Cloud computing stocks are perhaps one of the most attractive multi-year investment trends, driven by the acceleration of digital infrastructure investment. Cloud computing is a huge part of that, with the biggest names in the niche growing at a rapid pace despite the costs involved.
Despite its massive long-term growth trajectory, significant barriers to entry exist in the cloud computing space, making it imperative to stick to the top performers. Given the proliferation of AI, cloud infrastructure investments now follow a compressed cycle. Therefore, cloud space is becoming significantly more demanding, underscoring the long-term case for the best cloud computing stocks.
Keeping that in mind, here are three top cloud computing stocks that have proven incredibly resilient over the past several years. These companies effectively push the envelope in the cloud space to cater to the growing appetite for generative AI.
Amazon (AMZN)
According to Synergy Research Group, spending on infrastructure services surged 22% to $79 billion during the second quarter (Q2) compared to the prior-year period. This marks the third straight quarter of 20%+ YOY growth, driven by generative AI, with Amazon (NASDAQ:AMZN) Web Services leading the charge.
Despite the relatively mixed Q2 earnings report, AWS shined for the tech giant, posting an impressive 19% growth to $26.3 billion. Additionally, it blew past Wall Street’s guidance of 17.6% growth for the quarter. CEO Andy Jassy touted AWS’s ongoing momentum, driven by digital infrastructure upgrades and generative AI opportunities. AWS remains the top pick in the cloud due to its broad functionality, superior security and expansive partner ecosystem. Also, Amazon reported a healthy profit of $1.26 per share, up from 65 cents from the prior-year quarter.
Salesforce (CRM)
Salesforce (NYSE:CRM) is a popular cloud computing play specializing in customer relationship management (CRM) solutions. Since going public in 2004, Salesforce has consistently posted strong, strong-and-bottom-line growth backed by strategic acquisitions.
The stock has been a laggard recently due to lackluster quarters. Hence, it trades at a significant bargain compared to its historical averages as it aims to rebound in the upcoming quarters. CRM is an attractive buying opportunity for long-term investors who can weather short-term market fluctuations.
Salesforce’s stock’s upside is linked to its leadership position in AI within the CRM market. Reports suggest the global AI-driven CRM market could blow past $48.4 billion by 2033 at a 10-year CAGR of 28%. Salesforce’s commitment to the niche is evident through Einstein Copilot and partnerships with industry leaders such as IBM (NYSE:IBM).
Datadog (DDOG)
Datadog (NASDAQ:DDOG) is a hyper-growth stock in the fast-evolving cloud monitoring industry. With cloud adoption rates surging, the firm’s comprehensive platform is positioned well to gain greater market share. Moreover, its management has a clear vision of leveraging digital transformation, expanding DevOps, and continually improving its product offerings. Consequently, it has shown stellar customer retention and upsell capabilities to build on its annual recurring revenue base.
The firm’s top-line growth has averaged a superb 64% over the past five years. Moreover, despite the tough comps, the company continues posting double-digit growth each quarter, with an 81% gross margin. The firm comfortably blew past estimates across both lines in last year’s four quarters.
Unsurprisingly, Mizuho analyst Gregg Moskowitz recently upgraded the stock to ‘Outperform’ from ‘Neutral,’’ upping the stock’s price target to $155 from $135. He cites “meaningful” revenue upside due to larger transactions and vendor consolidation with the company’s 2024 revenue guidance as “quite conservative.”
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 did not have (either directly or indirectly) any positions in the securities mentioned in this article.
