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2 Tech Stocks That Are Thriving Despite the Coronavirus

By Chris Neiger - Sep 5, 2020 at 9:00AM

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Customers, and investors, have flocked to these two tech giants.

The coronavirus pandemic has wreaked havoc on the U.S. economy, and pushed the country's unemployment levels up to historic highs in a matter of months. Many businesses are still reeling from the effects of the virus, but some tech stocks have actually thrived during this time.

As people are spending more time at home and businesses are looking for ways to connect with customers online, tech companies including Netflix (NFLX -1.64%) and Microsoft (MSFT -1.38%) have grown. The gains that these companies have made don't outweigh the negative effects the virus has brought on many people around the world, but they do show that some services are still in demand despite the pandemic. 

A laptop with a graph on its screen.

Image source: Getty Images.

Nothing to do but watch

Netflix was already the video streaming king long before the coronavirus showed up, but the company's business has gotten a boost as people spend more time at home. A recent survey showed that the percentage of U.S. Netflix subscribers who spent more than 10 hours per week using the video streaming service jumped to 38%, up from the pre-pandemic percentage of just 16%.

The increased number of people looking for safe ways to spend their time resulted in a net addition of 10 million paid subscribers in Netflix's second quarter, outpacing analysts' estimate of 8.26 million net adds. In fact, in the first six months of this year, Netflix added 26 million net new customers, compared to just 12 million in the first half of 2019.

The additional customers helped drive up Netflix's revenue 25% in the second quarter to $6.15 billion. Additionally, diluted earnings per share rose to $1.59, up from $0.60 in the year-ago quarter.

Netflix is certainly facing increasing competition from Disney+ and other video streaming services, but investors shouldn't be worried. The company now has 193 million global streaming paid customers, and Netflix continues to be one of the top must-have streaming services. With the virus still looming and people still spending more time at home, Netflix continues to look like a good investment -- during the coronavirus and beyond

A dark server room.

Image source: Getty Images.

Cloud computing services are in high demand

The pandemic has forced many companies to move more of their businesses online, and that's driven demand for cloud computing services. This has been good news for Microsoft's Azure cloud service, which holds 18% of the cloud computing infrastructure market. 

Azure's sales spiked 50% on a constant currency basis in the fiscal fourth quarter (reported on July 22), and the company continues to gain momentum with its customers. Microsoft's chief financial officer, Amy Hood, said on the company's recent earnings call that "In FY '20, we closed a record number of multimillion-dollar commercial cloud agreements with material growth in the number of $10 million-plus Azure contracts."

The good news for Microsoft, and its investors, is that the cloud computing infrastructure market is nowhere near finished growing. The market will expand from $73 billion in 2019 to an estimated $167 billion by 2024. The only company that leads in the space more than Microsoft is Amazon. But with such a large market, there's plenty of room for both companies to benefit. 

Microsoft's stock took a hit recently when the broader market fell, led by a decline in technology stocks. But even with the recent dip, the tech giant's share price is still up 57% over the past 12 months.

For investors looking for a strong tech company that's made huge inroads in the cloud computing segment -- and has plenty of room left to keep growing -- Microsoft looks like a great long-term play.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Microsoft, and Netflix and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
$241.16 (-1.64%) $-4.01
Microsoft Corporation Stock Quote
Microsoft Corporation
$286.15 (-1.38%) $-4.01

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