the whole is ready to see big revenue and market growth numbers.
Amazon Chief Technology Officer Werner Vogels, in an interview with The Economic Times, said that if AWS were a startup, it would be the “biggest unicorn in the world.” (Source: “If AWS were a startup by itself, it would be the biggest unicorn in the world,” The Economic Times, May 3, 2017.)
The rapid rate of growth may not be sustainable forever, but Vogels also mentioned in the interview that he believes the AWS side of Amazon can rival the retail side of the business.
That makes Amazon one of the best cloud computing stocks in the world due to its strong market position and trajectory towards further gains.
AMZN stock has grown over 40% in the past 12 months, and over 25% since the beginning of 2017.
Amazon also registered growth of over 50% in the IaaS and PaaS sides of cloud computing. (Source: “2016 Review Shows $148 billion Cloud Market Growing at 25% Annually,” Synergy Research Group, January 3, 2017.)
2. Microsoft Corporation (NASDAQ:MSFT)
Microsoft Corporation (NASDAQ:MSFT) is in a similar position to Amazon in that it has both a commanding position in the market already and has a solid path towards growth. Another benefit to MSFT stock (again, similar to Amazon) is that it has its hands in a lot of different pies, so to speak, so it’s not solely reliant on the cloud computing industry to boost its share price.
3. Oracle Corporation (NYSE:ORCL)
Think of Oracle Corporation (NYSE:ORCL) as the upstart in cloud computing. While it doesn’t have near the market share of AWS, what it does have on its side is impressive growth rates.
The company’s PaaS and SaaS combined for an 81% increase in Q2 FY2017, reaching $878.0 million, the fourth consecutive quarter where Oracle’s PaaS and SaaS combined revenue growth increased. Even better, total revenue, which includes IaaS, rose 62% in the quarter to $1.05 billion. (Source: “Oracle Cloud Revenues Surge Again,” Forbes, December 16, 2016.)
Oracle co-CEO Safra Catz said that when salesforce.com, inc. (NYSE:CRM) passed the $1.0-billion total revenue mark, its revenue growth slowed to 36%, while Oracle’s has continued to see impressive rises.
Add on another 2,225 cloud databases, application development, business intelligence, integration, and other PaaS customers in Q2, and revenues skyrocketed approximately 600%, according to Oracle co-CEO Mark Hurd.
The company’s newest cloud offering, IaaS, grew six percent to $175.0 million.
And something that separates ORCL stock from its competitors is its technology strategy moving forward in the cloud computing business.
Amazon, along with Google and Microsoft, spent a combined $31.0 billion in order to create more or expand existing data centers across the world.
Oracle, on the other hand, spent much less; $1.7 billion. The reason? Oracle thinks its technology can make up the difference. (Source: “The 4 Most Interesting Things From Amazon’s Cloud Extravaganza,” Fortune, April 19, 2017.)
Hurd said in a interview with Fortune that Oracle’s superior technology would overcome that spending disparity.
Essentially claiming that Oracle’s computers will be “two-times faster” and therefore will not require as many data centers, the company is confident that it can catch Amazon and Microsoft alongside other big players in the industry with a superior technological advantage.
The company has certainly experienced a burst of activity in the sector and continues to train its sights on Amazon, going as far as to publicly trade barbs with its rival, with each insulting the other’s services, tech, and various other areas of the business. The nerd version of a celebrity rap feud, if you will.
Oracle stock has climbed over 16% since the beginning of 2017 and is looking to parlay its big talk when it comes to technology into even bigger gains in the market.
While its past year has seen a relatively slow amount of share price expansion compared to the aforementioned competitors, what sets Oracle apart is that its underdog ability allows for potentially bigger gains in the market compared to the larger beasts in MSFT stock and AMZN stock. Which means Oracle has perhaps the strongest upside of the three tickers listed here.
The Best Cloud Computing Stocks to Watch Today
As much as the industry is built towards the future, cloud computing also has a strong enough business today that investors can expect to see both immediate returns as well as long-term gains.
The fact is that the cloud is one of those technologies that will be integral to businesses in the near future, and taking advantage of that demand has already benefited giants like Microsoft and Amazon, while competitors like Google—owned by Alphabet Inc (NASDAQ:GOOG)—look to seize shares of the market.
It is certainly a crowded field, with mainstays like International Business Machine Corp. (NYSE:IBM) also making a claim on the promising industry.
All these tech giants are looking to be the go-to company to provide cloud solutions, but for the moment, the king of the castle is Amazon.
Microsoft is definitely trying to change that with its continued pursuit of AWS’s market share, while Oracle is hoping that its play towards advanced tech will help it not only gain a foothold alongside the giants, but even potentially upend Amazon’s dominant status.
All in all, you have a three very solid cloud computing choices, and they represent three of the best cloud computing stocks today.