We recently compiled a list of the 12 Best Cloud Computing Stocks to Buy According to Analysts. In this article, we are going to take a look at where Rackspace Technology, Inc. (NASDAQ:RXT) stands against the other cloud computing stocks.
Cloud computing enables companies to store their infrastructures remotely using the Internet, ultimately reducing costs and creating value. As per Gartner, worldwide end-user spending on public cloud services is expected to reach $723.4 billion in 2025, reflecting a rise from $595.7 billion in 2024. The use of Al technologies in IT and business operations continues to accelerate the role of cloud computing in helping operations and outcomes. The cloud use cases have been expanding with an increased focus on distributed, hybrid, cloud-native, and multi-cloud environments, aided by a cross-cloud framework, which should make the public cloud services market achieve a growth rate of 21.5% in 2025.
Gartner believes that 90% of organizations will adopt a hybrid cloud approach through 2027. Resultantly, all segments of the cloud market should see a double-digit growth rate in 2025 demonstrating how I&O (Infrastructure and Operations) leaders remain focused on effectively integrating I&O into their GenAl strategies and laying the groundwork for running Al and GenAl infrastructure at the edge.
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Key Trends to Watch Out in 2025
Moving forward, the concept of cloud computing is expected to change because of technological enhancements and dynamic business requirements. As per Nasscom Community, quantum computing integration, AI-driven cloud services and multi-cloud, and interoperability are some of the future trends in cloud computing. The emerging field of quantum computing focuses on changing how data processing is done because it can handle even the most complicated computations that some other conventional systems cannot solve. Over the next 5 years, more cloud services are expected to offer its clients quantum computing capabilities, which should in turn help in cryptography, drug development, material science, and optimization.
AI and ML are some of the leading technologies behind innovation in the cloud. Nasscom Community believes that pervasive AI is expected to be in each layer of the cloud system, right from the server level to the customer service level by 2025. Moving forward, AI algorithms should help in predictive analysis and, therefore, prevent problems that can arise with infrastructure, control workload, and reduce automation of tedious tasks.
Future developments in the cloud computing field are expected to enhance the multi-cloud strategies involving using more than one cloud service provider between the business and the cloud altogether. Notably, distributing workloads among several cloud providers would help enterprises maximize cost and performance. The businesses have been dividing their workload across multiple cloud service providers in a bid to control data and resources and use the strength of each cloud service provider.
Our Methodology
To list the 12 Best Cloud Computing Stocks to Buy According to Analysts, we conducted extensive research and sifted through several online rankings. After getting the initial list of 18 stocks, we chose the ones that were popular among hedge funds and that analysts saw the most upside to. Next, the stocks were arranged in ascending order of their average upside potential, as of 10th January. We also mentioned the hedge fund sentiment around each stock, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A futuristic multi-server data center, symbolizing the advanced multicloud services.
Rackspace Technology, Inc. (NASDAQ:RXT)
Number of Hedge Fund Holders: 13
Average Upside Potential: 15.8%
Rackspace Technology, Inc. (NASDAQ:RXT) operates as a multi-cloud technology services company. The company provides a wide range of cloud-related services, such as cloud migration, managed cloud services, and cloud optimization among other services. Rackspace Technology, Inc. (NASDAQ:RXT)’s Public Cloud segment has been regarded as a crucial growth driver. This segment supports companies in optimizing and managing their workloads and applications on public cloud platforms including Amazon Web Services (AWS) and Microsoft Azure.
The record bookings seen in this division in Q3 2024 demonstrate the elevated demand for the company’s cloud infrastructure and services offerings. The strength of Public Cloud was mainly evident in infrastructure and services, highlighting that the company is successfully capitalizing on the ongoing shift towards cloud-based solutions across industries. With businesses continuing to migrate to cloud-based solutions, Rackspace Technology, Inc. (NASDAQ:RXT)’s expertise in multi-cloud services is expected to result in higher market share and revenue growth. The company’s emphasis on improving its Public Cloud offerings aligns with industry trends, potentially enabling Rackspace Technology, Inc. (NASDAQ:RXT) to capture a significant portion of the growing cloud services market.
Several factors drove the strong performance of the Public Cloud segment in Q3 2024. First, structural changes were made in the go-to-market in late 2023, including transitioning to services-led motion and building a client-partner model. Second, expansion in mid-market while selectively penetrating the enterprise segment, which led to signing more than 10 master service agreements and continuing to focus on additional ones that will generate new growth opportunities. Finally, a disciplined approach to infrastructure resale, where Rackspace Technology, Inc. (NASDAQ:RXT) focused on deals meeting its return hurdles.
Overall RXT ranks 8th on our list of the best cloud computing stocks to buy according to analysts. While we acknowledge the potential of RXT as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than RXT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
