The COVID-19 pandemic has created havoc for most industries and countries around the globe. But one area that is benefiting from this new remote reality is cloud computing.
With millions of people sheltering in place, companies working remotely, and schools shuttered for an undetermined period of time, the world is turning to the internet to stay connected, learn, and collaborate. That is driving demand for cloud-based services, boosting the fortunes of cloud players.
Even without the pandemic, the cloud computing market was poised to see double-digit growth. According to Gartner, the market research firm, by 2022 the worldwide cloud computing market will hit $331.2 billion, up nearly 25% from $249.8 billion in 2020. That growth may turn out to be even bigger if working from home becomes the new normal.
There are a lot of strong players in the cloud computing market, but there are some standouts that are poised to do better than their rivals. They’re not only enjoying strong growth now, but likely will well into the future. With stocks taking a beating as the markets digest the pandemic-related news, these cloud standouts — Microsoft (NASDAQ:MSFT), Alphabet’s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google, and Alibaba (NYSE:BABA) — are even more compelling. Here’s why.
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Microsoft: a force in the cloud computing market
Rewind a couple of years and Microsoft was a scrappy competitor to Amazon Web Services, Amazon‘s (NASDAQ:AMZN) huge and successful cloud unit. But more recently Microsoft has changed that, putting a lot of blood, sweat, tears, and money into growing that part of its business, and it’s paid off.
Microsoft has seen several quarters of double-digit revenue growth as it slowly and methodically chips away at AWS’ dominance. In its fiscal second quarter, Microsoft’s Azure cloud unit saw 62% growth. Office 365, its cloud-based service that has more than 38 million subscribers, is being rebranded Microsoft 365 and will offer two different monthly subscription plans. The more customers who pay monthly, the less time Microsoft has to spend getting them to upgrade their OS every few years.
Then there’s the demand being created by the COVID-14 pandemic. With the world sheltering in place, cloud companies like Microsoft are seeing a huge surge in usage. Skype, its cloud-based video conferencing tool, saw daily users increase 70% month over month, while there’s been a 220% increase in Skype calling minutes. Teams, its digital collaboration tool, now has more than 44 million daily active users. Back in November, it had 20 million users. Meanwhile, Azure has seen a 775% increase in cloud services in regions that are enforcing strict social distancing rules. Sure, that demand is being driven by the pandemic, but a lot of it should remain once the virus is contained as companies embrace remote work cultures.
With shares of Microsoft under pressure along with the rest of the market, and with cloud demand increasing, it is among the cloud computing stocks to buy in April. Let’s look at the other two.