In the artificial intelligence (AI) investing world, the cloud computing providers are one of the primary beneficiaries. These are the companies spending hundreds of billions of dollars on data centers purpose-built for AI computing, but expect to make all of that money back — and more — as the computing capacity is rented out to clients.
The big three in this realm are Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). Each of these companies just announced results, and delivered incredible results, which shouldn’t come as a surprise to anyone.
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I think these are among the best stocks to buy now and hold for the next decade, even after any gains following a post-earnings pop.
Each company just crushed cloud computing results
Starting with the largest, Amazon Web Services (AWS) had a very strong quarter. Wall Street analysts only expected AWS to deliver 31% growth; instead, it came in at 37%. This shows the strength of Amazon’s business and how it’s well-positioned to maintain its title as the largest cloud computing provider.
I’d argue that Microsoft Azure posted the weakest quarter of the three, but it was still quite strong compared to most businesses. Azure’s revenue rose 43%, although we don’t know the revenue or profit profile of the business because Microsoft doesn’t reveal the numbers for individual business units like Amazon and Alphabet do. That’s faster than AWS, so why was it a worse quarter? During the previous quarter, Azure grew at 40%, so its growth rate isn’t accelerating. For comparison, AWS’s growth rate during Q1 was 28%.
However, Alphabet’s Google Cloud trumps them all as the best-performing cloud computing business. During Q2, it posted an unbelievable 82% revenue growth rate. However, there’s a catch here. While Google Cloud is doing great as a business, it’s also benefiting from selling its custom AI chips to external customers and accounting for the revenue in this division. This isn’t an apples-to-apples comparison to the other two, but I’d still wager that even when those results are stripped out, it’s the fastest-growing of the three.
So, with AWS’s growth rate accelerating and Google Cloud’s as well, I think these two are the main winners. However, don’t sleep on Microsoft, as it’s still delivering solid results; they’re just not as good as the others. Regardless, some of this is accounted for in valuations.
