With the rapid evolution of computing technology, bulky office computers have given way to sleek desktops and ultra-thin laptops. Courtesy of this digital progression, massive data centers have largely been replaced by cloud storage. Wondering whether data is at all floating in the sky? Enter the concept of cloud computing that allows users to access and store data over the Internet (“the cloud” per se) without managing their own physical servers and intricate IT infrastructure.
Cloud computing refers to the on-demand, seamless access of computing resources as services over the Internet. As cloud computing gains traction with greater flexibility and scalability, it has emerged as an attractive theme for investors seeking to invest in blue-chip tech firms. This has made cloud computing companies like International Business Machines Corporation IBM, Microsoft Corporation MSFT, Amazon.com, Inc. AMZN and Alphabet Inc. GOOGL indispensable for any investment portfolio. But before digging deep into these prized possessions, let us delve a little more into why organizations are increasingly adopting cloud computing.
Cloud computing is highly cost-effective as it eliminates fixed capital expenses of buying related hardware and software and reduces operating costs of maintaining onsite data centers and deploying IT experts to manage the infrastructure. Based on a pay-per-use pricing model, enterprises only pay for the computing resources they use. With easy access to a plethora of innovative technologies, it increases productivity with greater agility and flexibility, and improves scalability with higher economies of scale. Moreover, cloud computing services are delivered over a highly secured network with low latency for applications and data backup facilities for improved reliability.
Cloud computing services fall into four broad categories, namely infrastructure as a service (IaaS), platform as a service (PaaS), serverless and software as a service (SaaS), offering different levels of control, flexibility and management options to business enterprises. Relying heavily on virtualization and automation technologies, cloud computing provides the requisite infrastructure for AI (artificial intelligence) and machine learning (ML) workloads. It delivers powerful computing abilities to process and analyze data, rendering an ideal platform for Big Data management.
Per Grand View Research, the global cloud computing market size was estimated at $602.3 billion in 2023 and is expected to witness a CAGR of 21.2% from 2024 to 2030, with a variety of capabilities across multiple industries. These include better patient monitoring and outcomes in healthcare, personalized financial management and predictive spending, immersive learning in education, superior inventory management in retail and predictive maintenance and better supply chain management in the manufacturing sector.
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4 Cloud Computing Stocks to Watch
IBM has gradually evolved as a provider of cloud and data platforms. The Red Hat acquisition, in particular, has helped it strengthen its competitive position in the hybrid cloud market. With the Red Hat buyout, the company offers a Linux operating system—Red Hat Enterprise Linux—and a hybrid cloud platform—Red Hat OpenShift—that aids enterprises with digital transformation.
With a surge in traditional cloud-native workloads and associated applications, along with a rise in generative AI deployment, there is a radical expansion in the number of cloud workloads that enterprises are currently managing. This has resulted in heterogeneous, dynamic and complex infrastructure strategies, which has led firms to undertake a cloud-agnostic and interoperable approach to highly secure multi-cloud management. This, in turn, has translated into a healthy demand for IBM hybrid cloud solutions. In addition, the buyout of HashiCorp has significantly augmented IBM’s capabilities to assist enterprises in managing complex cloud environments. HashiCorp’s tool sets complement IBM RedHat’s portfolio, bringing additional functionalities for cloud infrastructure management and bolstering its hybrid multi-cloud approach.
IBM is poised to benefit from strong demand for hybrid cloud and AI, driving growth in the Software and Consulting segments. This Zacks Rank #2 (Buy) company’s growth is expected to be driven primarily by analytics, cloud computing and security in the long haul. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Microsoft is one of the prominent public cloud providers that can deliver a wide variety of IaaS and PaaS solutions at scale. Microsoft Azure, its cloud computing platform, allows users to build, run and scale applications in the cloud. It offers a variety of services, including storage, networking, analytics and AI.
Microsoft has doubled down on the cloud computing opportunity. Azure’s increased availability in more than 60 announced regions globally has strengthened Microsoft's competitive position in the cloud computing market. Operating through a vast network of global data centers that ensure high availability and reliability for applications, Azure offers seamless access to all the services included in the portal once customers subscribe to it. Subscribers can use these services to create cloud-based resources, such as virtual machines (VMs) and databases, which can then be assembled into running environments used to host workloads and store data.
As Microsoft continues to push the boundaries of networking technology, it aims to create innovative, resilient and secure solutions that enable businesses to leverage AI and the cloud to their fullest potential. This Zacks Rank #3 (Hold) company is heavily investing in AI-powered cloud services, integrating Azure OpenAI Service, Copilot and ML into various cloud solutions, making AI a central feature of Azure to empower organizations to manage their applications with greater confidence and efficiency.
Amazon enjoys a dominant position in the cloud-computing market, particularly in the IaaS space, thanks to Amazon Web Services (AWS), which is one of its high-margin-generating businesses. The expanding customer base of AWS driven by its strengthening cloud offerings will continue to aid Amazon's dominance in the global cloud space.
AWS is the world’s most comprehensive and broadly adopted on-demand cloud computing platform, offering more than 200 fully featured services from data centers globally. Millions of customers, —including the fastest-growing startups, largest enterprises and leading government agencies, —are using AWS to lower costs, become more agile and innovate faster. It reportedly offers the widest variety of databases that are purpose-built for different types of applications to enable subscribers to choose the right tool for the job.
Amazon aims to extend AWS’ AI and ML capabilities to facilitate improved decision-making. This Zacks Rank #3 company intends to expand its global infrastructure for faster and more reliable service with low latency and maximum availability. From cloud-native applications and AI-driven solutions to edge computing and sustainability initiatives, AWS is likely to push the limits in the realm of cloud computing technology.
Alphabet has been growing rapidly in the booming cloud-computing market. Over the last few years, the company has evolved from primarily being a search engine provider to a leading provider of cloud computing technology. Google Cloud has turned out to be the key catalyst behind the company’s growth, driven by its strengthening cloud service offerings.
The solid adoption of the Google Cloud Platform and Google Workspace and continued investments in infrastructure, security, data management, analytics and AI have helped Google to expand its cloud footprint worldwide. The increasing number of cloud regions and availability zones globally have been a hallmark of Google Cloud. Currently, Google Cloud has 40 cloud regions, 121 availability zones and 187 network edge locations across more than 200 countries. Google Cloud is considered the third-largest cloud player among numerous cloud providers worldwide.
Alphabet’s growing GenAI (generative AI) capabilities and significant investments in cloud computing are potential catalysts for the future amid stiff competition in the cloud space and increasing regulatory headwinds. This Zacks Rank #3 company’s dominant position in the search engine market and strong position in the cloud are long-term drivers.
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