There's simply no denying the world has changed in the past year. While society's digital transformation was already ongoing and even accelerating, 2020's stay-at-home orders and the consequent urgent need to convert vast numbers of jobs into remote-work positions led many companies to adopt cloud computing solutions for the first time.
Once companies have experienced the convenience that derives from employees being able to access their applications, data, and platforms from anywhere, there's simply no going back. And the list of products and services available via the cloud is long and growing. The cloud computing market, which hit an estimated $371 billion in 2020, is expected to top $832 billion by 2025.
Naturally, investors are looking for the best ways to capitalize on this opportunity and ride the increasing wave of cloud adoption. These three companies offer their shareholders clear opportunities to profit from the trend.
1. NVIDIA: The top choice of data centers worldwide
While NVIDIA (NVDA 1.45%) may not appear at first glance to be a cloud computing company, you'd have to search far and wide to find a major data center that doesn't use its cutting-edge processors.
Nearly every one of the world's top cloud providers turns to NVIDIA's graphics processing units (GPUs) to help them process data. The list includes Amazon's (AMZN -0.16%) AWS, Alphabet's (GOOGL -0.15%) (GOOG -0.08%) Google Cloud, International Business Machines' IBM Cloud, Microsoft's (MSFT -0.79%) Azure, and Alibaba Cloud -- and that's just the big dogs. Many smaller operators also rely on NVIDIA's GPUs to keep the data flowing.
Why NVIDIA? Its state-of-the-art GPUs have unrivaled parallel processing capabilities, which allow them to handle multiple complex mathematical calculations simultaneously. Turns out that this capacity is not only the key to rendering lifelike images in video games -- it's also the best solution available for powering AI systems and underpinning cloud computing.
During the first nine months of 2020, NVIDIA's revenue grew an impressive 49% year over year. However, its data center segment, which supplies processors for cloud computing, data centers, and AI, grew by 138% during the same period -- and that could be just the beginning.
Given the widespread adoption of cloud computing and the need for the company's GPUs to power the servers that underpin it, NVIDIA has a long and prosperous runway ahead.
2. Atlassian: Helping remote teams bridge the divide
One byproduct of the upheavals of the past year is the growing acknowledgment that the rise of remote work will outlast the pandemic. In fact, 74% of CFO's say their companies intend to shift at least some employees to remote work permanently, according to a survey by Gartner. As a result, teams will continue to need effective tools to help them collaborate across the distances.
That's where Atlassian (TEAM 2.90%) comes in. It provides a cloud-based platform that caters to the increasingly decentralized world of work, allowing colleagues to not only communicate in real time, but also collaborate on assignments, delegate tasks, share content, and manage projects. The Atlassian Marketplace also offers more than 4,000 third-party apps to customize the experience, and recently passed the milestone of more than $1 billion in lifetime sales.
In its fiscal first quarter, which ended Sept. 30, Atlassian's revenues grew 26% year over year. Perhaps more importantly, its subscription revenue -- driven primarily by cloud-based products -- grew by 38%. Those strong financial results were the result of solid customer gains. It added 8,620 net new customers in the quarter, bringing its total to 182,717. Year over year, that figure was up 14%. This client base includes an impressive 83% of the companies that make up the Fortune 500.
Atlassian sits at the intersection of three massive and growing markets: software, IT management, and general work management. These combine to create a total addressable market for the company of $24 billion. Given Atlassian's trailing-12-month revenue of just $1.7 billion, it should have plenty of opportunities for continued growth ahead.
3. Amazon: Pioneer and still king of the hill
It's hard to have a discussion about cloud computing without talking about one of the pioneers in the field: Amazon. When Amazon Web Services (AWS) debuted in 2006, it became the first to offer an infrastructure-as-a-service (IaaS) platform, a forerunner to modern cloud computing. The company had the market to itself for several years, and it continues to dominate the space today.
In late 2020, Amazon controlled roughly 32% of the cloud infrastructure services market, with Microsoft's Azure and Google Cloud in second and third place with 19% and 7%, respectively, according to data compiled by market analyst Canalys.
It's hard to overstate the importance of cloud computing to the tech giant. For the first nine months of 2020, AWS was responsible for nearly 13% of Amazon's revenue and 62% of its operating profits, while generating operating margins of more than 30%.
Those cash flows and profits have helped fund much of the expansion of Amazon's other business segments. This is particularly true for its international e-commerce operations, which still operate at around breakeven.
Even 15 years after its debut, AWS continues to expand at a remarkable pace, especially considering its size. For the first nine months of 2020, AWS grew by 30% from the prior-year period.
Given the acceleration in the adoption of cloud computing that has resulted from the pandemic, don't expect Amazon's gains in this arena to level off anytime soon.