The digital transformation in the business world was already well underway when 2020 began, but the emergence of the COVID-19 pandemic led to a notable spike in the rate at which organizations adopted cloud computing. Amazon (AMZN 0.60%) was a pioneer in this tech realm, and its Amazon Web Services (AWS) is still winning the largest slice of the business in it with about a third of the cloud infrastructure market. But investors who focus narrowly on the market leader risk missing out on an ever-growing list of opportunities in this fast-growing sector.

The advent of the cloud has created a host of new opportunities, and the companies that are taking the best advantage of them can provide excellent long-term gains for savvy investors. Let's consider a few of cloud computing's biggest business segments, and the companies that are the clear winners in each area.

Business man in suit looking at cloud with falling $100 bills.

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Twilio: Taking platform-as-a-service to new heights

In its simplest form, a platform-as-a-service company provides a cloud-based structure for developers, providing them with all the resources necessary to build software applications. These include access to servers, storage, and networking, all of which can be managed remotely.

Plenty of businesses figured out pretty early in the pandemic that they were going to need to do more to keep the lines of communication open, allowing customers to reach them wherever they might be. That's where Twilio (TWLO 0.77%) comes in. It provides a cloud-based framework that enables developers to seamlessly embed communications tools into business software and apps, so users can communicate directly with a company via telephone, video, or text message -- all without ever leaving its app. Adding such functions to an app, which once took developers weeks or even months, can be accomplished with Twilio's assistance in a matter of hours. The company's technology now underpins real-time updates from ride-hailing services and food delivery services, password resets within apps, chats with customer service, and much more.

Twilio has become the leading cloud communications platform, but that's just the beginning of its aspirations. The company has ambitions to become a top-tier customer engagement platform, offering its clients a single, unified view of all their customer interactions. To that end, Twilio recently acquired SendGrid, with its leading email communication framework, and Segment, a leading customer data platform. Those deals brought it closer to its ultimate goal of creating a toolkit that can be used by every software developer in the world. 

The company's strategy is bearing fruit. Revenue grew 55% in 2020, and adjusted profit rose 57%. This growth was fueled by an expanding client base, as its total active customer count grew 23% to 221,000. Not only is Twilio attracting new customers, but its existing customers are spending more: Its dollar-based net expansion rate grew to 139%. 

The company's recent acquisitions have also expanded its opportunities. Management now estimates Twilio's total addressable market will grow to $87 billion by 2023. Given the company generated revenue of just $1.76 billion last year, the runway ahead is long.

Fingers balancing a mobile device with an e-signature icon projected above the device.

Image source: Getty Images.

DocuSign: It's not just about digital signatures

Software-as-a-service (SaaS) -- as the name implies -- allows businesses and consumers to access software via the cloud on a subscription basis, rather than buying it outright. The ease and convenience of accessing these cloud-based options helped businesses move ahead even amid the challenges of the past year. A single example of those challenges was that with in-person meetings off the table, more agreements and contracts would need to be signed and ratified digitally. DocuSign (DOCU -0.17%) was there to answer the call.

The company is the undisputed leader in electronic signatures, with a 70% share of this large and growing market. That alone would make it a stock worth considering, but DocuSign's offerings don't stop there.

"Typically, e-signature is the first step that many customers take on their broader digital transformation journey with us," said CEO Dan Springer on a recent earnings call. "So from a financial point of view, we believe this surge in e-signature adoption bodes well for future Agreement Cloud expansion." 

DocuSign launched its Agreement Cloud in early 2019, providing a suite of products and integrations designed to digitally transform how organizations prepare, sign, act on, and manage agreements. It offers a wide range of functionality, including one-click consent on websites, automating the verification process of government-issued IDs, and managing the entire life cycle of agreements from conception to implementation. 

That strategy is paying off. In its fiscal 2021 (which ended Jan. 31), DocuSign's revenue grew 49%, while its adjusted earnings per share nearly tripled.  

With the addition of the Agreement Cloud, management estimates DocuSign's total addressable market has grown to more than $50 billion. This pales in comparison to the $1.5 billion in revenue it generated last year, illustrating the massive opportunity for growth that remains ahead of it.

A bank of servers in a data center.

Image source: Getty Images.

Microsoft: Infrastructure as a service (IaaS) at its best

Amazon popularized infrastructure-as-a-service (IaaS) by offering a wide range of data center services -- including storage, computing, networking, and security -- to businesses on an as-needed basis.

While the e-commerce giant is still the undisputed leader in IaaS, Microsoft (MSFT -0.06%) is the No. 2 player and giving it a run for its money. Microsoft's Azure has become the chief rival to AWS, growing at a faster rate and slowly closing the gap. In the fourth quarter, Azure's revenues grew 50% year over year, outpacing AWS's 28% growth. 

However, Microsoft proved last year that its strength derives in part from the diversity of its offerings. The company provides a wide assortment of cloud-based services, including Microsoft 365, Teams video conferencing software, Windows Virtual Desktop, and Dynamics accounting software.

It's worth noting that Microsoft doesn't just have its head in the cloud -- a variety of enterprise and consumer products round out its portfolio. These include its LinkedIn professional network, its Xbox gaming platform, and a host of other personal and business software products.

For its fiscal 2020, Microsoft showed that it's still a force to be reckoned with. Revenue grew 14%, driven by meaningful contributions from each of its major business segments. Operating income grew 23%, while adjusted earnings per share grew 21%.

Over the past year, Microsoft stock is up roughly 47% -- not bad for a company with a $1.78 trillion market cap. The tech giant also pays a respectable dividend which yields about 1% at current share prices, and it's using just 31% of profits to fund the payout.

With its wide assortment of stable, cash-generating businesses, its high-growth cloud segment, and its respectable dividend, it's easy to make the case that Microsoft is an attractive buy now.

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You get what you pay for

Each of these companies has been a star performer over the past year, and therein lies the catch: None of these stocks is cheap using traditional valuation metrics. Twilio, DocuSign, and Microsoft are selling for 32, 31, and 11 times sales, respectively -- when a good price-to-sales ratio for a stock is generally between 1 and 2.

That said, each of these cloud-based businesses has a long and prosperous path ahead, and investors have been willing to pay up in anticipation of the impressive top-line growth and profits yet to come. Given the breadth and length of the opportunities ahead for each of them, now is the time to buy these cloud pioneers.