Cloud computing is at the forefront of the digital economy, driven by AI-powered efficiency, flexible multi-cloud strategies, quantum advancements, and sustainability-focused services. These innovations make cloud stocks a compelling investment this year.

Likewise, leading the transformation, industry giants like Microsoft Corporation (MSFT - Get Rating), Amazon.com, Inc. (AMZN - Get Rating), and Alphabet Inc. (GOOGL - Get Rating) present compelling investment opportunities.

According to Gartner, 90% of organizations will adopt a hybrid cloud approach by 2027, with data synchronization emerging as the most urgent GenAI challenge in the coming year. To enhance efficiency and prevent vendor lock-in, businesses are adopting multi-cloud and hybrid cloud strategies, driving demand for diversified cloud infrastructure and positioning the sector as a prime investment opportunity.

Meanwhile, cloud providers are prioritizing energy efficiency and sustainability to align with corporate ESG goals. Interestingly, potential anti-competitive practices are also contributing to a more balanced market. Additionally, large-scale investments reflect confidence in long-term growth. As a result, the cloud computing market is projected to reach $832.88 billion in 2025, growing at a 13.2% CAGR.

Hence, in this digital age, given MSFT’s AI-driven industry transformation, AMZN’s leadership in innovation, and GOOGL Cloud’s rapid growth, these companies are poised for sustained success, making cloud computing a strong investment. Let’s now examine their fundamentals.

Microsoft Corporation (MSFT - Get Rating)

MSFT develops and supports software, services, devices, and solutions worldwide. The company’s segments include Productivity and Business Processes, Intelligent Cloud segment, and More Personal Computing.

On January 14, 2025, MSFT announced a multi-year partnership with Pearson to enhance AI skilling and learning, leveraging Azure Cloud and AI tools. The collaboration includes AI-powered certifications, workplace AI tools, and expanded Microsoft 365 Copilot deployment to boost workforce productivity.

In terms of the trailing-12-month levered FCF margin, MSFT’s 24.11% is 112.8% higher than the 11.33% industry average. Its 53.72% trailing-12-month EBITDA margin is 409.8% higher than the 10.54% industry average. Also, its 19.88% trailing-12-month Return on Total Capital is 535% higher than the industry average of 3.13%.

During the fiscal first quarter that ended on September 30, 2024, MSFT’s total revenue increased 16% year-over-year to $65.59 billion. Its operating income stood at $30.55 billion, up 13.6% from the prior year’s quarter. For the same period, MSFT’s net income reached $24.67 billion, or $3.30 per share, reflecting increases of 10.7% and 10.4% year-over-year, respectively.

For the quarter ending March 31, 2025, MSFT’s revenue is expected to increase 12.8% year-over-year to $69.79 billion. Its EPS for the same quarter is expected to rise 7.9% year-over-year to $3.17. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 10% to close the last trading session at $442.33.

It’s no surprise that MSFT has an overall rating of B, which translates to a Buy in our proprietary POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has a B grade for Momentum, Stability, Sentiment, and Quality. Within the B-rated Software – Business industry, it is ranked #16 out of 42 stocks. To access the additional ratings for MSFT’s Growth and Value, click here.

Amazon.com, Inc. (AMZN - Get Rating)

AMZN engages in the retail sale of consumer products and subscriptions through online and physical stores in North America and internationally. It operates through three segments: North America, International, and Amazon Web Services (AWS). The company’s products offered through its stores include merchandise and content purchased for resale; and products offered by third-party sellers.

On January 24, 2025, AMZN’s AWS and Booz Allen announced an expanded partnership to accelerate digital transformation for U.S. federal agencies, focusing on cloud migration, cybersecurity, and AI. The collaboration will deliver ready-made enterprise solutions to enhance security, efficiency, and innovation across defense, intelligence, and civil missions.

On January 14, 2025, AWS launched the AWS Mexico (Central) Region, investing over $5 billion to enhance cloud infrastructure, create jobs, and drive innovation. The investment aims to add $10 billion to Mexico’s GDP and includes a $300,000 AWS InCommunities Fund to support local projects.

In terms of the trailing-12-month net income margin, AMZN’s 8.04% is 85.6% higher than the 4.33% industry average. Likewise, its 11.25% trailing-12-month Capex / Sales is 289.2% higher than the 2.89% industry average. Moreover, the stock’s 1.16x trailing-12-month asset turnover ratio is 16.6% higher than the 0.99x industry average.

AMZN’s total net sales for the fiscal third quarter, which ended on September 30, 2024, rose 11% year-over-year to $158.88 billion. The company’s operating income was $17.41 billion, up 55.6% year-over-year. Additionally, the company’s net income and EPS were $15.33 billion and $1.43, respectively, reflecting increases of 55.2% and 52.1% from the year-ago values.

Analysts expect AMZN’s EPS and revenue for the quarter ended  December 31, 2024, to increase 48.4% and 10.2% year-over-year to $1.48 and $187.26 billion, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 47% to close the last trading session at $237.07.

AMZN’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, translating to a Buy in our proprietary rating system.

It is ranked #12 out of 48 stocks in the A-rated Internet industry. It has an A grade for Sentiment and a B for Growth, Momentum, and Quality. Beyond what we stated above, we have also rated AMZN for Value and Stability. Get all ratings of AMZN here.

Alphabet Inc. (GOOGL - Get Rating)

GOOGL offers various products and platforms in the United States, Europe, the Middle East, Africa, Asia-Pacific, Canada, and Latin America. It operates through its Google Services, Google Cloud, and Other Bets segments.Top of Form

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In terms of the trailing-12-month net income margin, GOOGL’s 26.74% is 630.1% higher than the 3.80% industry average. Its 32.10% trailing-12-month Return on Common Equity is 623.9% higher than the 4.43% industry average. Moreover, its 21.91% trailing-12-month Return on Total Assets is significantly higher than the 1.82% industry average.

In the fiscal third quarter, which ended on September 30, 2024, GOOGL’s revenue rose 15.1% year-over-year to $88.27 billion. Similarly, its income from operations grew 33.6% from the year-ago value to $28.52 billion. The company’s net income reached $26.30 billion, or $2.12 per share, reflecting increases of 33.6% and 36.8% from the prior-year quarter, respectively.

Street expects GOOGL’s EPS and revenue for the quarter ended December 31, 2024, to increase 29.8% and 12% year-over-year to $2.13 and $96.66 billion, respectively. It surpassed the consensus EPS estimate in each of the trailing four quarters. The stock has gained 27.3% over the past year to close the last trading session at $195.41.

GOOGL’s POWR Ratings reflect strong prospects. It has an overall rating of B, translating to a Buy in our proprietary rating system.

It is ranked #10 in the Internet industry. It has an A grade for Sentiment and a B for Quality. Click here to see GOOGL’s Growth, Value, Momentum, and Stability ratings.

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MSFT shares were trading at $414.90 per share on Thursday afternoon, down $27.43 (-6.20%). Year-to-date, MSFT has declined -1.57%, versus a 3.19% rise in the benchmark S&P 500 index during the same period.

About the Author: Abhishek Bhuyan

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments. More...

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