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4 Stocks to Buy on Increased Cloud Infrastructure Spending

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The pandemic saw millions working, learning as well as shopping from home. This digital transformation has seen the cloud business gain immense popularity and demand lately. The increased dependency is likely to further drive the cloud market as more tech companies shift focus to the cloud business.

Cloud Infrastructure Spending Growing

According to a recent report from Canalys, spending on cloud infrastructure in the United States grew 29% in the first quarter, hitting a record high of $18.6 billion. 

Another report from the IDC shows that global spending on cloud infrastructure reached $15.1 billion in the first quarter. As the pandemic saw more people working and learning remotely, demand for storage increased. Spending on cloud for compute and storage infrastructure products, including dedicated and shared environments, jumped 12.5% on a year-over-year basis.

Spending on non-cloud infrastructure grew 6.3% year over year during the same period. Global Spending on shared cloud infrastructure reached $10.3 billion in the first quarter, growing 11.6% on a year-over-year basis. Spending on dedicated cloud infrastructure jumped 14.7% to $4.8 billion.

Cloud Market Poised to Grow

The pandemic has changed the way people have worked, learnt and shopped so far. As more people are working and learning remotely, companies providing cloud-based solutions are fast adopting software-as-a-service (SaaS).

At the same time, most businesses are shifting data and information to technological and digital platforms to safely remain afloat, benefiting the cloud business.

This has seen cloud providers boosting infrastructure spending. According to Canalys, The top three cloud service providers in the first quarter were Amazon.com, Inc.’s (AMZN - Free Report) Amazon Web Services (AWS), Microsoft Corporation’s (MSFT - Free Report) Microsoft Azure and Alphabet, Inc.’s (GOOGL - Free Report) Google Cloud, which collectively accounted for 69% of the total spending.

Also, storing and managing huge data is increasingly becoming important for the healthcare industry, which is only going to further boost demand for cloud services.

According to IDC, spending on compute and storage cloud infrastructure is projected to witness a CAGR of 11.3% between 2021 and 2025, reaching $112.9 billion. This will account for 66.1% of total spending on compute and storage infrastructure.

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.

Zoom Video Communications, Inc.’s (ZM - Free Report) cloud-native unified communications platform, which combines video, audio, phone, screen sharing and chat functionalities, makes remote-working and collaboration easy.

The company’s expected earnings growth rate for the current year is 39.5%. The Zacks Consensus Estimate for current-year earnings has improved 27% over the past 60 days. Zoom sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Digital Turbine, Inc. (APPS - Free Report) offers products and solutions for mobile operators, device OEMs and third parties. The company's products include, a mobile device management solution DT Ignitewith targeted app distribution capabilities, a customized user experience and app discovery tool DT IQ, an application and content store named DT Marketplace, and DT Pay — a content management and mobile payment solution.

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 60 days. Digital Turbine carries a Zacks Rank #1.

ServiceNow, Inc. (NOW - Free Report) provides cloud computing services that automate digital workflows to accelerate enterprise IT operations. The company’s Now Platform enables enterprises to enhance productivity by streamlining system processes.

The company’s expected earnings growth rate for the current year is 18.8%. Its shares have gained 21.2% in the past 30 days. ServiceNow has a Zacks Rank #1.

Veeva Systems Inc. (VEEV - Free Report) offers cloud-based software applications and data solutions for the life sciences industry.

The company’s expected earnings growth rate for the current year is 19.1%. The Zacks Consensus Estimate for current-year earnings has improved 8.9% over the past 60 days. Digital Turbine carries a Zacks Rank #2 (Buy).

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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