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4 Stocks to Buy on a Booming Cloud Service Market

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The cloud infrastructure market was already flourishing and the COVID-19 pandemic helped it grow further at a pace not many had expected. As millions worked and learned from home and companies scrambled to store huge data, the cloud business got a boost.

As most companies are now relying on cloud-based solutions, the digital transformation will only help the cloud marketgrow further in the coming days.

Cloud Infrastructure Spending on the Rise

As more people are working and learning remotely, companies are adopting software-as-a-service (SaaS), helping companies that provide cloud-based solutions. According to a new report published by Information Services Group (ISG), a large number of U.S. companies feel more at ease by subscribing software and infrastructure as services.

Per the report, the annual contract value of large cloud-based, as-a-service engagements soared 33% to a record $5.9 billion in the Americas region. Moreover, annual contract value rose 31% to a record $1.9 billion for software-as-a-service (SaaS) and 33% to $3.9 billion for Infrastructure-as-a-service (IaaS).

The pandemic saw more people working, learning and even shopping from home, which added to the companies’ pressure to store data. This made companies plan more on business resiliency and shift data and information to technological and digital platforms to remain afloat, thus benefiting the cloud business.

Cloud Market Poised to Grow

Cloud providers are boosting infrastructure spending, which is giving a boost to their revenues. According to Gartner, spending on IaaS, platforms as a service (PaaS) and SaaS comprised a meager $182.4 billion or 1% of the total $3.7 trillion IT infrastructure spending globally in 2018.

However, that changed fast, especially after the pandemic struck. According to the report, global spending on cloud, IaaS grew 41% in 2020 to $64.3 billion and is expected to reach $331 billion by 2022.

Increased focus on cybersecurity should help the cloud-based service market in the coming days. The U.S. government has also increased spending on cybersecurity by investing in cloud services and has shelled out over $1 billion.

Our Choices

Microsoft Corporation (MSFT - Free Report) is one of the largest broad-based technology providers in the world. It is also one of the largest public cloud providers that can deliver a wide variety of IaaS and PaaS solutions at scale.

The company’s expected earnings growth rate for the current year is 8.4%. Its shares have increased 5.5% in the past three months. Microsoft has a Zacks Rank #2.

j2 Global, Inc. provides Internet information and services. The company primarily has two business segments: Digital Media and Cloud Services. Digital Media specializes in the technology, shopping, gaming, and healthcare markets, offering content, tools and services to consumers and businesses. Cloud Services operates a portfolio of web properties and apps, including IGN, Mashable, PC Mag, Humble Bundle, Speed test, Offers, Black Friday, AskMen, MedPage Today, Everyday Health and What to Expect.

The company’s expected earnings growth rate for the current year is 18.8%. The Zacks Consensus Estimate for current-year earnings improved 3.1% over the past 60 days. j2 Global has a Zacks Rank #2.

Dropbox, Inc. (DBX - Free Report) offers users a platform that enables them to store and share files, photos, videos, songs and spreadsheets. Dropbox, Inc. is headquartered in San Francisco, CA.

The company’s expected earnings growth rate for next year is 54.8%. The Zacks Consensus Estimate for current-year earnings improved 5.9% over the past 60 days. Dropbox has a Zacks Rank #2.

Paycom Software, Inc. (PAYC - Free Report) provides cloud-based human capital management software as a service solution for integrated software for both employee records and talent management processes. It serves more than 23,500 clients or nearly 12,700 customers based on Parent Company Grouping. 

The company’s expected earnings growth rate for the current year is 25.8%. The Zacks Consensus Estimate for current-year earnings improved 3.5% over the past 60 days. Paycom sports a Zacks Rank #1.


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