Microsoft is well on its way to dethroning Amazon in the ever-expanding cloud market.
Oracle’s autonomous database business is booming, and it sees further room for growth.
10 stocks we like better than Microsoft ›
Investors looking for winning stock ideas for the next decade need to look no further than the companies enabling artificial intelligence (AI) adoption. The recent financial results of leading companies serving the cloud computing market show that enterprise investment in AI is still in the early stages. Here are two stocks to profit from this opportunity.
Microsoft (NASDAQ: MSFT) is the 800-pound gorilla in the cloud services market. While Amazon continues to control the top spot in market share, Microsoft Azure is growing faster and is on pace to eventually overtake the No. 1 position in the cloud market. Microsoft stock is up 26% year to date.
Azure and other cloud services from Microsoft posted a 39% year-over-year increase in revenue for the fiscal fourth quarter (which ended in June). Management credits its growing footprint of over 400 data centers in 70 regions around the world for its momentum.
The company is further bolstering its competitive position with tools like Microsoft Fabric. This is a data and analytics platform that is rapidly expanding. Revenue grew 55% year over year last quarter, indicating that Microsoft is positioned to capture demand for AI-driven database services.
Microsoft generates $281 billion in annual revenue right now, yet management noted that there is $368 billion worth of contracted backlog across its cloud business.
With a company this large growing earnings per share at 24% year over year in the recent quarter, it’s possible that Wall Street is still underestimating the size of the AI opportunity. Analysts are projecting low-double-digit earnings growth over the next few years, but that might be underestimating the company’s opportunity. Microsoft has delivered excellent returns for investors for many years, and that streak doesn’t appear to be ending anytime soon.
Oracle (NYSE: ORCL) is another top tech stock to ride the growing investment in cloud services. Oracle’s Cloud Infrastructure business is experiencing explosive growth, which sent the stock to new highs after its fiscal Q4 earnings report in June. “In Q4, we hit double-digit revenue growth and it’s only going up from here,” CEO Safra Catz said during the earnings call.
Oracle has been building up its cloud offering for over a decade, and it’s paying off. Companies are choosing Oracle for its market-leading database services to leverage autonomous features. Autonomous database consumption revenue grew 47% year over year, accelerating from 27% growth in the year-ago quarter.
