5 Cloud Computing Growth Stocks to Buy Right Now

Cloud computing is a transformational technology that helps companies move their operations online, whether they’re analyzing data or building machine learning models. It enables collaboration between teams working in different locations, connecting organizations across borders like never before.

The industry continues to expand as companies innovate and find new ways to apply technology, which is fueling growth. Estimates suggest that the cloud computing market could be worth $483 billion in 2022 and could triple by 2030 to more than $1.5 trillion.

That is an important opportunity for these five companies that offer cloud services to their clients. Here’s why his stock is a buy right now.

Two people standing in a data center with a laptop, looking at a digital screen.

Image source: Getty Images.

1. Amazon

Cloud services may not be the first thing most people think of when they hear the name Amazon ( AMZN -3.55% ). After all, it is best known for being the largest e-commerce company in the world. But its cloud segment, Amazon Web Services (AWS), leads the industry and is the profit engine behind the entire company.

Amazon started offering online storage services in 2006, making it one of the oldest players in the cloud deal. Since then, AWS has grown to offer hundreds of different services, including web hosting, data analytics, and advanced technology like artificial intelligence (AI) and machine learning.

AWS generated $62 billion in revenue during 2021, which is 13% of Amazon’s total revenue of $470 billion. But the profitability picture is reversed, because despite being a minority of Amazon’s sales, AWS delivered 74% of the company’s overall operating income for the year.

Along with its cloud services, Amazon continues to diversify its business into new areas. such as advertising and electric vehiclesmaking it a great long-term diversified bet for investors.

2. Digital Ocean

Although Amazon Web Services operates at the rich end of the cloud industry, DigitalOcean Holdings ( doc. -5.54% ) has found an advantage at the smaller end of the market. It focuses on serving small and medium-sized businesses and is beating its competitors on price, service, and ease of use.

DigitalOcean makes it easy to deploy virtual machines with a one-click feature set, and its services are up to 41% cheaper than AWS, depending on configuration. And at $0.01 per gigabyte per month of bandwidth, it’s 80% cheaper than its closest competitor. Whether you’re building apps, managing databases, or need storage, DigitalOcean’s monthly plans range from $0 to $15 as a starting point, making them affordable for even the smallest startups.

The company now serves more than 609,000 businesses, and its revenue per customer reached an all-time high of $65.87 in 2021. DigitalOcean estimates that by 2025, its annual market opportunity will be worth $145 billion. Given that it brought in just $429 million in revenue last year, it has a long way to go.

A digital face that appears between computer code and a digital background.

Image source: Getty Images.

3. Splash

The third cloud computing stock that investors should buy right now is splunk ( SPLK -4.89% ). Is a machine learning leader, with a renewed focus on delivering its suite of advanced technology in the cloud so that it’s accessible quickly and easily, from anywhere. Splunk currently serves 96 of the Fortune 100 companies, as the demand for a technological advantage increases among large organizations.

Splunk clients use machine learning in different ways. E-commerce companies use it to monitor sales channels, predict technical issues, and reduce downtime. Manufacturers integrate it with critical facility operations and equipment to help it ingest mountains of data, which is used to improve efficiency and monitor potential costly failures. Overall, machine learning is an incredibly valuable tool that the cloud makes even better.

Splunk’s cloud revenue growth is far outpacing total revenue growth. Cloud sales grew 70% in the fiscal year 2022 that just ended, compared to just 19% of total sales. Cloud revenue also continued to expand to account for 35% of Splunk’s total $2.67 billion revenue base, up from 24% last fiscal year.

The company recently appointed a new CEO with extensive experience in the software as a service (SaaS) space, who is expected to help drive future growth.

4. Alphabet

Alphabet ( GOOG -2.55% )( GOOGLE -2.62% ) is better known as the parent company of Google. While search remains its flagship service, Google Cloud has become a formidable player in the cloud industry, offering a suite of tools that includes documents, storage, and even low code. artificial intelligence platform.

Its cloud-based Vision AI platform can be trained to scan images to identify objects, faces, and even locations, as well as hosting advanced text and speech recognition tools. But Google Cloud also offers a portfolio of essential services including virtual machines and data analytics, putting it alongside larger competitors like Amazon Web Services.

Alphabet is a $1.7 trillion company, but it continues to deliver staggering growth. In 2021, it increased revenue by 41% to $257 billion, and while the cloud segment represented only 7.4% of that number, it generated 47% growth, outperforming the company as a whole.

Clearly, Alphabet’s investment story is about more than just cloud services: It also gets exposure to its burgeoning search business and even its video platform, YouTube. It is truly a company of the future that has the quality to anchor any portfolio.

People watching a mobile device in front of lots of supercomputers.

Image source: Getty Images.

5.microsoft

The last cloud computing stock that investors should buy right now is Microsoft ( MSFT -1.58% ). While Microsoft is best known for its Windows operating system and Office 365 document suite, which are used by billions of people around the world, its largest segment by revenue is now its Azure segment. Azure has been in a fierce battle with AWS for the top spot in the industry in recent years, though Microsoft has often come in second place.

But owning Microsoft stock gives you even more than the impressive assets mentioned above. Despite being a software specialist, the company has a strong hardware footprint with its Xbox gaming platform and Surface line of laptops and tablets. Both are billion-dollar brands on their own, and Microsoft’s gaming business could get a big boost if it completes its $68 billion acquisition of Microsoft. Activision Blizzardwhich is currently under government review.

When it comes to the cloud segment, Microsoft’s Azure platform is the foundation. It offers more than 200 products used by a diverse set of industries, from gaming to financial services to healthcare. In the first half of fiscal 2022, Microsoft’s intelligent cloud segment generated $35 billion in revenue, growing 28% compared to the corresponding period in fiscal 2021, outpacing overall revenue growth from Microsoft of 21%.

Owning Microsoft stock offers diversity in its own right, and is the perfect long-term opportunity to ride the growing cloud industry alongside a bevy of other top tech companies.

This article represents the opinion of the author, who may not agree with the “official” recommendation position of a premium Motley Fool advisory service. We are motley! Questioning an investment thesis, even one of your own, helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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