3 stocks to buy amid rising cloud infrastructure spending

The cloud infrastructure market was already doing great and the pandemic provided a further boost. The pandemic has allowed millions of people to work, learn, play and shop from home, enabling the cloud business to grow.

As the pandemic is far from over and people are still reeling under the fear of the coronavirus, cloud business will only continue to grow. As a result, major players have spent billions of dollars expanding their cloud services.

Cloud infrastructure spending is growing

Billions of dollars have been invested by companies in the past year and a half to improve their cloud operations, according to a new report from Synergy Research Group. The report states that the cloud ecosystem market posted global revenue of $235 billion in the first half of 2021.

Cloud infrastructure services accounted for $150 billion or 63% of this total. The cloud infrastructure services include software-as-a-service (SaaS), infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS) and hosted private cloud services.

Although the pandemic has eased somewhat this year, the trend of working from home and learning is still continuing. In fact, the pandemic has left millions dependent on technology, helping the cloud services market further. According to the report, cloud infrastructure services revenues grew 37% year over year in the first half of 2021.

Of this, revenue from SaaS grew by more than 25%. In addition to colocation spending, leasing and data center construction grew 17% in the first half of this year.

As more people worked and learned remotely, the demand for storage skyrocketed. This caused organizations to shift their focus to building business resilience. Several companies began accelerating their digital transformation, leading them to adopt and consume cloud services.

Cloud market ready to grow

Since the start of the pandemic, the concept of working, learning and shopping has changed. This has led companies to adopt SaaS quickly. At the same time, most companies are shifting data and information to technology and digital platforms to stay safe in the midst of this competition. This, in turn, benefits the cloud business.

And to keep things going, cloud providers are increasing infrastructure spending.

A separate report form from Canalys shows global cloud infrastructure spending reached $47 billion in the second quarter, growing 36% on a quarterly basis. This means that spending in the second quarter was up by more than $5 billion and more than $12 billion year-over-year.

Increasing spending has resulted in companies achieving higher revenues, with major players leading the way. According to Canalys, the top three cloud service providers in Q2 were: Amazon.com, Inc.AMZN Amazon Web Services (AWS), Microsoft Corporation‘s MSFT Microsoft Azure and Alphabet, Inc.‘s GOOGL Google Cloud.

According to a report from IDC, spending on cloud infrastructure for computing and storage is expected to reach a CAGR of 11.3% between 2021 and 2025.

Our choices

Box, Inc. BOX is a provider of a cloud content management platform. The platform enables internal and external content collaboration, content-driven business process automation, custom application development, data protection, security and compliance functions.

The company’s forecast earnings growth for the current year is 15.7%. The Zacks Consensus Estimate for current year earnings has improved 5.7% over the past 60 days. Box carries a Zacks rank #2 (Buy). You can see the full list of current Zacks #1 Rank (Strong Buy) stocks here.

Microsoft Corporation is one of the largest broad-based technology providers in the world. It is also a public cloud provider that can deliver a wide range of IaaS and PaaS solutions at scale.

The company’s forecast earnings growth for the current year is 8.4%. The company’s shares are up 7% in the past three months. Microsoft has a Zacks Rank #2.

Alphabet Inc. is one of the most innovative companies in the modern technological era. In recent years, the company has evolved from primarily a search engine to cloud computing, ad-based video and music streaming, autonomous vehicles, healthcare providers and others.

The company’s forecast earnings growth for the current year is 73.8%. The company’s shares are up 10.1% in the past three months. Alphabet has a Zacks Rank #2.

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