Cloud computing has become an integral component of many businesses. The technology allows companies to store more data, increase productivity and save money.
Once companies start to put their data on the cloud, it’s difficult to walk away. Switching from one cloud platform to another is a significant commitment. Corporations that offer cloud computing services generate recurring revenue and have the flexibility to raise their prices periodically.
The industry is expected to grow by 16.40% each year through 2029. These three cloud computing stocks are in prime positions to capitalize on the industry’s prominence.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) is the cloud computing king based on market share. It has 31% of the market and recently reaccelerated as artificial intelligence attracts more customers. AI is giving Amazon Web Services customers more functionality. Not only is it bringing in more customers but AI is also giving existing customers more reasons to upgrade their accounts.
Amazon Web Services revenue increased by 17% year-over-year (YoY) in Q1 2024. That growth pace exceeded Amazon’s overall net sales growth of 13% YoY. Like many cloud computing kings, Amazon isn’t only focused on cloud computing. The tech conglomerate also has exposure to e-commerce, streaming, advertising, groceries and other industries.
The stock is already up by 25% year-to-date and has roughly doubled over the past five years. Expanding profit margins pave the way for additional gains. Analysts believe in that scenario, as the stock is rated as a Strong Buy. The average price target implies a 16% upside from current levels.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is in second place with a 25% market share in the industry. Cloud computing has become a foundational piece of Microsoft’s overall revenue and growth. Microsoft Cloud grew by 23% YoY to reach $35.1 billion in Q3 FY24. That’s more than half of the company’s total revenue.
The tech giant has been investing heavily in artificial intelligence. It’s made some high-profile acquisitions to expand its talent pool and fortify its lead. Microsoft Copilot has been a boon so far, and Copilot for Security can help Microsoft increase its market share in the cybersecurity industry.
Many analysts believe Microsoft’s momentum can continue. The stock is rated a Strong Buy with a projected 19% upside from current levels. The stock has gained 10% year-to-date and has soared by 232% over the past five years. Microsoft is a staple in many mutual funds and ETFs due to its $3 trillion market cap and various business segments.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has been gaining momentum in the cloud computing industry. It has an 11% share in cloud computing, but its revenue growth has outpaced Microsoft and Amazon’s cloud services. Google Cloud revenue grew by 28.4% YoY to reach $9.57 billion. Overall revenue came to $80.5 billion, up by 15% YoY.
Alphabet’s cloud segment made up more than 10% of the company’s business. As cloud revenue continues to accelerate, it should push the corporation’s overall revenue higher. The company is also making significant AI investments, strengthening its cloud platform.
The tech firm has been a top-performing stock for several years. Shares are up 200% over the past five years and 23% year-to-date. Alphabet has received a consensus Strong Buy rating and has a projected 11% upside. The highest price target of $220 per share suggests the stock could gain an additional 28%.
On this date of publication, Marc Guberti held long positions in AMZN, MSFT and GOOG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.