The cloud computing industry still has plenty of growth potential. The sector is projected to grow at a compounded annual growth rate of 16.40% from now until 2029. Many corporations that operate in this vertical have expanded their profit margins and stand to generate higher earnings thanks to scalability.
Investors can choose from several cloud computing stocks. Many investments in this sector have outperformed the stock market, but these are some of the top picks to consider.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) was an early entrant in the cloud computing industry thanks to Amazon Web Services. The tech giant launched its highly profitable growth driver in 2006. Even with a large percentage of market share and billions of dollars in quarterly revenue, AWS still exhibits double-digit growth rates.
Amazon Web Services revenue reached $24.3 billion in the fourth quarter of 2023. The 13% year-over-year increase represents a respectable segment of the company’s $170.0 billion in total net sales. The company, as a whole, achieved 14% year-over-year growth on its top line.
Amazon is tapping into artificial intelligence (AI) to strengthen its cloud computing platform. The company’s massive head start and large customer base suggest Amazon can continue to march forward. Online marketplace sales are still growing, and the company reported a record-breaking Q4 holiday shopping season.
Amazon stock is up by 91% over the past year and has more than doubled over the past five years.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is another leader in the cloud computing industry with a long history. The company unveiled Azure in 2010. Since then, it’s become one of the company’s most important sources of revenue and profits.
Azure is the foundation for the Microsoft Cloud category. The business segment generated $33.7 billion in Q2 FY24 revenue, representing a 24% year-over-year increase. The corporation overall delivered 18% year-over-year revenue growth and 33% year-over-year net income growth.
Cloud computing isn’t the company’s only specialty. Recent investments in AI have panned out nicely and positioned Microsoft as a leader in the industry. The company also owns LinkedIn, Bing, Xbox and other entities. The company has exposure to many verticals and the financial might and leadership to tap into new opportunities.
Microsoft has been one of the most consistent growth stocks in the market. Shares are up by 64% over the past year and 248% over the past five years.
Alphabet (GOOG, GOOGL)
Some investors like to find smaller companies that offer more long-term upside. However, this list demonstrates that you can still get great returns from tech giants specializing in the cloud computing industry.
Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) shares are up by more than 50% over the past year and have gained 135% over the past five years. Google Cloud has been a focal point of revenue acceleration and has been around since 2008.
The company’s fourth-quarter earnings report highlighted a broad recovery in the advertising market. Alphabet’s revenue increased by 13% year-over-year, while net income jumped by more than 50% year-over-year.
Google Cloud was a big reason for the company’s financial success. Its revenue jumped from $7.3 billion in Q4 2022 to $9.2 billion in Q4 2023. That’s a 26% year-over-year increase. Google Cloud also flipped a net loss into a net profit, resulting in higher net profit margins moving forward.
On this date of publication, Marc Guberti held long positions in MSFT and GOOG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
