Cloud-focused companies are at the front of the digital transformation, revolutionizing how data is managed, stored, and analyzed. These firms provide scalable and efficient solutions that cater to businesses of all sizes, enabling seamless data integration and real-time insights.

Given the industry’s strong outlook, investors could consider investing in quality cloud-focused stocks Dynatrace, Inc. (DT), UiPath Inc. (PATH), and Box, Inc. (BOX) that are well-positioned for potential gain.

The rise of Artificial Intelligence (AI) and Machine Learning (ML) has further increased the demand for cloud solutions. Cloud computing providers rely on AI to power the automated systems that deliver IT services and SaaS applications reliably and at the lowest possible cost for provisioning, batching, and tuning hyperscale cloud systems, which relieves humans of those tasks. Moreover, companies are utilizing cloud infrastructure to process large datasets, train AI models, and deploy intelligent applications.

The adoption of hybrid and multi-cloud strategies is becoming a dominant trend. Organizations are leveraging multiple cloud providers to optimize costs, enhance performance, and ensure data redundancy. Cloud-focused companies have responded by developing interoperable platforms that offer a range of benefits, from increased flexibility and cost optimization to enhanced reliability and innovation.

Also, the cloud computing market is projected to reach $2.29 trillion by 2032, exhibiting a CAGR of 16.5%. This shift is due to factors like increasing digital transformation across businesses, growing internet & mobile device adoption across the globe, and increased usage of big data.

With that in mind, let’s dig deeper into the fundamentals of the above-mentioned stocks in detail:

Dynatrace, Inc. (DT)

DT provides unified observability and security services. The company operates Dynatrace, a security platform that provides application and microservices monitoring, runtime application security, infrastructure monitoring, log management and analytics, digital experience monitoring, digital business analytics, and cloud automation.

On January 14, DT announced it had become the official Observability and Performance Analytics Technology partner for Visa Cash App Racing Bulls (VCARB), a Formula One team, starting the 2025 race season. In this collaboration, VCARB will use DT’s AI technology and extract meaningful real-time insights into vehicle dynamics, driver performance, and race optimization throughout the racing season.

In the fiscal second quarter that ended on September 30, 2024, DT’s total revenues increased 18.9% year-over-year, amounting to $418.13 million. The company reported non-GAAP income from operations of $130.67 million, indicating a 22.8% growth from the prior-year quarter. Its non-GAAP net income came in at $112.66 million and $0.37 per share, up 20.5% and 19.4% year-over-year.

Street expects DT’s revenue for the fiscal third quarter (ended December 2024) to increase 16.9% year-over-year to $426.84 million. Its EPS for the same period is expected to register a 3.5% growth from the prior year, settling at $0.33. In addition, it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.

According to the company’s updated fiscal year 2025 guidance, DT expects total revenue to be in the range of $1.665 billion and $1.675 billion. Its non-GAAP net income is expected to lie between $396 million-$404 million. The company’s non-GAAP EPS is set in the range of $1.31 to $1.33.

DT shares have surged 23.1% over the past six months to close the last trading session at $54.36.

DT’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, each weighted to an optimal degree.

DT has a B grade for Growth and Quality. It is ranked #40 out of the 126 stocks in the Software – Application industry. Click here to see the additional ratings for DT (Value, Momentum, Stability, and Sentiment).

UiPath Inc. (PATH)

PATH is an enterprise automation and AI software company that provides an end-to-end automation platform that offers a variety of international Robotic Process Automation (RPA) solutions. 

On October 23, PATH announced the transformation of operations for Omega Healthcare, a global leader in revenue cycle management, healthcare, and clinical enablement services, through its AI-powered automation. The partnership could position PATH as a frontrunner in AI-driven automation and deliver significant outcomes.

On October 22, PATH announced a strategic partnership with Inflection AI to integrate the UiPath Platform with the new Inflection for Enterprise solution, allowing enterprises to achieve more operational efficiency and effectiveness without compromising trust and AI security options.

PATH’s revenues for the third quarter (ended October 31, 2024) increased 8.8% year-over-year to $354.65 million. It reported a non-GAAP gross profit of $300.36 million, indicating a 5.8% growth from the prior-year quarter, while its non-GAAP net income for the quarter stood at $59.81 million or $0.11 per share. Also, the company’s non-GAAP adjusted free cash flow increased 12.2% year-over-year, amounting to $182.87 million.

As per the financial outlook for the fourth quarter of fiscal 2025, PATH forecasts revenue to be between $422 million and $427 million. The company also expects a non-GAAP operating income of approximately $100 million.

Analysts expect PATH’s revenue for the fiscal year (ending January 2025) to increase 9.4% year-over-year to $1.43 billion, while its EPS for the same quarter is expected to be $0.47. For the fiscal year 2025, its revenue is expected to be $1.58 billion, indicating a 10.7% improvement over the prior year, and its EPS for the same quarter is expected to grow 7.2% from the prior year to $0.51.

Shares of PATH have gained 9.9% over the past six months to close the last trading session at $13.45.

It’s no surprise that PATH has an overall rating of B, which equates to a Buy in our POWR Ratings system. It has a B grade for Growth, Value, and Quality. Out of 18 stocks in the A-rated Software – SAAS industry, PATH is ranked #8.

Beyond what is stated above, we’ve also rated PATH for Momentum, Stability, and Sentiment. Get all PATH ratings here.

Box, Inc. (BOX)

BOX is an intelligent content cloud company that provides a cloud content management platform that enables organizations of all sizes to securely manage cloud content while allowing easy, secure access and sharing of this content from anywhere, on any device. 

On December 10, BOX announced a partnership with Adobe Inc. (ADBE) to redefine how digital media is managed, created, and shared in the enterprise. This partnership allows every Box user to create and edit visual content directly in Box with Adobe Express as the default image editor, enhancing Box’s Intelligent Content Management solution.

In the same month, BOX expanded its strategic partnership with Amazon Web Services (AWS) to make Adobe Experience Platform (AEP) available on AWS to empower brands in deepening customer relationships with precise personalization. This partnership will allow BOX to expand the value of its Intelligent Content Cloud and integrate AI models in Box AI.

For the third quarter that ended October 31, 2024, BOX’s revenue increased 5.5% year-over-year to $275.91 million. Its non-GAAP gross profit was $226.07 million, up 13.2% from the year-ago value.

The company’s non-GAAP operating profit grew 24.1% year-over-year to $80.19 million. In addition, BOX’s non-GAAP net income attributable and EPS were $67.46 million and $0.45, representing increases of 26.7% and 25% from the prior year’s period, respectively.

Per the updated financial guidance for 2024, BOX forecasts revenue to be approximately $1.09 billion. The company expects GAAP net income per share to be $0.30. Also, its non-GAAP net income per share is forecasted to be $1.70.

The consensus revenue estimate of $279.19 million for the fiscal fourth quarter (ending January 2025) represents a 6.2% increase year-over-year. The consensus EPS estimate of $0.42 for the same quarter indicates a marginal 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.

The stock has gained 16.1% over the past six months to close the last trading session at $31.43.

BOX’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 also has a B grade for Value and Quality. Within the same B-rated Technology – Services industry, it is ranked #9 out of 78 stocks. Click here to see BOX’s ratings for Growth, Momentum, Stability, and Sentiment.

What To Do Next?

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DT shares were trading at $54.52 per share on Thursday afternoon, up $0.16 (+0.29%). Year-to-date, DT has gained 0.31%, versus a 3.73% rise in the benchmark S&P 500 index during the same period.

About the Author: ShreyaRathi

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