The technology sector never stops growing and the 11 best publicly traded cloud computing companies are at the forefront of that technological revolution, finding new ways to improve the ease of life and business. The cloud industry has been gaining ground in the last decade or so, becoming a major disruptor to other industries in the process. However, because cloud computing is still young, most analysts and experts project that it will continue growing at a fast pace for at least the next three years. IDC estimates that worldwide spending on public cloud computing will surge to $162 billion in 2020 from $82 billion in 2016, resulting in a CAGR of 19%. Gartner meanwhile predicts that the worldwide cloud services market will grow to $246.8 billion this year from $209.2 billion in 2016 and will reach $383.36 billion in 2020.
When it comes to cloud computing, there are three main segments: Software-as-a-Service (SaaS), Infrastructure-as-a-Service (IaaS), and Platform-as-a-Service (PaaS). Among these, the largest is SaaS because it not only caters to businesses, but also represents the basis of the business model of many software companies (Dropbox, Office365, Google Docs, etc.). In addition, SaaS has become the main delivery model for a lot of business applications, especially in customer relationship management (CRM), which is the largest market for SaaS. Gartner estimates that the SaaS market will reach $75.73 billion in 2020, followed by IaaS, which will reach $71.55 billion.
The surge of cloud computing and fast adoption rates have prompted the launch of many cloud computing companies. However, only large tech companies had the resources to invest heavily in the new industry and to capture leading market shares. In this way, Amazon.com, Inc. (NASDAQ:AMZN)‘s Amazon Web Services and Microsoft Corporation (NASDAQ:MSFT) are currently occupying the top positions, with adoption rates of 59% and 43%, respectively, based on a survey conducted by RightScale. Alphabet Inc (NASDAQ:GOOGL), International Business Machines Corp (NASDAQ:IBM), and Oracle Corporation (NYSE:ORCL) are also among the leaders, but with much smaller adoption rates. The trends are expected to remain unchanged over the next three years, with Amazon and Microsoft still leading the market.
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The introduction of cloud computing has not only provided a lot of benefits for businesses and households, but also opened new opportunities for investors. Because of the fast growth registered by the industry, early investors got the chance to ride the wave to high profits. However, because of the current domination by a few large enterprises, the industry has started to consolidate. There has been a lot of M&A activity in the space, such as IBM’s acquisition of Blue Box and Cleversafe. As the consolidation is expected to continue, it is expected that the industry will narrow, with major providers solidifying their lead, while other companies will either be absorbed or will be forced to change their focus or exit the market altogether. To see some of this consolidation in action, check out our list of the 10 Biggest Cloud Computing Companies in the World.
In turn, this raises a question for investors: what are the best cloud computing companies to invest in? One way to answer that question is to follow large investors like hedge funds and see which cloud providers they choose to put their money in. Hedge funds usually either invest in companies that they expect to perform well over the long run, or are looking for signs that these companies have the potential to generate shareholder value through becoming acquisition targets.
Here’s where our research can be useful. We track over 700 of the most successful hedge funds ever in our database and identify only their best stock picks. Our flagship strategy has gained 44% since February 2016 and our stock picks released in the middle of February 2017 gained over 5 percentage points in the three months that followed. Our latest stock picks were released last month, which investors can gain access to by becoming a subscriber to Insider Monkey’s premium newsletters.
Having said that, let’s proceed with a look at the 11 best publicly traded cloud computing companies based on the sentiment among the 676 hedge funds in our database which filed 13Fs for the first quarter.
