Cloud computing, a cornerstone of the modern digital age that allows for the storage and access of data and software over the internet, is quickly becoming one of the most rapidly expanding technology sectors. The boom in data creation in today’s interconnected society has led to substantial growth in global spending on cloud infrastructure services. According to Statista, in the fourth quarter of 2023 alone, spending soared by $12 billion, reaching a staggering $73.7 billion for the three months ending Dec. 31. Throughout the entire preceding year, a monumental $270 billion was poured into cloud infrastructure services. The allure of these substantial figures has catapulted technology companies, both big and small, into a feverish race to carve out their piece of the pie in this fiercely competitive arena. Amidst this backdrop, let’s delve into three standout cloud computing stocks that merit a spot on your Q2 radar.
Microsoft (MSFT)
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Microsoft’s (NASDAQ:MSFT) ongoing surge is not powered by artificial intelligence (AI) but rather by its booming cloud computing division. The tech behemoth headquartered in Seattle recently revealed that its Intelligent Cloud segment raked in $25.88 billion in quarterly revenue, marking a 20% uptick from the previous year. Zeroing in further, revenue in Azure and other cloud services spiked by an impressive 30%, surpassing Wall Street’s expected 27% growth rate.
Microsoft disclosed in its earnings report that it now boasts 53,000 Azure AI customers, with a third of them signing up within the past year. Notably, commitments exceeding $1 billion on Azure cloud services for the upcoming year surged in the final quarter of 2023. The company also unveiled its latest innovation with custom cloud-computing microchips.
Oracle (ORCL)
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Oracle (NYSE:ORCL) is not to be outshone, experiencing robust growth fueled by its cloud arm. The tech titan’s cloud service and license support segment, its primary business, witnessed a 12% surge in sales to reach $9.96 billion in Q4 2023. The substantial growth in the cloud services division helped offset declines in other sectors, particularly in hardware where revenue dipped 7% year-over-year to $754 million. On a positive note, Oracle’s robust cloud expansion prompted an optimistic forward guidance from the company.
Oracle anticipates earnings ranging between $1.62 to $1.66 per share for the current first quarter of 2024, overshooting analysts’ estimates of $1.64. Revenue growth is also expected to clock in at 4% to 6% in the current quarter, a figure that surpasses analyst projections. Management, during an earnings call, expressed confidence that sustained growth in the cloud computing division positions the company to hit $65 billion in sales by 2026.
ORCL stock has soared by 40% over the last 12 months, including a 20% ascent thus far in 2024.
Amazon (AMZN)
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Amazon (NASDAQ:AMZN) retains its crown as the cloud-computing titan, commanding a formidable 31% share of the global cloud infrastructure market. However, Microsoft is swiftly closing in on Amazon’s lead, now holding a 24% market share. While concerns have surfaced about Amazon Web Services (AWS) sustaining its dominant position, the most recent quarterly figures showed AWS revenue hitting $24.20 billion, meeting, if not surpassing, Wall Street’s projections.
Despite these reservations, many analysts foresee a bright future for Amazon’s cloud division, particularly with the forthcoming wave of AI technology adoption. Analysts at Monness, Crespi, Hardt recently reiterated a “buy” rating on AMZN stock with a $215 price target, suggesting a 20% upside from current levels. Their stance resonated that: “We believe the leading cloud service providers are well positioned to benefit from the early-stage ramp of generative AI projects, including AWS.”
AMZN stock has surged by 82% over the past year, including a 19% uptick so far in 2024.
As of the publication date, Joel Baglole held a long position in MSFT. The viewpoints expressed in this piece are those of the author and are subject to the InvestorPlace.com Publishing Guidelines.
