Big tech triumphs in the cloud


Three of the six biggest companies in the Nasdaq-100 reported earnings last night. All three scored big wins in cloud computing. (AMZN) topped the list by growing its “AWS” (Amazon Web Services) segment by 49 percent in the first quarter. Profitability shot up 57 percent thanks to margin expansion. That helped AMZN crush estimates and fly to a new all-time high this morning.

“AWS services are by far the most evolved and most functionality-rich,” CEO Jeff Bezos said in a statement, attributing his company’s leadership to “the unusual advantage of a seven-year head start before facing like-minded competition.”

That might have been a reference to Microsoft (MSFT), which seemed to lack enthusiasm for cloud computing before Satya Nadella took the helm as CEO in 2014. But last night the parent of Windows and Office delivered 17 percent growth in its intelligent cloud. Some analysts see the potential for MSFT exploiting its dominant position in business computing to cross sell more cloud services.

A quick lesson in case you don’t know what “cloud” computing is. Simply put, it’s the practice of software running on remote servers managed by companies like AMZN or MSFT. It’s been replacing traditional programs installed on your own desktop for the last decade or so. Customers like it because the outside firms keep servers running smoothly, and vendors like it because the revenue tends to be more stable.

Intel (INTC), the sixth-biggest member of the Nasdaq-100, rounds out today’s list. Once upon a time the semiconductor giant thrived on providing chips to all those PCs. But last night it reported 24 percent growth in data centers — the server farms at the heart of cloud computing. Old-school desktops grew just 3 percent and now account for just half of INTC’s business.

By the way, the other major stocks in the Nasdaq-100 are:

1. Apple (AAPL), which reports earnings the afternoon of next Tuesday, May 1.

4. Alphabet (GOOGL & GOOG), which reported mixed results Monday afternoon.

5. Facebook (FB), which issued better-than-expected earnings on Wednesday night.

In conclusion: Cloud computing isn’t new, but it’s growing fast. Executives and analysts see plenty of room for expansion, so investors may want to keep their eyes open for ways to benefit from the trend. We’ll explore other companies in future posts.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.