Back to top

Image: Bigstock

3 Stocks to Make the Most of the Rising Demand for IaaS

Read MoreHide Full Article

Infrastructure as a Service (“IaaS”) has risen in popularity over the years as businesses continue to benefit from the myriad advantages that this service model offers. One of the primary benefits of IaaS is that businesses can use several technology-related infrastructure like servers for storing data, and so on, via a cloud platform. This helps in significantly reducing capital expenses as businesses don’t have to install, maintain and upgrade costly hardware.

Businesses can simply opt for a subscription-based IaaS model per their requirements and start their operations. Since the infrastructure is maintained by service providers, this means that they are responsible for regularly upgrading and providing support to ensure that businesses can make the most out of the service.

In any case, the adoption of cloud computing and in turn, IaaS, witnessed an uptick last year due to coronavirus. This is because cloud computing allows businesses to carry on their operations from anywhere, simply with an Internet connection. It also served as an effective way of collaboration as remote working gained pace. Reflective of the conveniences that IaaS offers, a report by Gartner stated that the worldwide IaaS public cloud services market grew 40.7% in 2020.

Besides enabling remote working and being affordable, IaaS also offers the advantages of faster completion and deployment of projects and applications as no time is lost in installing essential hardware. Since the data is stored on remote servers, it can significantly reduce downtime in case of any untoward incident. Also, firms don’t have to worry about their data being affected in any way. Service providers offer enhanced security to firms while storing their data.

Scalability is another advantage provided by IaaS as firms can conveniently utilize more resources when their operations increase or scale them down per their requirements. Owing to these benefits, Gartner stated in another report that in 2021, IT services are expected to rise 9.8%, primarily boosted by IaaS spending. A report by IMARC also stated the global IaaS market is set to witness a CAGR of about 27% from 2021 to 2026.

3 Stocks to Keep an Eye On

IaaS adoption seems ready to witness further acceleration going forward, owing to the advantages it provides to businesses like reduced capital expenses, faster deployments, enhanced security and so on. This seems then a prudent time to consider stocks that can make the most of this potential. We have selected three such stocks that carry a Zacks Rank #2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Microsoft Corporation (MSFT - Free Report) offers Azure IaaS, which provides services like Azure Virtual Desktop, Azure Backup, and so on. In fiscal fourth-quarter 2021, Azure's revenues, increased 51% year over year.

Shares of Zacks Rank #2 Microsoft have risen 35.8% year to date. The Zacks Consensus Estimate for its current-year earnings increased 3.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 8%.

Alphabet Inc.’s (GOOGL - Free Report) Google offers several IaaS products and solutions via the Google Cloud platform, like Compute Engine, among others. In the second quarter of 2021, Google Cloud revenues increased 53.9% year over year.

Shares of this Zacks Rank #3 company have advanced 62.1% year to date. The Zacks Consensus Estimate for its current-year earnings increased 14.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 73.8%.

Hewlett Packard Enterprise Company (HPE - Free Report) offers HPE GreenLake, which allows businesses to modernize IT infrastructure by delivering public cloud services and IaaS for workloads on-premises, fully managed in a pay-per-use model. On Jul 1, the company announced that it has entered into a definitive agreement to acquire Zerto, which provides cloud data management and protection, for $374 million.

Shares of Hewlett Packard have risen 27.5% year to date. The Zacks Consensus Estimate for its current-year earnings increased 1.6% over the past 90 days. This Zacks Rank #3 company’s expected earnings growth rate for the current year is 40%.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Microsoft Corporation (MSFT) - free report >>

Alphabet Inc. (GOOGL) - free report >>

Hewlett Packard Enterprise Company (HPE) - free report >>