AWS is the leader in cloud computing, but we delve into five other companies that are also benefiting from a shift to the cloud in a work-from-home economy.
The global pandemic has undoubtedly accelerated a shift to the cloud, with all five of these companies’ stock gaining significantly in recent times. These companies have enabled many of us to continue our work from home and have proven to be resilient in the last few months.
Microsoft (NASDAQ: MSFT) is the largest of the five companies on our list and is second only to Amazon’s (NASDAQ: AMZN) AWS in terms of market share in the cloud space.
In the latest quarter, Microsoft’s Intelligent Cloud segment grew by 17% to $13.4 billion, driven by Azure, which grew 47% compared to AWS’s revenue growth of 29% to $10.8 billion. Microsoft commercial cloud revenue increased by 30% year-over-year due to increased demand for its offerings such as Office 365 along with higher margins.
E-commerce is another area of growth during COVID-19 and Amazon’s competitors may use Microsoft’s cloud offerings instead. Microsoft’s cloud growth can also be demonstrated by the victory in winning the $10 billion JEDI contract with the U.S Department of Defense last year.
Microsoft has many strings to its bow, but its cloud segment is an integral part of its business.
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Datadog (NASDAQ: DDOG) is a monitoring and analytics platform that enables companies to manage all its cloud-based software. This is vital for companies using increasing amounts of data and cloud-based applications to run their businesses.
Datadog is growing rapidly with Q2 results reflecting this. Revenue increased 68% year-over-year to $140 million, and the number of customers with annual recurring revenue (ARR) of $100,000 or more increased by 71%. Many well-known companies, such as Peloton (NASDAQ: PTON) and Airbnb use Datadog, which is a testament to the company and its product.
Datadog is also founder-led with CEO Oliver Pommel and co-founder/CTO Alexis Lê-Quôc both owning considerable stakes in the business. Before its IPO in 2019, Datadog turned down an acquisition offer from Cisco (NASDAQ: CSCO), demonstrating a clear long-term vision and belief in its prospects as a stand-alone company.
Twilio (NYSE: TWLO) is a platform-as-a-service that enables software developers to use digital communication such as calls or texts to enhance the user experience. This founder-led company’s offerings are used by high-profile customers such as tech giants Netflix (NASDAQ: NFLX) and Zoom (NASDAQ: ZM), among others.
Twilio has a geographically diverse revenue stream, with 27% of revenue coming from outside the U.S, which is increasingly important during difficult times. In Q2 of 2020, revenue grew by 46% year-over-year to $401 million and dollar-based net expansion 132% driven by a digital transformation within many companies. A report by Twilio stated that companies’ digital communication was accelerated by an average of six years due to COVID-19.
Twilio’s top 10 customers accounted for 15% of revenue, with Facebook’s (NASDAQ: FB) Whatsapp contributing 7% alone. This is not a massive cause for concern but rather a point to keep an eye on.
Veeva (NYSE: VEEV) is a founder-led business that operates cloud-based software for the global life sciences industry and has over 600 customers. It is a mundane yet profitable business that has rewarded investors.
Despite minor COVID-19 disruptions, the company has remained innovative, as highlighted in its Q2 revenue of $337.1 million, up 38% year-over-year. Subscription revenue accounts for the majority of this, which provides a stable revenue stream. Management has a long-term goal of hitting $3 billion in revenue by 2025 and is “more confident than ever” about reaching it with revenue for the current year forecast at $1.38-1.39 billion.
Veeva is also expanding into other industries other than life sciences, which it had previously been unable to do due to an agreement with Salesforce (NYSE: CRM). Veeva launched QualityOne, which is targeted at highly regulated industries such as cosmetics.
Fastly (NYSE: FSLY) operates an edge computing platform and content delivery network that enables companies to handle traffic on apps and websites. The market for these is estimated to be valued at $35.8 billion by 2022, which leaves a massive growth opportunity.
Fastly’s Q2 revenue increased by 62% year-over-year with both the number of customers and average spends growing. The net retention rate was also 138%, up 8% from Q1. Management also raised guidance, but despite this, the stock has dropped from all-time highs.
One of Fastly’s most important customers is viral app TikTok which those bullish on the stock would deem a testament to the product, but others may see this as a risk with President Trump signing an executive order to ban the app.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.