Forever is a long time, and few companies have the business fundamentals to grow profitably for decades. It's an especially tough ask in the technology sector, where innovation is constantly nipping at your heels. Against the odds, some technology companies stand a reasonable shot at being successful "buy and hold" stocks for years to come. Here are five dominant companies that can generate loads of cash to keep competitors at bay and get shareholders through tough times.
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1. Microsoft
Technology conglomerate Microsoft (MSFT -1.27%) is one of the most powerful software companies. Its Windows operating system has dominated for decades; 75% of the world's computers and tablets use it. Microsoft's Azure is the world's second-leading cloud infrastructure provider, owning 21% of the global market.
MSFT Free Cash Flow data by YCharts
Microsoft has continued growing, earning more free cash flow and net income (bottom line profit) over decades, evolving its business to capture new opportunities. For example, Azure is a key piece of Microsoft today, but it didn't exist until 2010! The company has about $104 billion in cash and short-term investments -- immense resources to continue investing in new products or acquisitions.
2. AT&T
Telecommunications company AT&T (T 1.10%) is the leading wireless network provider in the United States, with 67 million phone customers and another 6 million using fiber internet. The infrastructure that powers wireless networks costs billions of dollars that AT&T has invested over the years. The expensive nature of the industry makes it unlikely that new competitors will spend that sort of money just to attempt to challenge existing leaders like AT&T.
T Free Cash Flow data by YCharts
You can see in the chart above how these large investments have caused some volatility in the company's finances, but free cash flow and profits have trended higher over the long term. AT&T tried and failed to get into streaming, which loaded the balance sheet with $168 billion in net debt (debt minus cash on hand). However, it recently spun off its entertainment to focus on its core telecom business and pay down debt, so the company could perform better moving forward.
3. Amazon
E-commerce company Amazon (AMZN -2.56%) dominates online shopping in the United States with about 41% of the market. The company does nearly half a trillion dollars in annual revenue, making it so big that most other retailers can't compete on price and convenience (who here has Amazon Prime?). Amazon Web Services is also the world's leading cloud infrastructure offering, with an estimated 33% market share. These two segments make up most of the company.
AMZN Free Cash Flow data by YCharts
Amazon's e-commerce business is massive, but it's low-margin -- it sells at low prices to protect its market share. Fortunately, AWS is very profitable, resulting in the company generating $39 billion in operating profits over the past four quarters. Free cash flow recently plunged due to inflation and some investments, but Amazon also has $66 billion in cash and short-term investments, giving it financial stability.
4. Meta Platforms
Social media company Meta Platforms (META -4.13%) owns a handful of social sites and apps, like Facebook, Instagram, and WhatsApp, as well as "Reality Labs," where it's developing metaverse and virtual reality products. Meta has roughly 3.6 billion people who use its networks each month; the company sells ads, generating billions of dollars in profits. Below, you can see how lucrative this has been, with free cash flow and net income soaring since the company went public.
FB Free Cash Flow data by YCharts
Many of Meta's users have iPhones, so Apple's 2021 privacy policy update, which can block apps from tracking users, has created some headwinds for Meta. Studies have shown that social media is addictive, so this modern "sin stock" will probably be around for years. Meta's fantastic profitability and $43 billion in cash on hand should give investors peace of mind.
5. Alphabet
Technology conglomerate Alphabet (GOOG -1.10%) might be the best textbook example of a monopoly. Its Google search engine has a staggering 85% market share of worldwide search activity! Additionally, its video platform YouTube is the world's second-most-visited site. These massive amounts of traffic enable the company to generate billions in ad revenue each year, translating to billions of annual cash flow and net income for the company and its shareholders.
GOOG Free Cash Flow data by YCharts
Over the past four quarters, Alphabet's revenue is $270 billion, and $69 billion of that was free cash flow. The company has $134 billion in cash and short-term investments on its balance sheet, a staggering "war chest" of capital to protect its core business and help grow new projects. "Google" has become a verb for looking things up online, so investors should feel confident that Alphabet will remain a tech powerhouse for many years to come.
