Cloud computing has been at the forefront of growth in technology for the past few years, offering efficient solutions to businesses and consumers. Recently, cloud computing exchange-traded funds (ETFs) have been on a run, signaling strong investor confidence and market momentum.
Most pure-play cloud computing ETFs like WisdomTree Cloud Computing ETF WCLD, First Trust Cloud Computing ETF SKYY and Global X Cloud Computing ETF CLOU have generated solid returns in the past month.
Zacks Rank #2 (Buy) ETF WCLD added 7.8% in the past month while Zacks Rank #1 (Strong Buy) ETF SKYY generated 7.4% gains. The Zacks Rank #2 ETF CLOU has added 5.3% in the past month in comparison to 0.6% gain in the SPDR S&P 500 ETF Trust SPY and a 1.2% uptick in the Nasdaq-100 ETF Invesco QQQ Trust QQQ.
The top ranks associated with these cloud computing ETFs indicate the potential for further gains in these ETFs. Let’s tell you why.
Growth in Cloud Infrastructure
The widespread adoption of remote work and e-commerce has continued to fuel the need for scalable and reliable cloud solutions. Moreover, advancements in cloud technologies, including artificial intelligence (AI), machine learning (ML), and cybersecurity enhancements, have expanded the use cases for cloud services, attracting a broader customer base.
Investments in cloud infrastructure have also been a significant growth driver. Companies have expanded their global data center footprint to meet the surging demand, improve service delivery, and ensure data sovereignty compliance.
In Q3 of 2024, cloud infrastructure service spending grew 23% compared to the same period in 2023, reaching over $84 billion, as quoted on Statista.com. The "Big Three" -- Amazon AMZN, Microsoft MSFT and Alphabet GOOGL -- make up more than 60% of the ever-growing cloud market.
Amazon Web Services (AWS), is leading the pack. According to estimates from Synergy Research Group, Amazon’s market share in the worldwide cloud infrastructure market amounted to 31% in the third quarter of 2024, ahead of Microsoft's Azure platform at 20% and Google Cloud at 11%, as quoted on Statista.
Cloud infrastructure services spending’s year-on-year growth rate has been rising for the fourth successive quarter, after seeing growth rates soften through much of 2023. However, generative AI is a major factor behind the recent market acceleration.
In late June, IDC forecast that cloud infrastructure spending will grow 26.1% year over year in 2024 to $138.3 billion. Non-cloud infrastructure is forecast to grow 8.4% to $64.8 billion. Shared cloud infrastructure is expected to grow 30.4% year over year to $108.3 billion for the full year.
Upbeat Corporate Earnings
Microsoft's Intelligent Cloud group generated $38.9 billion in sales in Q1 of 2024, up 22% year-over-year. Alphabet's Google Cloud said that revenues increased by 35% year over year. Its cloud business posted revenues of $11.4 billion, with an operating margin of 17%. Revenue growth at Amazon Web Services has accelerated year over year for five successive quarters. The unit recorded its highest profit margin since at least 2014. AWS revenues increased 19% to $27.45 billion.
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Alphabet Inc. (GOOGL) : Free Stock Analysis Report
First Trust Cloud Computing ETF (SKYY): ETF Research Reports
Global X Cloud Computing ETF (CLOU): ETF Research Reports
WisdomTree Cloud Computing ETF (WCLD): ETF Research Reports
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