The dynamic cloud computing realm has given investors remarkable opportunities to capitalize on high-growth stocks. Though the sector was under duress amidst the stock market rout last year, the potential for cloud-computing growth stocks remains stronger than ever. As the market sentiment shifts, investors can open positions in the best growth stocks in the cloud computing sphere at historically low prices.
Cloud computing has revolutionized how organizations operate, enhancing efficiency levels for digital operations. Companies worldwide are harnessing the power of cloud computing to analyze data, develop cutting-edge machine-learning models, and facilitate seamless collaboration among teams.
Market estimates have shown that the cloud computing industry was valued at around $483 billion last year and could triple to over $1.5 trillion by 2030. Given these staggering numbers, investing in top cloud-computing growth stocks could yield massive returns for savvy investors.
Cloud-Computing Growth Stocks To Buy: Amazon (AMZN)
Amazon (NASDAQ:AMZN) is the undisputed leader in the multi-billion dollar cloud infrastructure services market. Amazon Web Services (AWS) sits comfortably as the most dominant player in the cloud, with a 33% market share, almost double that of the next two competitors.
Over the years, it’s consistently generated double-digit revenue growth from its cloud division, essentially becoming a cash cow for its business. Recent results have shown a marked slowdown in growth rates from the division on the back of the challenging macro conditions. Nevertheless, it still posted a 20% increase on a year-over-year basis in sales, contributing $21.4 billion to its overall revenue base.
Over the long term, research firms such as Redburn believe the division could be a stand-alone entity with a valuation of over $3 trillion. Moreover, with Amazon trading at a market cap of roughly $1.04 trillion, it could represent a colossal 200% bump in value for just its cloud division.
Salesforce (CRM)
Salesforce (NYSE:CRM) has established its position as a software leader in cloud-based customer-relationship-management solutions. It’s been a remarkably consistent business, generating double-digit revenue and EBITDA growth over the past several years. Moreover, it boasts a highly sticky user base that has helped generate robust cash flows each year.
Despite the post-pandemic slowdown and elongated software purchase decisions from customers, the company has proven to be resilient in growth. In the fourth quarter, the company reported revenues of $8.4 billion, a 14% YOY increase, with more than 90% of revenues being generated from subscriptions. Furthermore, the tech giant saw full-year sales increase by an impressive 18%, reaching $31.4 billion.
Furthermore, CRM has recently demonstrated a shift towards prioritizing shareholder returns. On the back of its strong cash flow performance, it has bumped its stock buyback plan from $10 billion to $20 billion. Additionally, the appointment of Elliott Management directors to the board further reinforces its commitment to its investors. That makes it one of the top cloud-computing growth stocks in my book.
Adobe (ADBE)
Adobe’s (NASDAQ:ADBE) ubiquitous creative software stack has made it a household name for content creators worldwide. Having shifted its business model to a Software-as-a-Service (SaaS) over a decade ago, the firm has become a powerhouse in the cloud computing ecosystem. Its paid subscriptions now form over 93% of its total quarterly sales, which has helped solidify a recurring revenue base. Moreover, its free cash flow per share has grown from a modest $1.92 in 2013 to a whopping $15.75 in 2022.
Adobe’s creative, document, and experience clouds have collectively witnessed double-digit growth in paid subscriptions each year. For instance, its annual recurring revenues (ARR) for its creative cloud have grown from $768 million in 2013 to a dumfounding $11.6 billion at the end of last year. Such staggering growth numbers are a testament to the impact of its strategic shift toward the cloud.
Microsoft (MSFT)
Tech giant Microsoft (NASDAQ:MSFT) has dominated this year’s headlines for its investments in artificial intelligence through OpenAI. However, its involvement has taken the sheen off its other blockbuster products, such as its cloud platform Azure. According to market research firm Statista, Azure has a market share of roughly 23% global cloud infrastructure market, second only AWS, which controls 33% of the market.
Revenues from its cloud division have been growing at a rapid clip each quarter. Despite the slowdown in cloud spending, revenues from its cloud unit were up an amazing 29% on a constant currency basis during its second quarter of fiscal 2023. Perhaps what was most impressive was its ability to increase its market share from 23%, up 21% sequentially in the quarter, compared to AMZN, which dropped to 33% from 34%.
Snowflake (SNOW)
Snowflake (NYSE:SNOW) is a pioneering force in data-as-a-service, a market expected to be worth over $42.7 billion next year.
Though it still has ways to achieve profitability, its absurd top-line growth is second to none. It’s grown its sales by an eye-watering 127% over the past five years, with forward estimates at roughly 50%. Moreover, in fiscal 2023, its revenue soared by an amazing 69% YOY, showcasing its prowess in the sphere.
Furthermore, its customer base has grown by 31% in the past year, with a whopping 79% growth in large customers. With stellar revenue retention rates of over 150%, the company seems on course to generate $10 billion in product sales by fiscal 2029. Also, its management approved a $2 billion share repurchase program over the next two years, pointing to an exceptionally bright future ahead. Analysts at Tipranks estimate a 25% upside from current price levels.
Datadog (DDOG)
Datadog (NASDAQ:DDOG) is a giant in the cloud observability market, offering an unparalleled SaaS-based data analytics platform for its clients. It empowers its clients to effectively monitor and secure digital infrastructure channels from a single location. Additionally, it minimizes blind spots and vulnerabilities, ensuring a robust digital environment.
The firm’s meteoric rise is second to none in its niche, where its sales grew from $101 million in 2017 to $1.7 billion last year. It had 317 customers, spending over $1 million on the platform, a 47% bump YOY. On top of that, it continues to add new functionalities to its platform, which includes its most recent integration with Amazon Security Lake.
Datadog has its tentacles in some of the most lucrative cloud verticals that are expected to grow each year spectacularly. For instance, Future Market Insights estimates that the observability platform market could grow at a remarkable CAGR of 8.2% from 2022 to 2032.
Palo Alto Networks (PANW)
The unprecedented expansion of cloud-based platforms has effectively ushered in a new era of cybersecurity. Cloud security has become more crucial than ever, and leading cybersecurity plays such as Palo Alto Networks (NASDAQ:PANW) are poised to reap the benefits of the trend.
The company offers cutting-edge security solutions designed to safeguard cloud environments from cyber threats efficiently. Through its integrations with the top cloud platforms such as AWS, Azure, and GCP, it effectively delivers some of the most potent tools for data protection in the cloud. As businesses continue to embrace digital transformation, Palo Alto Networks is in position to capitalize on the growing demand for robust cloud security.
During the third quarter of 2022, Palo Alto was the top cybersecurity vendor, growing 24.9% YOY and increasing its market share to 8.4%. Moreover, its revenue growth rate of over 26.7% is ahead of its 5-year average of 25.5%, pointing to how crucial its service is to its customers.
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.