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4 Stocks to Make the Most of the Cloud Computing Boom in 2020

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The global business landscape is changing rapidly with cloud computing taking up a large share of traditional tech spending. Notably, there has been accelerated adoption of cloud-computing strategies within enterprises with analysts reportedly expecting more than 80% of businesses to shift to the cloud by the end of 2020.

Increasing acceptance has made cloud computing one of the most sought-after niches in the tech space.

Cloud Computing Going Mainstream

World’s leading information technology research and advisory firm Gartner Inc. IT estimates $216 billion of IT spending to be shifted to the cloud in 2020 compared with $111 billion in 2016. This shows that companies prefer other firms to take care of their servers, storage and networking gear and are not willing to spend money for construction and maintenance of costly information management technology and infrastructure.  

With the adoption of public cloud computing services, it is optimal for clients to spend only for computing, networking and storage, while getting rid of recurring expenditures for updating their own servers and software year after year.

SaaS to Remain the Largest Market Segment in 2020

Among the three major cloud computing services, software-as-a-service (SaaS) will outpace infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) to remain the largest market segment, per Gartner. Across the globe in 2020, SaaS is expected to contribute $116 billion in revenues to public cloud computing service business, surpassing $50 billion and $39.7 billion revenues for IaaS and PaaS, respectively, added the global research and advisory firm.  

However, in terms of year-over-year worldwide revenue growth projection by Gartner, IaaS will outpace SaaS and PaaS to record the fastest growth of 24% in 2020. This is because there has been an increasing need for infrastructure at a scale among recent applications, which traditional data centers are unable to fulfil.

4 Cloud Software Stocks to Buy Now

It has become increasingly evident that enterprises are fast-tracking their shift to public cloud service providers from own data centers. This probably led Gartner to forecast that the market for global public cloud service will grow almost 17% to $266.4 billion in 2020.

Given the encouraging projection for cloud-software companies in 2020, it would be wise to buy four promising SaaS stocks. These firms carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Five9 Inc. FIVN, headquartered in San Ramon, CA, is among the leading providers of cloud software for contact centers. The stock surpassed the Zacks Consensus Estimate for earnings in each of the past four quarters, the average positive earnings surprise being 46.8%. For 2020, the company is likely to see earnings growth of 10.4%.

Zoom Video Communications Inc. ZM, headquartered in San Jose, CA, helps clients to have face-to-face video experiences through its cloud-native platform. Notably, the company has witnessed positive earnings estimate revisions for fiscal 2020 over the past 30 days.

Redmond, WA-based Microsoft Corporation (MSFT - Free Report) helps clients to connect to and use office tools like Microsoft Office 365 over the Internet. The company not only beat the Zacks Consensus Estimate for earnings in all the prior four quarters but is expected to see earnings growth of 12.6% in fiscal 2020.

Zuora Inc. ZUO – headquartered in San Mateo, CA – is primarily involved in providing cloud-based software on a subscription basis. The company delivered an average positive earnings surprise of 24.7% for the past four quarters. For fiscal 2020, the stock is likely to see 34.6% earnings growth.

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