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Cloud Business Set to Score Big on Coronavirus Fears: 4 Winners

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Ritujay Ghosh
·4 min read
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The pandemic has changed a lot of things over the past year and many of them are likely to remain the way they are now in the near future. The work-and–learn-from-home culture has seen demand for desktops escalate. From shopping to ordering food to making payments, everything can be done sitting at home, thanks to technology that has have helped millions during this period of crisis.

This has seen the cloud business benefiting the most. Over the past year, an increasing number of tech companies have been spending more on cloud business to grab a bigger share of the market.

Companies Investing in Cloud Business

Companies are rapidly shifting data and information to digital platforms to stay afloat amid the COVID-19 outbreak. This has seen tech companies shifting focus to cloud-based IT services in the United States. According to a report in Forbes, the pandemic has created an opportunity for the cloud market, with surging cloud adoption across industries.

According to Gartner, global public cloud end-user spending is projected to reach $304.9 billion by the end of 2021, reflecting an increase of 18.4% from $257.5 billion in 2020. The report also says that spending on IT services will increase in the aftermath of the pandemic, with cloud business expected to make up 14.2% of overall global IT spending market by 2024, increasing 9.1% from 2020.

SaaS, PaaS to Drive on Cloud Business

According to a survey by Flexera, that took into account 750 global cloud decision-makers, more than 50% of the enterprise data and workload are expected to be on cloud in the next 12 months. Moreover, 59% of the companies expect their cloud usage plan to exceed pre-COVID plans.

Also, 61% of the companies plan to focus on cloud migration. Among cloud services, software as a service (SaaS) will dominate the market segment, reaching $117.7 billion in 2021. However, application infrastructure services (PaaS) is projected to grow at a faster pace and jump 26.6% by 2021. Remote working and learning will drive the PaaS market as demand for high performing, content-rich and scalable infrastructure will be on the rise.

Our Choices

Tech companies have been aggressively expanding their cloud services, given that the coronavirus pandemic is far from over. Given the situation, we have shortlisted four tech companies that are sure to benefit from soaring demand for cloud services.

Alphabet Inc. GOOGL, over the last few years, has evolved from primarily being a search-engine provider to cloud computing, ad-based video and music streaming, autonomous vehicles, healthcare providers and others.

The company’s expected earnings growth rate for next year is 6.2%. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past 60 days. Alphabet has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zscaler, Inc. ZS is one of the world’s leading providers of cloud-based security solutions. The company offers a full range of enterprise network security services including web security, Internet security, antivirus, vulnerability management, firewalls, and control over user activity in mobile, cloud computing, and Internet of things environments.

The company’s expected earnings growth rate for the current year is 58.3%. The Zacks Consensus Estimate for current-year earnings has improved 31% over the past 60 days. Zscaler holds a Zacks Rank #2.

Cisco Systems, Inc. CSCO is an IP-based networking company offering products and services to service providers, companies, commercial users and individuals.

The company’s expected earnings growth rate for next year is 6.6%. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the past 60 days. Cisco holds a Zacks Rank #2.

Avalara, Inc. AVLR is a provider of cloud-based tax compliance solutions. It offers businesses of all sizes achieve compliance with transaction taxes including sales and use, VAT, excise, communications and other tax types. 

The company’s expected earnings growth rate for the current year is 75%. Its shares have gained 26% over the past six months. Avalara carries a Zacks Rank #2.

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