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AMZN, MSFT, GOOGL & ORCL Wins Pentagon Deal, Boosts Cloud Game

The intense cloud-computing battle gets a boost at the end of 2022 with the latest decision of the U.S. Defense Department.

Pentagon declared Amazon AMZN, Alphabet GOOGL, Microsoft MSFT and Oracle ORCL as the winners of the multibillion-dollar cloud computing contract in an announcement that was long pending.

The underlined contract for the Joint Warfighting Cloud Capability (JWCC) highlights the requirement of the Defense Department to rely on multiple cloud providers.

The contract will allow U.S. military personnel to access top-secret information in the cloud from anywhere in the world.

Further, the contract is a multiple-award procurement comprising four sub-contracts with a shared ceiling of $9 Billion. Each of the four tech companies is guaranteed at least $100,000 under the contract.

We note that the latest Pentagon decision has taken the cloud computing game to another level among the abovementioned tech giants.

Deal Bodes Well, Cloud Prospects

The latest contract bodes well for the companies’ prospects in the booming cloud computing space.

Our world’s fast-paced, data-driven nature has made cloud technology almost indispensable to businesses globally.

Growing adoption of the Internet of Things (IoT), Artificial Intelligence (AI), Machine Learning (ML) and big data within the cloud infrastructure remain the key catalysts in the infrastructure as a service (IaaS) market.

According to the Fortune Business Insights report, the global cloud market is expected to hit $480.04 billion in 2022 and reach $1.7 trillion by 2029 by witnessing a CAGR of 19.9% between 2022 and 2029.

According to a Facts and Factors report, the market is likely to hit $1.025 trillion by 2028 at a CAGR of 15.8% between 2022 and 2028.

Per Grand View Research data, the underlined market is likely to experience a CAGR of 15.7% over the period of 2022-2030.

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AMZN, GOOGL, MSFT & ORCL Placed Well

The latest win and these tech giants’ constant efforts place them well to capitalize on the immense growth prospects in the cloud computing market.

Moreover, the Pentagon contract highlights the robustness and reliability of the cloud computing platforms of these tech giants.

Amazon, the dominant player in this market, carrying a Zacks Rank #3 (Hold), is continuously riding on its well-performing cloud platform — Amazon Web Services (“AWS”). The platform has been helping the company maintain its leading position on the back of its growing adoption, popularity and strong services portfolio.

It recently unveiled many news services like Amazon DataZone, Amazon Security Lake, AWS SimSpace Weaver, AWS Supply Chain and AWS Clean Rooms, among others.

Apart from portfolio strength, the company’s increasing number of regions and availability zones remains noteworthy. Currently, AWS is operating 90 availability zones across 28 geographic regions.

These endeavors are likely to continue aiding AWS’ dominance in the cloud computing market and drive the top line in the days ahead.

In third-quarter 2022, AWS generated revenues of $20.5 billion (16% of total sales), which grew 27% year over year. In the same quarter, AWS accounted for 32% of the global cloud spending, maintaining its leading position in the cloud market, per the Canalys report.

Microsoft, carrying a Zacks Rank #3, is currently riding on the robust adoption of Azure cloud offerings. Azure's increasing number of availability zones and regions globally and strength in its consumption-based business will likely continue driving Microsoft's cloud momentum in the near term.

In the recently reported first-quarter fiscal 2023, Microsoft’s Intelligent Cloud segment, including Azure cloud services and server and enterprise products, generated $20.3 billion (40.6% to total revenues). The metric increased 20.2% year over year. Azure was recognized as the second-largest cloud service provider, accounting for 22% of worldwide cloud spending.

Google Cloud is continuously contributing substantial growth to the total revenues of Alphabet. Expanding data centers, availability zones and cloud regions are expected to keep boosting Alphabet's cloud position.

Google Cloud’s offerings, including Google Cloud Platform and Google Workspace, have constantly been gaining momentum. The company’s growing investments in infrastructure, security, data management, analytics and AI have been major positives.

In third-quarter 2022, Google Cloud revenues rose 37.6% year over year to $6.9 billion, accounting for 9.9% of the total revenues. The company represented 9% of the cloud spending and was marked the third-largest cloud provider.

Oracle is benefiting from the solid momentum across its cloud business, driven by the strong uptake of Oracle Cloud Infrastructure services and Autonomous Database offerings. Solid adoption of cloud-based applications, comprising NetSuite Enterprise Resource Planning (ERP), Fusion ERP and Fusion Human Capital Management, remains positive.

In the first-quarter fiscal 2023, the Zacks Rank #2 (Buy) company’s cloud services and license support revenues (73% of total revenues) increased 14% year over year to $8.41 billion.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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