It isn't Facebook's (NASDAQ:FB) past results -- stellar as they've been -- that should impress investors; it's the fact the social media company has so many growth drivers that should make for a great ride for years to come. As for Microsoft (NASDAQ:MSFT), it doesn't sport Facebook's sky-high revenue and earnings growth, but it has positioned itself as a leader in a market with unlimited potential. Finally, Adobe Systems (NASDAQ:ADBE) makes this list of tech company stocks to buy and hold forever thanks to CEO Shantanu Narayen's plan to alter its business model to emphasize building a reliable foundation investors can rely on.
Despite their differences, these tech industry leaders have one thing in common: each warrants a place in a long-term investor's portfolio.
Here we go again
The expectations ahead of Facebook's third-quarter results earlier this week spoke volumes as to why the company is on this list. Earnings estimates were for $0.97 a share and revenue of $7 billion, 56% above Q3 2015's $4.5 billion. Facebook actually over-delivered on those sky-high estimates, reporting $7 billion in sales and earnings-per-share excluding one-time expenses of $1.09, an astounding 91% improvement over last year's $0.57.
Facebook's results are even more impressive considering it has multiple, as-yet-untouched, revenue drivers waiting in the wings. The billion-plus monthly average users (MAUs) on both WhatsApp and Messenger aren't even contributing to Facebook's industry-leading results, yet it still commands an estimated 68% of the world's social media ad spend.
Change is good
When CEO Satya Nadella took the reins at Microsoft, shareholders were not a happy bunch. Microsoft stock had been languishing in lockstep with the already fading PC industry. Then came Nadella's "cloud first" initiative, and today Microsoft offers investors long-term growth potential along with a 2.6% dividend yield.
Windows is still a critical piece of its business, but the perception of Microsoft is changing. No longer is Microsoft "the PC company." Now, it's all about the cloud. And with an annual cloud revenue run-rate of over $13 billion last quarter, Microsoft is one of the ballooning industry's undisputed leaders.
Microsoft separated itself from the cloud pack by recognizing early on that its real opportunities lay in utilizing its Azure cloud platform as a means to an end -- in this case, generating cloud Software-as-a-Service (SaaS) sales. It's not a coincidence that commercial Office 365 revenue soared 51% last quarter, or that Dynamics CRM grew sales 11%. Then there's Microsoft's pending $26.2 billion acquisition of user-data-rich LinkedIn (NYSE:LNKD.DL), which will give it another source of growth on deck.
Slow but steady
Adobe isn't going to report the 91% jump in earnings in the current quarter Facebook did, nor can it boast $13 billion in cloud sales, a la Microsoft. But what Adobe will deliver, as it has since its shift to building its annual recurring revenue (ARR) began, is stable, consistent growth that investors can expect to continue for years to come.
There was a lot to like about Adobe's third quarter, but what really jumped out was its $3.7 billion in ARR. In a record quarter during which it generated $1.46 billion, to already have recurring revenue equal to more than three times that is a significant win. For some perspective, Adobe's ARR was 40% higher than last year's $2.65 billion, and 30% higher sequentially.
Narayen's focus on building subscription-based recurring revenue lacks the pizzazz of some high-flying tech companies' business plans -- and that's is exactly why it has earned a spot on this list. There's usually a place in most portfolios for the proverbial tortoise to balance out the aspiring hares, and Adobe fits that niche perfectly. And with its recent expansion into virtual reality and augmented reality taking root, Adobe has its own additional sources of future growth mapped out, too.
Tim Brugger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool owns shares of LinkedIn and Microsoft. The Motley Fool recommends Adobe Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.