We recently compiled a list of the 10 Best Cloud Computing Stocks to Buy Now. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other cloud computing stocks. You can also check out the 10 Best Artificial Intelligence Stocks to Buy Under $10 here.
Cloud computing has changed the way we access and manage computing resources. The industry is poised for significant growth in the coming years. Market estimates suggest a jump from a size of $0.68 trillion in 2024 to a projected $1.44 trillion by 2029, reflecting a compound annual growth rate (CAGR) of 16.4%. This upward trend is expected to continue, with the market reaching a value of almost $2.5 trillion by 2032. These figures point towards a rising adoption and utilization of cloud solutions across various industries.
The growth in the industry is likely to be driven by a number of factors. One key factor is the growing recognition among large enterprises of the impact that cloud computing can have on their operations. In fact, an impressive 94% of companies across the globe have already adopted cloud computing solutions. This high rate of adoption is expected to have a remarkable economic impact, with forecasts showing that it could generate approximately $3 trillion in revenue by the year 2030.
Currently, North America and Europe are leading the way in cloud computing adoption, with Asia Pacific not far behind. North America holds the largest share of the global market at 41%. The region’s early adoption of technologies like artificial intelligence (AI) and machine learning (ML) has played a key role in driving its cloud market growth.
Even with stricter regulations around data privacy and security, the European markets are also displaying consistent growth in cloud adoption. Countries like Sweden, Finland, the Netherlands, and Denmark are leading the way in cloud adoption within specific industries. This suggests that European businesses are increasingly recognizing the value of cloud solutions while navigating a regulatory landscape that prioritizes data protection.
The Asia Pacific region is also currently experiencing a rise in cloud computing adoption. The market size rose to an estimated $32.5 billion in 2022 and is projected to be a significant contributor to the global cloud computing market in the coming years. This growth can be attributed to a large-scale shift towards digital business models across various industries in the region. The need for cost-effective solutions has fueled cloud adoption among small and medium businesses (SMBs). Approximately 78% of SMBs are currently using cloud services, with 39% of these businesses spending up to $600,000 per year on public cloud services.
Our Methodology
To shortlist the best cloud computing stocks to buy now, we relied on Insider Monkey’s extensive database of 920 hedge funds as of Q1 2024. We picked the cloud computing stocks with the highest number of hedge fund investors. Why are we interested in 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 development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 293
Microsoft Corporation (NASDAQ:MSFT), another major player in the tech industry, focuses on systems software. The company’s Intelligent Cloud segment is responsible for providing its cloud computing offerings, including the well-known platform Microsoft Azure. Microsoft Corporation (NASDAQ:MSFT) ranks highly among the best cloud computing stocks to buy now.
Microsoft Corporation’s (NASDAQ:MSFT) earnings report revealed a 13% year-over-year increase in revenue, reaching $6.4 billion. This growth stemmed from two key segments: Intelligent Cloud and Productivity and Business Processes. Furthermore, Microsoft Corporation (NASDAQ:MSFT) reported an EPS of $2.94, higher than the estimated $2.84. The company has successfully beaten EPS estimates in the last 4 quarters.
Analysts are bullish on Microsoft Corporation (NASDAQ:MSFT), assigning a “Strong Buy” rating based on 35 analyst recommendations in the past 3 months. The average 12-month price target for Microsoft Corporation (NASDAQ:MSFT) sits at $500.71, suggesting a potential upside of over 10% from the current price levels.
Here’s what Baron Funds said about Microsoft Corporation (NASDAQ:MSFT) in its Q1 2024 investor letter:
“Our second largest purchase during the quarter was the software platform, Microsoft Corporation (NASDAQ:MSFT), which we continued to add to, after initiating a position in the fourth quarter of 2023. Microsoft continues to report strong quarterly results, with revenue growth of 16% year-over-year in constant currency thanks to better-than-expected demand in its intelligent cloud segment, which saw revenue growth of 19% year-over-year, driven by Azure growth of 28% with AI contributing 6pts to growth compared with 3pts in the prior quarter. While the adoption of GenAI remains in its early stages, Microsoft has disclosed positive initial data points with 53,000 Azure AI customers as of its December quarter up from 18,000 in the prior quarter, 1.3 million paid GitHub Copilot subscribers (up 30% sequentially) and more than 230,000 organizations who have used AI capabilities in the power platform (up 80% sequentially). Management also noted that large cloud optimizations that started a year or so ago have largely finished. Profitability also continues to be strong with 44% non-GAAP operating margins, which was 120bps better than expected.”
Overall MSFT ranks 2nd on our list of the best cloud computing stocks to buy. You can visit 10 Best Cloud Computing Stocks to Buy Now to see the other cloud computing stocks that are on hedge funds’ radar. While we acknowledge the potential of MSFT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MSFT 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.
