The cloud computing sector continues to thrive in the modern business, enabling companies to scale operations, enhance efficiency, and innovate rapidly. High-growth cloud computing stocks are benefiting from this trend as organizations across industries shift to cloud-based solutions.
Amid this backdrop, investors could add fundamentally solid cloud computing stocks, such as Atlassian Corporation (TEAM), The Trade Desk, Inc. (TTD), and AppLovin Corporation (APP) to their watchlists for growth potential.
One of the driving forces behind the growth of cloud computing is the increasing adoption of hybrid and multi-cloud strategies. Enterprises are no longer relying on a single provider but are instead diversifying their cloud usage to optimize costs and enhance security and functionality. According to a Forbes survey, out of 727 cloud technology decision-makers at large companies, 63% have a multi-cloud strategy established.
The rise of edge computing further boosts the appeal of cloud stocks. By bringing data processing closer to the source, edge computing reduces latency and enhances performance for applications like IoT, manufacturing, energy, and autonomous vehicles. Cloud companies investing in edge infrastructure are extending digital transformation.
Furthermore, the global cloud computing market is anticipated to reach $2.39 trillion by 2030, exhibiting a CAGR of 21.2%. As companies continue to digitize and innovate, the demand for scalable, secure, and cost-effective cloud solutions will only grow, offering compelling investment opportunities.
Considering these encouraging trends, let’s examine the fundamentals of the three Software - Application stock picks, beginning with the third choice.
Stock #3: Atlassian Corporation (TEAM)
Headquartered in Sydney, Australia, TEAM is a global technology company that designs, develops, licenses, and maintains various software products. Its product portfolio includes Jira Software and Jira Work Management, Confluence, and Trello.
On December 4, TEAM announced a multi-year strategic collaboration agreement with Amazon Web Services (AWS) to expedite cloud transformation and deliver advanced AI and security capabilities to enterprise customers. This agreement will help support the migration of millions of enterprise users to TEAM’s Cloud running on AWS, leveraging both the party’s security, and privacy of cloud.
For the fiscal 2025 first quarter that ended on September 30, TEAM’s total revenues increased 21.5% year-over-year to $1.19 billion. The company’s non-GAAP gross profit grew 21.4% from the same period last year to $998.49 million.
Its non-GAAP operating income is $268.05 million, indicating a 19.2% growth from the prior year's quarter. Moreover, TEAM’s non-GAAP net income came in at $199.70 million and $0.77 per share, up 18.2% and 18.5% year-over-year, respectively.
The consensus revenue estimate of $1.24 billion for the fiscal second quarter (ending December 2024) represents a 16.9% increase year-over-year. The consensus EPS estimate of $0.76 for the same quarter indicates a 3.5% improvement year-over-year. The company has an excellent surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
TEAM’s revenue has grown at CAGRs of 26.8% and 28.5% over the past three and five years, respectively. Likewise, the company’s levered FCF has increased at a CAGR of 31.6% over the past three years.
TEAM shares have surged 63.3% over the past six months and 56.5% over the past three months to close the last trading session at $250.19.
TEAM’s stance is apparent in its POWR Ratings. The stock has a B grade for Growth, Sentiment, and Quality. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Among the 126 stocks in the Software - Application industry, it is ranked #67. Click here to see the additional TEAM ratings (Value, Momentum, and Stability).
Stock #2: The Trade Desk, Inc. (TTD)
TTD operates as a technology company internationally, offering a self-service cloud-based platform that allows buyers to plan, manage, optimize, and measure data-driven digital advertising campaigns across various ad formats and channels.
On November 20, TTD announced that it had developed Ventura, an innovative new streaming TV Operating System (OS). TTD will partner with TV Original Equipment Manufacturers (OEMs) and other streaming TV aggregators to deploy Ventura. This development should help advertisers maximize campaign performance, giving consumers a better TV ad experience when streaming.
During the third quarter that ended on September 30, TTD’s revenue increased 27.3% year-over-year, amounting to $628.02 million. It posted income from operations of $108.48 million, indicating a 187.9% increase from the prior-year quarter.
In addition, the company’s non-GAAP net income stood at $207.23 million, up 23.9% year-over-year, while its non-GAAP earnings per share grew 24.2% from the year-ago value to $0.41. Also, its adjusted EBITDA rose 28.8% from the year-ago value to $257.03 million.
Street expects TTD’s revenue for the fiscal fourth quarter (ending December 2024) to increase 25.3% year-over-year to $759.32 million. Its EPS for the same period is expected to register a 38.6% growth from the prior year, settling at $0.57. In addition, it surpassed the consensus revenue estimates in each of the trailing four quarters, which is impressive.
Moreover, TTD’s revenue has grown at CAGRs of 30.7% and 27.3% over the past three and five years, respectively. In addition, its EPS increased at 24.9% CAGR over the past five years.
Over the past year, the stock has surged 69.2%, closing the last trading session at $127.93.
TTD’s POWR Ratings reflect this outlook. It has an A grade for Growth and a B for Quality and is ranked #66 out of 126 stocks in the same industry. To see the other ratings of TTD for Value, Momentum, Stability, and Sentiment, click here.
Stock #1: AppLovin Corporation (APP)
APP engages in building a software-based platform for advertisers to enhance the marketing and monetization of their content worldwide. The company operates through two segments: Software Platform and Apps.
APP’s revenue for the third quarter (ended September 30, 2024) increased 38.6% year-over-year to $1.19 billion. Its income from operations increased 187.1% year-over-year to $534.93 million. Its net income came in at $434.42 million and $1.25 per share, up 299.9% and 316.7% year-over-year, respectively.
APP’s adjusted EBITDA rose 72.1% from a year-ago period to $721.62 million. Also, the company reported a free cash flow of $1.38 billion, indicating a 97.6% growth from the prior year’s quarter.
Analysts expect APP’s revenue for the fourth quarter (ending December 2024) to increase 31.9% year-over-year to $1.26 billion, while its EPS for the same quarter is expected to grow 154.8% from the prior year to $1.25. Moreover, the company has consistently exceeded expectations, surpassing the consensus EPS estimates in each of the trailing four quarters.
Over the past three years, APP’s EBIT and normalized net income grew at CAGRs of 146% and 434.8%, respectively. Its total assets grew at 6% CAGR over the past three years.
The stock has gained 685.6% year-to-date and 359.4% over the past nine months to close the last trading session at $313.07.
APP’s fundamentals are reflected in its POWR Ratings. The stock has an A grade for Quality and a B for Growth. It is ranked #62 in the Software - Application industry.
Beyond what is stated above, we’ve also rated APP for Value, Momentum, Stability, and Sentiment. Get all of APP’s ratings here.
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APP shares were trading at $318.07 per share on Thursday afternoon, up $5.00 (+1.60%). Year-to-date, APP has gained 698.17%, versus a 24.98% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
