Cloud computing has helped millions of companies save time and money. Businesses don’t have to worry about hardware costs and can access data quickly. Also, cloud computing companies offer cybersecurity resources to keep data safe from hackers.
Many stocks in the sector have outperformed the market over several years and can generate more gains in the years ahead. Therefore, these cutting-edge tech stocks look poised to expand and shape the future of cloud computing.
ServiceNow (NOW)
ServiceNow (NYSE:NOW) boasts a high retention rate for its software and continues to attract customers with deep pockets. The company has over 7,700 customers and almost 2,000 of them have annual contract values that exceed $1 million.
Further, NOW’s remaining performance obligations are more than triple the company’s Q3 revenue. The platform allows businesses to run more efficient help desks and streamline repetitive tasks with built-in chatbots. Also, ServiceNow offers high-level security to protect sensitive data.
Additionally, the company has been a reliable pick for investors who want to outperform the market. Shares are up by 74% over the past year and have gained 284% over the past five years. The stock is trading at a 58-forward P/E ratio. The company’s net income growth can lead to a better valuation in the future. And, ServiceNow more than tripled its profits year over year (YOY) in the third quarter. Revenue grew at a nice 25% clip YOY.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) makes most of its revenue from advertising and cloud computing. Google Cloud has become a popular resource for business owners, boasting over 500,000 customers. Also, Alphabet stands at the forefront of AI , enhancing the tech giant’s future product offerings.
Notably, the company’s cloud segment remains a leading growth driver. Revenue for Google Cloud increased by 22.5% YOY in the third quarter. And, Alphabet’s entire business achieved 11% YOY revenue growth, which is an acceleration from the previous period.
Also, Google Cloud reported a profitable quarter, swinging from a $440 million net loss in Q3 2022 to $266 million net income in Q3 2023. Alphabet investors’ positive response to the news helped the stock rally by 57% over the past year. The stock has gained 163% over the past five years.
Alphabet currently trades at a 22-forward P/E ratio and has a $1.8 trillion market cap. Finally, the company’s vast advertising network gives them plenty of capital to reinvest in Google Cloud and the company’s smaller business segments.
Datadog (DDOG)
Datadog (NASDAQ:DDOG) helps companies improve their cybersecurity across multiple cloud computing solutions. Cloud spending is still in its early innings and is expected to reach $1 trillion in annual spending in 2026. The company is projected to have a $62 billion total addressable market (TAM) in that year.
Specifically, Datadog removes silos and friction associated with keeping cloud applications safe from hackers. Over 26,000 customers use Datadog’s software including approximately 3,130 customers with annual contract values exceeding $100,000. The company’s revenue growth over the trailing twelve months is currently 31%. Further, operating margins have improved significantly to help the company secure a net profit in the third quarter.
In fact, DDOG has a good relationship with many cloud computing giants, including Alphabet. The two corporations expanded their partnership to close out 2023.
Investors have been rushing to accumulate Datadog stock in recent years. Shares have gained 68% over the past year and are up by 240% over the past five years. DDOG is still more than 35% removed from its all-time high. However, continued revenue growth and profit margin expansion can help the stock reclaim its all-time high.
On this date of publication, Marc Guberti held a long position in NOW. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.