Technology is constantly evolving, and enterprises must keep pace with the latest innovations if they hope to remain competitive. Cloud computing is a perfect example. Today, businesses can provision cloud services through the internet, and that technology allows them to scale more quickly and operate more efficiently because they don't have to make sizable upfront investments in infrastructure or pay to maintain costly hardware.
As a result, research company Gartner believes enterprises will spend over $540 billion on cloud services this year, and that figure will surpass $915 billion by 2025. Companies like DigitalOcean (DOCN 0.95%) and Arista Networks (ANET) are well-positioned to benefit from that unstoppable trend, and both stocks could produce monster returns over the next decade.
Here's what you should know about these two unstoppable stocks.
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1. DigitalOcean: Democratizing cloud services
DigitalOcean is a cloud-services provider. Its portfolio includes infrastructure services like compute, storage, and networking, and a growing number of platform services, like a selection of fully managed databases, including MongoDB. More importantly, those products are designed with a click-and-go interface that simplifies cloud computing for small- and medium-sized businesses (SMBs). Thanks to DigitalOcean, clients can quickly build, deploy, and scale applications without specialized training, even if they don't have an IT department.
Doubling down on that niche, the company also provides 24/7 customer service and tech support to all clients, as well as an extensive collection of learning materials, including thousands of tutorials and community-generated questions and answers. In short, its focus on simplicity and support makes its platform perfect for SMBs, and that differentiates DigitalOcean from rivals like Amazon and Microsoft. While both cloud titans undoubtedly have a more robust lineup of services, their products are designed for large enterprises backed by big IT departments.
So far, DigitalOcean's approach is working. It now has 609,000 customers, and the average customer spent 16% more over the past year. During that time, revenue rose 35% to $428.6 million, and the company generated free cash flow (FCF) of $24 million, marking its first full year of positive FCF. Even so, DigitalOcean has hardly scratched the surface of its true potential.
The company puts its market opportunity at $145 billion by 2025, a figure that accounts for the 100 million SMBs globally. And with the stock trading at 11.1 times sales -- below its historical average of 15.1 times sales -- now looks like a good time to buy. Over the next decade, I wouldn't be surprised to see DigitalOcean grow tenfold in valuation, from $5.5 billion today to $55 billion by 2032.
2. Arista Networks: Connecting cloud data centers
Cloud computing has fundamentally changed the world, allowing businesses and consumers to access software and services through the internet. But it requires powerful IT infrastructure. Data centers owned by companies like Microsoft or Meta Platforms see traffic in the millions (and even billions) of users each day. Therefore, the underlying network must be fast and flexible. Arista Networks provides that technology.
Arista's core innovation is the Extensible Operating System (EOS), the software that powers its lineup of switching and routing platforms, allowing clients to deploy a seamless network across public clouds and private data centers. That approach differs from legacy vendors like Cisco Systems, which use multiple operating systems, making network management more costly and complex for clients. Additionally, Arista relies exclusively on merchant silicon, sourcing chips from suppliers like Broadcom and Intel. That means Arista can equip its devices with the latest silicon without spending money to develop those solutions in house.
As a result, while Cisco still leads the broader data-center switching industry, Arista is the leader in the high-speed category, with ethernet switches that offer throughput of 100 gigabits per second (Gbps) and above. And that dominance has made Arista a financial machine. In 2021, revenue rose 27% to $2.9 billion, and free cash flow jumped 32% to $951.1 million.
More importantly, Arista's edge in the high-speed category bodes well for the future because that's where the industry is headed. As cloud computing becomes more common and applications become more data-intensive, data centers will need faster networking solutions. With that in mind, Arista puts its market opportunity at $35 billion by 2025, leaving plenty of room for growth. I wouldn't be surprised to see this $36 billion business grow fourfold over the next decade. That's why this unstoppable tech stock could supercharge your portfolio.
