Cloud Stocks Have Become a Haven in Tech. Here Are 4 Clear Winners.

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A server from Hewlett Packard Enterprise, which is benefiting from companies’ ongoing digital transformations.

Marijan Murat/Alamy Stock Photo

As the world emerges from the pandemic, tech companies have been put in a tough spot. They’re under pressure to sustain pandemic-era boosts, and many of them have struggled to meet the challenge, including

Zoom Video Communications

Peloton Interactive


But there’s one pandemic trend that isn’t reversing: Cloud computing is here to stay. In fact, the cloud trend is gaining strength.

Almost every company in Silicon Valley talks about the power and sustainability of “digital transformation,” the shift of more businesses—and business processes—into the digital realm. It’s an overused buzzword. I can barely say it without wincing, but digital transformation is real, and you could see the evidence throughout the latest earnings season.

The first hints came about a month ago, with quarterly results from


(ticker: MSFT),

(AMZN), and


(GOOGL). Microsoft Azure grew 46% in the latest quarter, Google Cloud grew 45%, and market leader Amazon Web Services grew 40%. The big are getting bigger—at an accelerating rate.

The cloud strength also showed up in strong results from key infrastructure providers like

Cisco Systems

(CSCO) and

Arista Networks

(ANET), and crucial chip suppliers to those companies, like


(NVDA) and



This past week of earnings news brought a fresh wave of data points from enterprise tech companies.

HP Enterprise

(HPE), which makes servers, storage, and networking hardware, posted 2% revenue growth for the quarter. That’s no great shakes on its own, but it topped Wall Street estimates—and order growth exceeded 20% for the third quarter running, with 35% order growth in its Aruba networking-hardware unit.

Pure Storage

(PSTG), which makes flash-memory-based enterprise storage, crushed expectations for the January quarter. “Any company looking at updating their systems to invest in data—which is all companies—have to consider us as one of their suppliers,” Pure CEO Charles Giancarlo says. Pure posted 41% growth in the quarter. It was the company’s best growth in four years.


(AVGO), a key chip provider to cloud players, said its April- quarter results would accelerate from 16% growth in the January quarter.

The trend is more obvious on the software side.


(CRM), the software-as-a-service sector’s largest and most seasoned player, has expanded its cloud-based offerings from its core customer relationship-management software into a host of new areas, in part via acquisition, including last year’s $28 billion purchase of messaging service Slack. On a constant currency basis, Salesforce has seen revenue growth accelerate for four quarters running, to 27% in the latest quarter, up from 19% a year ago.

“Digital transformation is an enduring secular trend,” Salesforce’s Co-CEO Bret Taylor told me this past week.

The same pattern is playing out at


(WDAY), which sells human-resources and financial-management software to large enterprises. Workday posted 22% revenue growth in its January quarter; sales have gained steam for three straight quarters.


(BOX), once a basic provider of cloud storage, now sells a suite of tools for helping companies manage, share, and protect their documents. The company also delivered better-than-expected January-quarter results. CEO Aaron Levie says that Box is benefiting from the shift to hybrid work, an increased focus on cybersecurity, and—all together now!—“digital transformation.” Box had 17% revenue growth in the quarter, accelerating for the fourth quarter in a row. A year ago, sales were up just 8%.

Finally, there’s


(SNOW), the fastest-growing of the major cloud stocks. The company sells data-analytic tools that sit on top of the three public clouds. Snowflake posted 102% growth in the January quarter, which, while extraordinary, actually left investors wanting more. The stock fell 15% on the report.

CEO Frank Slootman told me in a postearnings interview that the company recently made its software cheaper to use. Snowflake, which once sold compute time by the hour, now sells it by the second, he says. That tweak hit the company’s January 2023 revenue outlook by nearly $100 million, but Slootman thinks the move will spur customers to use more data over time.

Morgan Stanley analyst Keith Weiss writes that Snowflake is banking on the Jevons Paradox, a theory from the 19th century economist William Jevons. It holds that as resource use gets more efficient, consumption tends to increase.

Slootman is a believer. “This isn’t philanthropy,” he says. “When you make something cheaper, people buy more of it.”

Snowflake shares, which went public in September 2020 at $120 and immediately doubled, have fallen about 45% from their November peak above $400. There’s an ongoing debate on Wall Street about how to value the company. At current levels, Snowflake trades for a lofty 34 times estimated January 2023 fiscal-year sales.

But Snowflake is projecting growth of 65% to 67% for the current year, and I suspect it could be a lot higher. Last year, Snowflake’s initial forecast was for 80% growth; sales were ultimately up 106%.

While Snowflake is no value stock, the story is compelling, and Slootman is one of Silicon Valley’s most respected CEOs. If you believe the broader cloud story, I wouldn’t bet against him.

Write to Eric J. Savitz at

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