3 Cloud Computing Stocks to Buy Before 2026 as Digital Demand Soars
ZACKS·2025-12-26 14:40

Core Insights - The artificial intelligence (AI) sector, bolstered by the growth of cloud computing and data centers, is experiencing robust demand, particularly for data center capacity to manage cloud-based data [2] Group 1: Amazon.com Inc. (AMZN) - Amazon reported strong Q3 2025 results, with revenues driven by Prime and Amazon Web Services (AWS), exceeding Zacks Consensus Estimates [4] - AWS generated $33.01 billion in Q3 2025, reflecting a 20.2% year-over-year increase, with strong demand in AI and core infrastructure [5] - Amazon's AI initiatives include the use of the Claude chatbot from Anthropic and the Trainium2 AI chip, which saw a 150% sequential increase in business [5][6] - Amazon's fourth-quarter 2025 sales are projected between $206-213 billion, with an expected EPS of $1.91, indicating a 2.7% year-over-year increase [12] Group 2: Microsoft Corp. (MSFT) - Microsoft reported solid Q1 fiscal 2026 results, with intelligent cloud revenues of $30.9 billion, up 28.3% year-over-year, and Azure revenues growing 40% [14] - The company is capitalizing on AI momentum and has invested significantly in AI-powered data center infrastructure, with Q1 capex at $34.9 billion [16] - Microsoft maintains a 25% market share in the enterprise cloud market, leveraging deep integration with existing products to enhance customer retention [17] - For Q2 fiscal 2026, Microsoft expects revenues between $79.5 billion and $80.6 billion, representing a growth of 14% to 16% [21] Group 3: Alphabet Inc. (GOOGL) - Alphabet reported impressive Q3 2025 results, with AI-powered cloud revenues increasing 32% year-over-year to $15.16 billion, and a cloud backlog of $155 billion [24][26] - The company raised its 2025 capex to a range of $91-93 billion, reflecting increased investment in AI-powered data centers [24] - Alphabet's AI applications, including Gemini 2.5, have gained significant traction, with over 650 million monthly active users [26] - GOOGL has an expected revenue growth rate of 14.7% and an earnings growth rate of 4.3% for the next year [31]