The cloud computing industry is experiencing unprecedented growth, driven by advancements in multi- and hybrid cloud environments, artificial intelligence (AI), and the Internet of Things (IoT). As businesses increasingly rely on secure, scalable, and efficient cloud solutions, key players like Workday, Inc. (WDAY), Datadog, Inc. (DDOG), and Okta, Inc. (OKTA) are emerging as leaders in this transformative space. As the cloud industry continues to evolve and expand, these stocks represent strong contenders for explosive growth in the coming years.
The cloud computing industry is undergoing a transformation fueled by emerging trends like the adoption of multi- and hybrid cloud environments, the integration of artificial intelligence (AI), and the rapid expansion of the Internet of Things (IoT). These advancements are redefining how businesses operate and scale. With the global public cloud market projected to grow at a CAGR of 18.5% between 2024 and 2029, reaching a market value of $1.8 trillion, the potential for investors is substantial.
Further, IDC projects that cloud infrastructure spending will increase at a double-digit rate, reaching $213.7 billion by 2028, underscoring the growing importance of cloud technology. As organizations become more reliant on the cloud, software security is essential to safeguard systems, manage access control, and defend against emerging threats. The security software market is expected to expand at a CAGR of 13.9% from 2024 to 2030, with its value approaching $58.6 billion.
Let’s take a closer look at three cloud computing stocks poised for remarkable growth in the years ahead.
Workday, Inc. (WDAY)
WDAY develops enterprise cloud applications focused on financial management, spend management, human capital management, planning, analytics, and supply chain solutions. These products serve diverse industries, including finance, healthcare, education, government, technology, media, retail, and hospitality.
WDAY’s revenue has grown at a CAGR of 18.9% over the past three years and its EBITDA has risen at a CAGR of 49.6% over the same time frame.
On November 14, 2024, WDAY partnered with Syssero, Inc., gaining access to enhanced resources to provide customized services that align with WDAY’s commitment to delivering value.
On November 4, 2024, WDAY and Compa partnered to integrate Compa’s real-time market intelligence into Workday’s platform, enabling companies to make data-driven pay decisions to attract and retain top talent. This collaboration offers Workday customers a strategic advantage in today’s competitive labor market.
During the fiscal second quarter that ended July 31, 2024, WDAY’s total revenues increased 16.7% year-over-year to $2.09 billion. Its non-GAAP operating income grew 23% from the year-ago value to $518 million. In addition, the company’s net income and non-GAAP net income per share came in at $132 million and $1.75, up 67.1% and 22.4% over the prior-year quarter, respectively.
Analysts expect WDAY’s EPS and revenue for the quarter ended October 31, 2024, to increase 14.9% and 14.2% year-over-year to $1.76 and $2.13 billion, respectively. It surpassed the Street EPS and revenue estimates in each of the trailing four quarters, which is promising.
Over the past year, the stock has gained 16.8% to close the last trading session at $271.49. It has surged 10% over the past six months.
WDAY’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
WDAY has an A in Growth and a B grade in Sentiment and Quality. It is ranked #30 out of 129 stocks in the Software - Application industry.
Beyond what we have stated above, we also have given WDAY grades for Stability, Value, and Momentum. Get all the WDAY’s ratings here.
Datadog, Inc. (DDOG)
DDOG provides a comprehensive observability and security platform designed for cloud applications, offering products such as infrastructure monitoring, application performance tracking, log management, security monitoring, incident management, and workflow automation.
DDOG’s revenue and levered free cash flow have grown at a CAGR of 42.3% and 56.5% over the past three years.
On November 12, 2024, DDOG introduced Kubernetes Active Remediation, enhancing its automated troubleshooting features to offer Kubernetes users curated guidance, best practices, and comprehensive issue management directly within Datadog's platform. This addition empowers customers to quickly identify, understand, and resolve issues for faster, streamlined operations.
In the fiscal third quarter ended September 30, 2024, DDOG’s revenues increased 26.0% year-over-year to $690.02 million. Its non-GAAP operating income grew 32.3% from the year-ago value to $173.02 million. Moreover, its non-GAAP net income after tax adjustments and net income per share stood at $165.74 million and $0.46, respectively, representing increases of 31% and 27.8% over the prior-year quarter.
Street expects DDOG’s revenue for the quarter ending December 31, 2024, to increase 21.0% year-over-year to $713.72 million. Its EPS for the same quarter is likely to be $0.43. It surpassed the consensus EPS and revenue estimates in all the trailing four quarters.
The stock climbed 8.3% year-to-date and 20.6% over the past year, to close the last trading session at $131.43.
DDOG’s POWR Ratings reflect strong prospects. It has an A grade for Growth and a B for Sentiment and Quality. It is ranked #16 out of 39 stocks in the Software - Business industry.
To access DDOG’s Stability, Value and Momentum ratings, click here.
Okta, Inc. (OKTA)
OKTA provides identity and access management solutions to secure identities for organizations globally. Its product suite includes Single Sign-On, Adaptive Multi-Factor Authentication, API Access Management, and other tools that enable secure, streamlined access across cloud, mobile, and on-premises environments.
OKTA’s revenue and levered free cash flow have grown at a CAGR of 34% and 19.9% over the past three years.
OKTA’s total revenue increased 16.2% year-over-year to $646 million in the fiscal 2025 second quarter that ended on July 31, 2024. Its non-GAAP operating income came in at $148 million, up 150.8% year-over-year. Moreover, its non-GAAP net income and net income per share stood at $131 million and $0.72, respectively, representing increases of 133.9% and 132.3% over the prior-year quarter.
Street expects OKTA’s revenue for the fiscal third quarter (ending October 2024) to increase 11.2% year-over-year to $649.64 million. Its EPS for the same quarter is expected to grow 32.7% from the prior year to $0.58. In addition, it surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.
Shares of OKTA have gained 9.6% over the past year to close the last trading session at $76.93.
OKTA’s bright prospects are apparent in its POWR Ratings. It has a B grade for Growth. Within the B-rated Software - Security industry, it is ranked #10 out of 20 other stocks.
Click here to see OKTA’s ratings for Value, Momentum, Stability, Sentiment, and Quality.
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WDAY shares were unchanged in premarket trading Friday. Year-to-date, WDAY has declined -1.66%, versus a 26.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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