The cloud computing sector has been at the forefront of technological advancements within the software application industry. Businesses are increasingly shifting to the cloud to improve scalability, security, and cost-efficiency, which has propelled exponential growth in the cloud computing space.
As innovation continues to unfold, it presents promising opportunities for investors to tap into this momentum. Companies like Salesforce, Inc. (CRM), Open Text Corporation (OTEX), and Docebo Inc. (DCBO) are well-positioned for long-term growth, making them attractive options for those looking to capitalize on this booming sector.
Cloud computing is also central to AI, machine learning, and big data analytics advancements, positioning the industry for explosive long-term growth. With businesses moving towards digital-first operations, the future of cloud computing stocks looks brighter than ever. The cloud computing market is projected to reach $2.29 trillion by 2032, exhibiting a CAGR of 16.5%.
Moreover, cloud adoption has become the norm for businesses across industries, with more than 90% of organizations now using cloud services to improve efficiency and innovation. As cloud-based solutions continue to evolve, the growth potential for cloud computing stocks remains strong.
Now, let’s examine the Software - Application industry stocks in detail, beginning with the third choice:
Stock #3: Open Text Corporation (OTEX)
Headquartered in Waterloo, Canada, OTEX provides information management products and services. It provides software solutions and content services, including content collaboration and intelligent capture to records management, collaboration, e-signatures, and archiving.
On September 5, OTEX announced a partnership with Nippon Gases Deutschland, the German business unit of Nippon Sanso Holdings Corporation (NSHD). This partnership enables Nippon to effectively manage the complexities of evolving e-invoicing mandates in Germany through OTEX’s advanced cloud-based solutions.
On August 19, Serica Energy, a British independent oil and gas company, announced a partnership with OTEX. Through this collaboration, Serica Energy will leverage OTEX’s solutions to streamline engineering information and accelerate time to completion while reducing risk across the lifecycle of projects and operations. Additionally, OTEX will help Serica eliminate limitations on document management and enhance overall operational performance.
Such collaborations reflect the growing demand for OTEX’s products and services across various sectors over its peers.
For the fourth quarter of 2024, which ended on June 30, OTEX’s total revenues stood at $1.36 billion, while its Cloud services and subscriptions segment reported a total revenue of $464.90 million, up 2.9% year-over-year. Its operating income stood at $193.26 million, indicating a 59.4% growth from the prior-year quarter period.
Its attributable net income came in at $248.23 million compared to the prior-year quarter’s net loss of $48.73 million, while its non-GAAP EPS stood at $0.98, up 7.7% year-over-year. Also, the company’s free cash flow grew 59.2% from the year-ago value to $145.24 million.
Analysts expect OTEX’s revenue and EPS for the current year (ending June 2025) to be $5.34 billion and $3.60, respectively. For the fiscal year 2026, both its revenue and EPS are expected to grow by 2.7% and 16.8% from the prior year to $5.48 billion and $4.21, respectively.
OTEX’s revenue has grown at CAGRs of 19.4% and 15% over the past three and five years, respectively. Likewise, the company’s net income and total assets have increased at a CAGR of 14.4% and 13.9%, respectively, over the past three years.
OTEX shares have surged 10.9% over the past three months to close the last trading session at $33.01.
OTEX’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
OTEX has an A grade for Value. It is ranked #16 out of 129 stocks in the Software - Application industry. Click here to see the additional ratings for OTEX (Growth, Momentum, Stability, Sentiment, and Quality).
Stock #2: Salesforce, Inc. (CRM)
CRM provides Customer Relationship Management (CRM) technology that brings companies and customers together worldwide. It supports third-party development and offers global sales, service, and subscription services, enabling data storage, lead tracking, and issue resolution.
On September 17, CRM announced a strategic collaboration with NVIDIA Corporation (NVDA) to develop and co-innovate advanced AI capabilities and interactive avatar experiences within their platforms, CRM’s Agentforce and NVDA’s AI platform. This collaboration will enable new insights and improved productivity across the sales, service, marketing, and IT teams.
On the same day, CRM and Google Cloud announced the extension of their partnership to create Salesforce Agentforce Agents that will allow people to collaborate securely across Salesforce Customer 360 and Google Workspace apps. The partnership will help create the first agent ecosystem, delivering a fully AI-infused productivity suite.
In the fiscal 2025 second quarter that ended on July 31, 2024, CRM’s total revenue increased 8.4% year-over-year to $9.33 billion. The company reported non-GAAP income from operations of $3.14 billion, indicating a 15.5% growth from the prior year quarter with a non-GAAP operating margin of 33.7% (up 210 bps year-over-year). Its free cash flow increased 20.2% year-over-year to $755 million.
CRM’s non-GAAP net income came in at $2.49 million, up 19.1% year-over-year, while its non-GAAP net income per share grew 20.8% from the year-ago value to $2.56.
For the fiscal year 2025, the company’s non-GAAP operating margin is projected to be 32.8%, with EPS anticipated to fall between $6.05 and $6.13. On a consolidated adjusted basis, its non-GAAP EPS is expected to range from $10.03 to $10.11. CRM expects total revenue to range between $37.7 billion and $38 billion, representing a growth of 8%-9%.
Street expects CRM’s revenue for the fiscal third quarter (ending October 2024) to increase 7.2% year-over-year to $9.35 billion. Its EPS for the same period is expected to register a 16% growth from the prior year, settling at $2.45. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters, which is promising.
Over the past three and five years, CRM’s net income grew at CAGRs of 33.8% and 42.8%, respectively, while its revenue grew at CAGR of 15.7% over the past three years and CAGR of 19.9% over the past five years.
Shares of CRM have gained 32.8% over the past year to close the last trading session at $274.09.
It’s no surprise that CRM has an overall rating of B, equating to a Buy in our POWR Ratings system. It has an A grade for Sentiment and a B for Quality. Out of 129 stocks in the same industry, CRM is ranked #15.
Beyond what is stated above, we’ve also rated CRM for Growth, Value, Momentum, and Stability. Get all CRM ratings here.
Stock #1: Docebo Inc. (DCBO)
Based in Toronto, Canada, DCBO operates as a learning management software company that provides an internationally powered learning platform for artificial intelligence (AI). It provides a Learning Management System (LMS) to train internal and external workforces, partners, and customers.
DCBO’s net revenue for the second quarter (ended June 30, 2024) increased 21.7% year-over-year to $53.05 million. Further, its gross profit grew 21.6% from the prior year’s quarter to $42.80 million. The company’s operating income amounted to $4.52 million compared to an operating loss of $7.52 million in 2023.
In addition, its adjusted EBITDA rose 160.4% from the year-ago value to $7.95 million. DCBO’s adjusted net income for the quarter amounted to $7.93 million or $0.26 per share, reflecting an increase of 69.5% and 85.7%, respectively, from the same period last year.
The consensus revenue estimate of $54.13 million for the fiscal third quarter (ending September 2024) represents a 16.4% increase year-over-year. The consensus EPS estimate of $0.25 for the same quarter indicates a 67.6% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
Moreover, DCBO’s revenue has grown at CAGRs of 34.5% and 42.9% over the past three and five years, respectively. In addition, its total assets increased at 53.3% CAGR over the past five years.
Over the past three months, the stock has surged 17.6%, closing the last trading session at $44.71.
DCBO’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Sentiment and Quality and a B for Growth. Within the same industry, it is ranked #13. Click here to see DCBO’s ratings for Value, Momentum, and Stability.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
CRM shares were trading at $275.33 per share on Thursday afternoon, up $1.24 (+0.45%). Year-to-date, CRM has gained 5.10%, versus a 21.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
The post 3 Cloud Computing Stocks for Explosive Long-Term Growth appeared first on StockNews.com