The software industry’s growth prospects appear appealing with the ever-expanding demand for enterprise software and the transition to cloud systems. This is also fueled by robust companies’ spending, and latest advancements in technologies.
Given the industry’s resilient outlook, it could be wise to invest in high-growth cloud stocks Workday, Inc. (WDAY), Adobe Inc. (ADBE), and Salesforce, Inc. (CRM) which are revolutionizing enterprise tech.
As more and more companies shift to cloud services, spending in the industry are continuously on the rise. During the second quarter 2024, global spending on cloud infrastructure services grew 19% year-on-year to reach $78.20 billion with companies growing IT budgets, where a substantial portion of spending is assigned towards AI-related investments.
Also, Gartner projects worldwide end-user spending on public cloud services to rise by 20.4% to reach around $675.40 billion in 2024 majorly driven by generative AI (GenAI) and application modernization. The spending is further anticipated to surge exponentially at a CAGR of 19.4% until 2028.
With the growing cloud application by enterprises and changing market dynamics, the global enterprise software market is expected to grow at a CAGR of 11.5%, resulting in a market volume of $517.26 billion by 2030. Factors like increasing end-use enterprises’ expenditures, demand for better digital infrastructure, advancements’ in cloud analytical tools fuel the market.
Amid the current market trends, investors could consider high-growth cloud stocks as digitalization is on the rise and companies are vigorously investing in cloud systems and technology integration. High-growth cloud stocks can potentially yield long-term gains and offer wide growth opportunities for the investors.
Given the promising prospects of the Software - Application industry, let’s look at the fundamentals of the above-mentioned stocks, starting with the third stock.
Stock #3: Workday, Inc. (WDAY)
WDAY provides enterprise cloud applications internationally. The company’s applications help its customers to plan, execute, analyze, and extend to other applications and environments to manage their business and operations.
On November 4, WDAY announced a partnership with Compa, the leading provider of software-delivered market data, to bring Compa’s real-time market intelligence directly into Workday, to help companies make more informed pay decisions to attract and retain top talent.
Also, on September 19, WDAY and The Josh Bersin Company collaborated, aimed at integrating The Josh Bersin Company’s market-leading AI-powered expert assistant, Galileo™, with Workday Human Capital Management (HCM). This integration will allow WDAY users to ask questions about current HR best practices and get advice and assistance.
On September 18, WDAY launched Workday Wellness, a new AI-powered solution that will provide companies with a real-time view into which benefits and wellness offerings their employees want and use. This will empower companies with AI-driven recommendations and deliver a more personalized wellness experience for their employees.
During the second quarter that ended on July 31, 2024, WDAY’s total revenues increased 16.7% year-over-year to $2.09 billion. The company’s non-GAAP operating income of $518 million reflects 23% growth from the year-ago period. The company’s net income totaled $132 million, up 67.1% from the prior year’s quarter, while its non-GAAP net income per share rose 22.4% year-over-year to $1.75.
In addition, the company’s free cash flows of $516 million indicate an increase of 43.3% year-over-year.
As per company’s updated guidance for the fiscal 2025, WDAY expects Subscription revenue of $1.95 billion, representing growth of 16% during the third quarter.
Also, for the full year, the company expects Subscription revenue to range between $7.70 billion and $7.72 billion, reflecting growth of approximately 17%.
For the third quarter (ended October 2024), analysts expect WDAY’s revenue and EPS to grow 14.2% and 14.9% year-over-year to $2.13 billion and $1.76, respectively. Also, the company topped the consensus revenue and EPS estimates in of the trailing four quarters.
WDAY’s stock has gained 6.9% over the past month and 16.5% over the past year to close the last trading session at $257.98.
WDAY’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Growth. It also has a B grade for Sentiment and Quality. Within the Software - Application industry, WDAY is ranked #26 of 129 stocks.
Click here to access additional ratings of WDAY for Momentum, Value and Stability.
Stock #2: Adobe Inc. (ADBE)
ADBE operates as a diversified software company globally. The company operates in three segments: Digital Media; Digital Experience; and Publishing and Advertising. The company offers products, services, and solutions that allow individuals, teams, and enterprises to create, publish, and promote content. Its flagship product is Creative Cloud that allows members to access its creative products.
On October 14, ACBE launched Premiere Pro’s first set of Firefly-powered video editing workflows powered by the new Firefly Video Model (beta), and other enhancements and upgrades to its app’s performance and user experience. New features include Generative Extend (beta), smooth out transitions and hold on shots longer for perfectly timed edits.
The new upgrades enable additions capabilities for busy editors, unlocking more creative time by tripling export speeds and offering a new context-sensitive properties panel.
On the same day, the company announced major updates to Photoshop and Illustrator, unveiling AI-powered features like Generative Fill and Generative Shape Fill to streamline workflows and enhance precision. These innovations, powered by Adobe Firefly, provide faster, more intuitive tools for creative professionals across digital and 3D design.
In the third quarter that ended on August 30, 2024, ADBE reported total revenue of $5.41 billion, up 10.6% from the prior year’s quarter. The company’s non-GAAP operating income increased 11.1% from the year-ago value to $2.51 billion. Its non-GAAP net income and EPS grew 10.8% and 13.7% year-over-year to $2.08 billion and $4.65, respectively.
Furthermore, the company’s cash and cash equivalents and total assets stood at $7.19 billion and $29.83 billion as of August 30, 2024.
Analysts expect ADBE’s revenue and EPS for the fourth quarter (ending November 2024) to increase 9.8% and 9.4% year-over-year to $5.54 billion and $4.67, respectively. Moreover, the company has surpassed the consensus EPS and revenue estimates in all four trailing quarters, which is remarkable.
Shares of ADBE have surged marginally over the past month and 1.8% over the past six months to close the last trading session at $500.92.
ADBE’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
ADBE has an A grade for Quality and a B for Sentiment and Stability. It is ranked #24 out of 129 stocks in the Software – Application industry.
In addition to the POWR Ratings we’ve stated above, we also have ADBE ratings for Growth, Momentum, and Value. Get all ADBE ratings here.
Stock #1: Salesforce, Inc. (CRM)
CRM provides Customer Relationship Management (CRM) technology to bring companies and customers together worldwide. Its service includes sales to store data, monitor leads and progress, forecast opportunities, gain insights through analytics and artificial intelligence, and deliver quotes, contracts, and invoices.
On October 29, CRM launched Agentforce, a customizable AI agent platform that autonomously handles business tasks across sales, service, marketing, and commerce. With Agentforce, users can easily create and deploy AI agents to automate processes, enhancing efficiency and customer experience without complex integration.
On September 17, CRM entered into a strategic partnership with NVIDIA to advance AI agents on the Salesforce platform, integrating NVIDIA’s AI tools to enhance customer interactions and productivity through autonomous agents and interactive avatar experiences. The collaboration will empower businesses with faster, AI-driven insights and engaging real-time digital experiences.
During the second quarter that ended July 31, 2024, CRM’s total revenues increased 8.4% year-over-year to $9.33 billion. Its non-GAAP income from operations rose 15.5% from the year-ago value to $3.14 billion. Also, the company’s non-GAAP net income came in at $2.50 billion or $2.56 per share, up 19.1% and 20.8% year-over-year, respectively.
In addition, the company’s free cash flow grew 20.2% from the year-ago value to $755 million.
According to the company’s guidance for the third quarter, CRM expects total revenue between $9.31 billion and $9.36 billion, reflecting 7% year-over-year growth. Also, its non-GAAP EPS is set to be $2.42 - $2.44.
For the full year, the company expects total revenue in the range of $37.70 billion - $38 billion, representing 7% to 8% growth from the prior year. CRM’s non-GAAP EPS is projected at $10.03 - $10.11.
Street expects CRM’s EPS to grow 15.9% year-over-year to $2.45 for the third quarter (ended October 2024). For the same quarter, the company’s revenue is expected to increase 7.2% year-over-year to $9.35 billion. Further, CRM surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past six months, the stock has gained 12.1% and 46.7% over the past year to close the last trading session at $310.78.
CRM’s bright prospects are reflected in its POWR Ratings. The stock has an overall grade of B, translating to a Buy in our proprietary rating system.
CRM has a B grade for Quality and Sentiment. It is ranked #17 among 129 stocks within the same industry.
To see the other ratings of CRM for Stability, Value, Growth, and Momentum, click here.
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CRM shares fell $0.07 (-0.02%) in after-hours trading Friday. Year-to-date, CRM has gained 22.89%, versus a 27.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
3 High-Growth Cloud Stocks Revolutionizing Enterprise Tech StockNews.com
