3 Strong Buy Cloud Computing Stocks to Add to Your February Must-Watch List
Cloud computing is helping businesses get more done and keep their data safe in the process. The technology has helped many corporations with their work flows, and investors have benefitted immensely.
Additionally, many stocks in the cloud computing sector have outperformed the S&P 500 and Nasdaq 100. Despite the gains, these equities can experienced sustained rallies due to their recurring revenue models. Also, most customers pay a monthly or an annual subscription to use cloud computing platforms. So, as these businesses accumulate more data or have more needs, monthly subscriptions increase.
Therefore, investors looking to benefit from this prolific industry may consider from these cloud computing stocks.
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ServiceNow (NOW)
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ServiceNow (NYSE:NOW) is a cloud computing company that helps organizations become more efficient and keep their data secure. Impressively, over 8,100 enterprise customers use the software. And, most of these customers are pleased based upon the company’s 99% renewal rate.
Notably, most of the company’s revenue is recurring, which results in predictable cash flow. The firm earned $8.68 billion in subscription revenues in 2023. That’s a 25.5% year-over-year (YOY) growth rate which was the same figure as Q4 2023’s growth rate. Almost 2,000 customers pay an annual contract value that exceeds $1 million.
Performance obligations continued to grow for the company and suggest that revenue growth will remain strong. This segment grew by 24% YOY in the fourth quarter.
Most of ServiceNow’s clients who remain loyal spend more money for the software over time. The “Customer Cohort Growth” page on ServiceNow’s Q4 2023 Investor Presentation indicates annual revenue growth rates get higher as companies work with the firm for more years.
Microsoft (MSFT)
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Microsoft (NASDAQ:MSFT) is a tech conglomerate that has withstood many economic cycles. The company was founded in 1975 and has been a reliable pick for several years. Shares have gained 65% over the past year and are up by 298% over the past five years.
Once again, Microsoft reported a solid quarter that headlined with 18% YOY revenue growth, and net income increasing 33% YOY. Also, artificial intelligence (AI) played a role in the corporation’s successful quarter.
“”We’ve moved from talking about AI to applying AI at scale. By infusing AI across every layer of our tech stack, we’re winning new customers and helping drive new benefits and productivity gains across every sector,” Satya Nadella, CEO of Microsoft stated in the press release.
Additionally, Microsoft Cloud revenue rallied by 24% YOY and wasn’t the only segment to report double-digit YOY growth. Furthermore, Office Commercial products and Dynamic products saw double-digit YOY gains.
Also, this is the first quarter with the Activision Blizzard acquisition impacting financial results. Xbox revenue soared 61% YOY with 55 points driven by the acquisition. Finally, Microsoft has a firm grip on the gaming industry, cloud computing, artificial intelligence, and other verticals.
Amazon (AMZN)
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Amazon (NASDAQ:AMZN) reported a strong fourth quarter to close out 2023 that is giving investors more optimism about the stock. Shares jumped by almost 8% amid 14% YOY revenue growth.
Growth rates in North America segment sales, international segment sales, and Amazon Web Services (AWS) segment sales were higher in the fourth quarter than in the previous quarter. Also, net income surged to $10.6 billion, a hefty improvement from the $0.3 billion in net income during the same period last year.
AWS is the company’s main cloud computing engine and continues to gain market share. Recent efforts to incorporate AI into AWS have proved successful and contributed to higher revenue growth.
Amazon’s new chips represent its desire to absorb additional market share in cloud computing and AI. As more businesses rush to use AI, Amazon looks ready to deliver more gains for investors. In fact, shares are up by 66% over the past year.
On this date of publication, Marc Guberti held long positions in NOW and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.
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