Cloud computing set for rapid growth in 2021; these ASX stocks could benefit

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• Cloud computing already $4 billion and will reach $6.7 billion by 2022
• Cloud services and infrastructure enable lower capital expenditure for clients
• Several ASX stocks benefited from the sector’s rapid growth

Cloud computing has been one of the fastest growing industries worldwide and there are a number of ASX stocks directly or indirectly involved.

The “cloud” is essentially anything run on the internet instead of locally on your computers.

In a business context, cloud computing enables companies to use their software and services on a “pay as you go” agreement via the internet rather than own their own infrastructure.

“The more elastic cost structure of cloud services with lower capital expenditure frees up resources allowing firms across the globe to focus on innovative ways to better customer experience and revenue generation,” Commvault’s David Rajkovic explained to Stockhead.

This may seem like something that goes without saying but as cloud demand has grown, so have companies that operate the infrastructure, as well as relevant software powered by that infrastructure.

Amazon Web Services and Oracle are two global examples but locally there are also handful of successes, particularly NextDC (ASX:NXT).

Back in 2012 the Australian cloud market was worth $884 million. But Gartner estimates it is now $4 billion and will grow to $6.7 billion in the next couple of years. This would represent growth of over 600 per cent in a decade.

Citing this statistic, Commvault’s Rajkovic declared: “We’ll see more enterprise companies investing heavily and expediting to exciting new cloud services in the years to come.”

Here’s a list of ASX stocks involved with cloud computing…

Key players

There are only a handful of pure play stocks while dozens of others are software stocks relying on cloud infrastructure.

NextDC (ASX:NXT) is the biggest company of all of them, operating data centres across Australia. It listed a decade ago as another startup of Bevan Slattery’s but is now a $5.5 billion company – off the back of this demand for cloud infrastructure.

There are two other other pure play data centres in DXN (ASX:DXN) and recently listed DC Two (ASX:DC2).

Many telco stocks such as 5G Networks (ASX:5GN) run their own data centres too but the biggest Australian player, from a footprint perspective, is Silicon Valley-based Equinix (NYSE:EQIX).

There are several other software stocks that utilise cloud infrastructure and often operate under a Software as a Service (SaaS) model.

Large caps include business services software company Xero (ASX:XRO) and insurance-focused Fineos (ASX:FCL).

Small caps tend to focus on niche services but many have still been in high demand such as Cirralto (ASX:CRO), which has a payments platform and Dropsuite (ASX:DSE), which has solutions focused on data backup including email archiving.

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