>>> Cloud Computing Sales Growth Seen Slowing In March Quarter For Tech Titans
Investor's Business Daily
The slowdown in cloud computing sales growth for Amazon.com (AMZN), Microsoft (MSFT) and Alphabet's (GOOGL) Google will likely worsen when March-quarter earnings come in for MSFT, GOOGL and AMZN stock. The most downside is expected for Amazon Web Services, the biggest provider of cloud services.
After years of torrid growth, cloud computing revenue growth began slowing markedly in 2022. Some of that is attributable to the law of big numbers — growth was expected to moderate at some point. AWS sales rose 29% to $80.1 billion in 2022.
Another factor is that some corporate customers have been rethinking how to most efficiently utilize cloud services. Also, more companies could cut cloud spending if the U.S. economy falls into a recession.
AMZN Stock: Cloud Computing Slowdown For AWS
In the March quarter, Wall Street analyst estimates call for revenue growth for AWS to slow to 15% from 37% a year earlier, said a Jefferies report.
Meanwhile, UBS expects AWS sales growth to slow to 13% in the March quarter.
"Customer efforts to optimize/trim their cloud spend are well beyond any historical norm and our checks suggest that optimization efforts will be deeper and last longer than most think," AMZN stock analyst Karl Keirstead of UBS said in a note to clients.
He added: "Relative to the consensus view that we're deep enough into these efforts such that the deceleration in cloud growth can begin moderating meaningfully as early as Q2 2023, we conclude that such efforts will persist at a high level throughout 2023."
Microsoft and Google earnings are due April 25. Amazon has not yet set a date to report.
Negatives For GOOGL Stock
Slowing cloud revenue growth is a negative for AMZN, MSFT and GOOGL stock. It's also a headwind for many software and cloud infrastructure makers. Warehouse-size internet data centers are packed with computer servers, data storage devices and high-speed communications gear.
Jefferies analyst Brent Thill in a report said Wall Street consensus estimates on AMZN stock expect AWS revenue growth to "trough" in the June quarter of 2023, then slowly reaccelerate.
"Investors remain concerned around the durability of AWS growth as customers shift to cost optimization and delay broader transformations during a period of increased budget scrutiny," Thill said.
He added: "We are cutting our 2023 AWS estimate by 3.5% and now expect 12% AWS growth in fiscal 2023 (1% below consensus)."
According to UBS, consensus estimates for Google Cloud have come down to 28% revenue growth in Q1 2023, down from 44% growth in the March quarter of 2022.
MSFT Stock: Dealing With Slowdown
The March quarter marks Microsoft's fiscal third quarter. Revenue growth at Microsoft's Azure cloud unit is expected to be 30%, down from 49% a year earlier.
In addition, Jefferies' Thill expects pricing pressure to continue.
"AWS operating margin remains under pressure since peaking at 35% in Q1 2022, with Q4 2022 AWS operating margin of 24.4% representing the lowest levels since Q2 2017," the AMZN stock analyst said.
In the "public" cloud market, customers rent servers and data storage as needed. The cloud giants sell processing power and data storage by the hour, week, month or year. Also, the cloud companies have been pushing new consumption-based services.
>>> Arista Networks (ANET) leads high-speed data center networking
Arista provides the high-speed networking platforms (like switching and routing solutions) that allow information to flow through modern data centers. The company pairs its core networking products with adjacent software for network telemetry, workflow automation, and security. Arista first brought its technology to cloud data centers, but it has since expanded across enterprise and campus environments.
Arista says its principal innovation is its Extensible Operating System (EOS), the software that powers its entire lineup of switching and routing platforms. By running a single operating system, Arista allows clients to integrate their IT environments -- from public clouds to private data centers, in both wired and wireless workspaces -- into a seamless network. That distinguishes the company from legacy vendors that use multiple operating systems, an approach that increases cost and complexity for clients.
Arista's networking products offer industry-leading capacity and low latency, meanings its switches and routers can move large amounts of data very quickly. That selling point has helped Arista win the business of cloud titans like Microsoft and Meta Platforms, and it has propelled the company to the forefront of the industry. Arista holds 41.5% market share in high-speed data center switches (like 100G, 200G, and 400G), which is nearly twice as much market share as the next closest competitor.
Arista provides the high-performance networking platforms needed to support cloud data centers, and it lowers the total cost of network ownership for customers by implementing a single operating system. That value proposition has fueled impressive financial results, even in a difficult economic environment. Third-quarter revenue climbed 57% to $1.2 billion, and GAAP net income soared 61% to $1.13 per diluted share.
Going forward, Arista should benefit from several tailwinds, including the ongoing adoption of cloud computing, 5G networks, and artificial intelligence applications, and the proliferation of Internet of Things devices. Those trends will put pressure on data center infrastructure, creating a need for faster networking solutions over time. With that in mind, Arista estimates its total addressable market will grow at 13% annually to reach $51 billion by 2027.
Currently, shares trade at a reasonable 10.5 times sales, slightly above its three-year average of 10.3 times sales. At that price, Arista is still well positioned to produce market-beating returns for patient shareholders.
>>> NICE Shares Pop After Q3 Beat; Clocks 12% Revenue Growth Backed By Cloud Momentum
by Anusuya Lahiri
November 10, 2022
NICE Ltd (NASDAQ: NICE) reported third-quarter FY22 non-GAAP revenue growth of 12.2% year on year to $554.7 million, beating the consensus of $548.8 million.
Non-GAAP revenues from Cloud grew 26% Y/Y to $330.5 million.
The non-GAAP gross margin expanded 120 bps to 73.5%, while the non-GAAP operating margin expanded 40 bps to 28.7%.
Non-GAAP EPS of $1.92 beat the consensus of $1.87.
NICE generated $94.3 million in operating cash flow and held $1.46 billion in cash and equivalents.
CEO Barak Eilam said, "We reported double-digit growth in total revenue driven by another excellent quarter in cloud revenue, which grew 27% at constant currency."
Eilam continued, "We are witnessing a dramatic shift in the enterprise software landscape that is creating massive opportunities for some and unbridgeable gaps for others."
Outlook: NICE reiterated the FY22 non-GAAP revenue outlook of $2.168 billion - $2.188 billion (consensus: $2.18 billion).
NICE boosted non-GAAP EPS from $7.33 - $7.53 to $7.40 - $7.60 (consensus: $7.45).
Price Action: NICE shares traded higher by 9.69% at $184.02 in the premarket session on the last check Thursday.
>>> NICE Ltd. (NICE), together with its subsidiaries, provides cloud platforms for AI-driven digital business solutions worldwide. It offers CXone, a cloud native open platform that supports contact centers ranging from small single sites to distributed remote agents and enterprises; Enlighten, an AI engine for CX that discovers automation opportunities for self-service; digital-entry points solutions that enable organizations to address consumers' needs; and journey orchestration solutions that empower organizations to connect and route customers to deal with the customer's request, and connecting them using real time AI-based routing. The company also provides smart self service solutions that empower organizations to build intelligent automated conversations based on data; and prepared agent solutions and tools enable contact center agents to guide and alert them in real time so they can provide resolutions; complete performance solutions that help organizations to record structured and unstructured customer interaction and transaction data; and NICE Evidencentral, an digital evidence management platform for public safety emergency communications, law enforcement, and criminal justice helps agencies. In addition, it offers X-Sight, is an open and flexible AI-cloud platform for financial crime and compliance; Xceed, a cloud platform for comprehensive AML and fraud prevention for small and mid-sized organizations; data intelligence solutions that enable organizations to turn raw data into comprehensive actionable intelligence to prevent and detect financial crimes; AI and analytics technologies to detect and prevent financial crimes in real-time; money laundering and fraud prevention solutions that help organizations adhere to capital markets compliance and anti-money laundering compliance regulations; intelligent investigations solutions; and self-service solutions that provide organizations with customization and self-development capabilities. The company was formerly known as NICE-Systems Ltd. and changed its name to NICE Ltd. in June 2016. NICE Ltd. was founded in 1986 and is based in Ra'anana, Israel.
>>> Is Snowflake Stock A Buy? Data Analytics Specialist Rides Cloud Computing Wave
Investor's Business Daily
by REINHARDT KRAUSE
Think of Snowflake stock as a proxy on the torrid growth of cloud computing giants Amazon.com (AMZN), Microsoft (MSFT) and Alphabet's (GOOGL) Google.
Stellar customer growth enabled SNOW stock to pull off the largest initial public offering ever by a software company in September 2020. The Snowflake (SNOW) IPO raised $3.4 billion.
But is Snowflake stock a buy right now? One issue is how software growth stocks are doing generally. The iShares Expanded Tech-Software Sector ETF rose 10% in October after falling 5.7% in September. For the year, the index is up 24%.
As of Nov.15, SNOW stock has gained nearly 40% in 2021. Snowflake stock reports third quarter earnings on Dec. 1.
SNOW stock was added to the IBD Leaderboard on Oct. 14. The Leaderboard is IBD's curated list of leading stocks that stand out on technical and fundamental metrics.
SNOW Stock: Synergy With Cloud Computing Giants
Many companies are turning to cloud computing services as part of "digital transformation" projects that aim to gain business insights from crunching massive volumes of data. The cloud computing titans offer their own data analytics and management tools.
But the cloud giants make Snowflake's platform available to their customers. The reason is Snowflake's tools are better at some key tasks, such as letting companies compile, view, analyze and share massive amounts of data in an easy way.
Nearly two-fifths of Fortune 500 companies use Snowflake's software in the cloud as they move away from on-premise data warehousing products from Teradata (TDC), Oracle (ORCL) and IBM (IBM).
One Snowflake customer is pharma giant Pfizer (PFE). Pfizer uses Snowflake tools to forecast product sales and to gain insights into the distribution of the Covid-19 vaccine.
Snowflake Stock: Competition Increasing
Snowflake stock hit an all-time high of 429 in early December last year. But SNOW stock swooned in late 2020 amid analyst concerns over its lofty valuation.
At a June 10 analyst day, Snowflake laid out a path to $10 billion in product revenue by fiscal 2029, which coincides with calendar 2028. The $10 billion revenue target would result in a compound annual growth rate of 44%.
The company said it expects to increase the number of customers with over $1 million in product revenue. Snowflake also guided to long-term operating margin of 10%-plus, lower than some analysts expected.
Snowflake in July announced support for digital advertising standard Unified ID 2.0. Advertising is one of Snowflake's largest verticals with customers representing a large percentage of players in the space, noted a RBC Capital report. The move comes as Google phases out internet cookies for targeted advertising.
Whether Amazon Web Services or Google cloud ratchet up competition remains a concern for SNOW stock. Plus, competition with privately held Databricks is heating up. A February funding round valued Databricks at $28 billion.
Databricks, which uses artificial intelligence, is expected to launch its own IPO. Hewlett Packard Enterprise (HPE), with its GreenLake platform, is another rival.
Snowflake stock bulls point to its seasoned management team as a strength no matter what unfolds.
Two former Oracle engineers — Benoit Dageville and Thierry Cruanes — along with Marcin Zukowski, former chief executive of startup Vectorwise, started Snowflake in 2012. The company holds patents in database architecture, data warehouses and other areas.
SNOW Stock: ServiceNow Veterans Lead Company
Snowflake brought in Frank Slootman as chief executive in May 2019. Slootman had stepped down as CEO of ServiceNow in early 2017. Former ServiceNow Chief Financial Officer Mike Scarpelli in 2019 also joined Snowflake in the same CFO position.
Unlike legacy, on-premise data management systems, Snowflake's platform was built from the ground up for cloud computing. It provides 100% of its software over the internet.
Snowflake customers can share data with their partners across multiple online storage systems using the company's data warehouse. Snowflake also enables easily searchable data to be shared among applications.
Snowflake's data analytics tools became available on Amazon Web Services in 2015, Microsoft's Azure in 2018 and on Google's cloud platform in 2020.
In June, Snowflake partnered with C3.ai (AI). The two companies will cooperate in offering artificial intelligence tools to companies.
Amazon Web Services A 'Frenemy'
"While Snowflake is multi-cloud, it derives some 85% of its revenues from data analytics jobs deployed on Amazon Web Services, which is also Snowflake's biggest rival with AWS Redshift," UBS analyst Karl Keirstead said in a recent note to clients.
"This 'frenemy' relationship is critical to Snowflake's success," Keirstead went on to say. "AWS benefits far more from Snowflake spending on compute and storage infrastructure resources than they lose in the form of foregone AWS Redshift revenues. Snowflake represents a dream customer and partner for AWS and Microsoft Azure."
Snowflake has focused on six core markets, including financial services, health care and life sciences, retail and consumer packaged goods, advertising media and entertainment, technology, and the government sector.
When Snowflake went public in September it used a dual-class share structure that gave its CEO and insiders super-voting rights. However, Snowflake eliminated the dual-class structure in March.
Snowflake had been based in San Mateo, Calif. Amid the shift to remote work spurred by the coronavirus emergency, Snowflake in May said it no longer has a corporate headquarters. It designated Bozeman, Mont., as its principal executive office. Slootman and Scarpelli are based in Bozeman.
Snowflake Stock Fundamental Analysis
Software stocks typically trade as a multiple of forward-looking revenue growth. Software-as-a-service, or SaaS, companies, such as Salesforce.com (CRM), typically provide the highest revenue growth. Salesforce is a key marketing partner of SNOW stock.
Snowflake also partners with consulting firms such as Deloitte and information technology firms such as privately held Informatica.
Snowflake is not an SaaS company, however. Instead, it uses a consumption-based business model based on how much data its customers crunch and store.
Snowflake's revenue growth stands out. But there's less transparency and predictability than with subscription-based, recurring-revenue SaaS business models, analysts say.
"SNOW has a consumption model, whereby customers contract for a certain amount of compute and storage capacity," Mizuho Securities analyst Gregg Moskowitz said in a note. "The company only records revenue, however, as that capacity is used, so there can be a lag of several months or more before revenue recognition begins."
Snowflake is nearing an annual revenue run-rate of $1 billion. That's a big milestone for software growth companies. But SNOW stock is unprofitable on the two most common accounting standards.
Many software companies are unprofitable using GAAP earnings, or generally accepted accounting principles, which includes stock-based compensation. But they're profitable on a non-GAAP or "adjusted" earnings basis.
Snowflake Stock Gains Traction In Large Deals
Snowflake's July quarter decelerated from the previous quarter but topped analyst estimates as it gained traction with large deals in the financial services and healthcare markets.
Snowflake said July-quarter revenue jumped 104% to $272.2 million from a year earlier. Analysts had estimated Snowflake revenue of $256.5 million.
Snowflake sales soared 110% in the April quarter and 117% in the January quarter.
The provider of cloud-based data analytics software said product revenue rose 103% to $254.6 million vs. estimates of $240 million.
In addition, Snowflake said it now has 116 customers with "trailing 12-month product revenue greater than $1 million," up from 104 such customers as of April 30.
"SNOW stock ended the quarter with 12 net new $1 million-plus customers (vs. 27 last quarter, 8 a year ago), bringing total $1 million-plus customers to 116," said Cowen analyst J. Derrick Wood in a report. "Management cited strength come from rising deal sizes, strong competitive win rates, high sales productivity levels and balanced demand across geographies, customer segments and verticals. SNOW's recent vertically-focused, go-to-market initiatives are resonating particularly well in financial services and healthcare."
For the October quarter, Snowflake forecast product revenue in a range of $280 million to $285 million, above estimates of $270.5 million.
SNOW Stock Technical Analysis
Snowflake stock went public on Sept. 16, 2020, at 120 a share. At the time, software growth stocks were hot as investors sought recurring revenue amid the coronavirus emergency.
SNOW stock popped as high as 319 on the first day of trading and closed 111.6% above the IPO price at 253.93. Shares pulled back as analysts debated Snowflake's valuation.
Snowflake stock forged a cup-with-handle base over the next two months. The new base created an entry point of 301. SNOW stock blew past the buy point, hitting an all-time high of 429 on Dec. 8.
Snowflake stock hit a 12-month low of 184.71 on May 13.
Is Snowflake Stock A Buy Right Now?
Snowflake stock still trades at a substantial premium as a multiple of forward-looking revenue growth. SNOW stock holds an IBD Composite Rating of 69 out of a best possible 99, according to IBD Stock Checkup.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
One bright spot is that Snowflake stock owns an Accumulation/Distribution Rating of A-minus, according to IBD MarketSmith analysis. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading.
The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
Snowflake stock forged a new entry point of 328.16, just above its Sept. 17 high. But as of Nov. 15, Snowflake stock is extended and not in a buy zone.
>>> Pentagon asks Amazon, Google, Microsoft and Oracle for bids on new cloud contracts
NOV 20 2021
by Jordan Novet
The U.S. Defense Department expects to dole out cloud contracts to multiple companies.
The new push comes after the Pentagon scrapped its plans for a single-vendor cloud contract for Microsoft worth up to $10 billion over a decade.
The U.S. General Services Administration said Friday that the Defense Department has solicited bids from Amazon, Google, Microsoft and Oracle for cloud contracts.
The outreach comes after the Pentagon set aside a highly contested $10 billion contract that Microsoft had won and Amazon had challenged. The value of the new contracts is not known, but the Defense Department estimates it could run into the multiple billions of dollars.
The new effort, known as Joint Warfighting Cloud Capability, or JWCC, appears like it will bolster the top global cloud infrastructure providers, Amazon and Microsoft, although it could also provide more credibility to two smaller entities.
“The Government anticipates awarding two IDIQ contracts -- one to Amazon Web Services, Inc. (AWS) and one to Microsoft Corporation (Microsoft) -- but intends to award to all Cloud Service Providers (CSPs) that demonstrate the capability to meet DoD’s requirements,” the GSA said in its announcement.
An indefinite delivery, indefinite quantity, or IDIQ, contract includes an indefinite amount of services for a specific period of time.
The GSA said only two U.S. cloud infrastructure providers, Amazon and Microsoft, appear able to comply with all of the Pentagon’s requirements, which include “tactical edge devices” that can operate outside of traditional data centers and support all levels of data classification.
Amazon and Microsoft were the finalists for a single Joint Enterprise Defense Infrastructure, or JEDI, contract. That contract was meant for a single provider and was expected to be worth up to $10 billion over 10 years. Microsoft won it in 2019, Amazon filed a protest and the Pentagon canceled the contract in July.
Andy Jassy, currently Amazon’s CEO and previously head of AWS, argued that there was political interference in the award of the contract. Guy Snodgrass, who was speechwriter for former Defense Secretary James Mattis, asserted in a book that former President Donald Trump called Mattis and said to “screw Amazon” out of a chance to bid on JEDI. But the Pentagon’s inspector general determined the contract did not seem to have been influenced by the White House.
The JWCC differs from JEDI because it allows the Pentagon to rely on multiple cloud providers.
The Pentagon expects each of the IDIQ contracts to have a three-year base period and two year-long option periods.
“Oracle is delighted to be included in the Joint Warfighter Cloud Capability RFP,” Oracle spokesperson Deborah Hellinger said. “We are committed to delivering the highest level of security, performance, and value in enterprise cloud applications and cloud infrastructure in support of DOD’s Warfighter mission.”
Google spokesperson Ben Jose pointed to a blog post from last week that said the company planned to pursue a bid for the military contract, noting the Pentagon is the world’s largest employer. CNBC reported Monday that executives attempted to tactfully address growing employee concern over the contract and previously established artificial intelligence principles, after employees protested against Google’s plans to bid on the JEDI contract.
“Our commitment to supporting our nation’s military and ensuring that our warfighters and defense partners have access to the best technology for the best value is stronger than ever,” an AWS spokesperson told CNBC in an email. “We look forward to continuing to support the DoD’s modernization efforts and building solutions that help accomplish their critical missions.”
Microsoft declined to comment.
>>> GE Appliances signs multi-year smart home deal with Google Cloud
By Fin Strathern
20th August 2021
GE Appliances has signed a multi-year partnership deal with Google Cloud to build the next generation of smart home technologies.
The partners will combine their expertise – GE Appliances in hardware and Google Cloud in data, artificial intelligence, analytics, and machine learning – to deliver new smart home technologies and improved experiences.
Viren Shah, CDO of GE Appliances, said:
“As the fastest-growing appliance manufacturing company in the United States and with more than a century of industry experience, we are committed to continuing our evolution and fulfilling our promise to deliver the best appliances to our owners and customers.
Bringing together Google and GE Appliances to co-innovate and build advanced technologies is a key driver propelling this evolution forward.”
The company also notes that it will benefit from Google Cloud’s seamless integration with other Google platforms and technologies such as Android and Google Assistant while also being able to tap into powerful capabilities like Vision AI.
Google’s cloud platform will also enable the appliance company to enhance its AI-enabled intelligent product platform that can help manage fleets of appliances and decrease unplanned downtime.
Dominik Wee, managing director of manufacturing and industrial at Google Cloud, commented:
“GE Appliances is an award-winning, smart home innovator that gives consumers the forward-thinking features and capabilities they want and expect.
Marrying GEA’s expertise in smart home appliances with Google Cloud’s data analytics and AI/ML will deliver industry-leading, innovative appliances and digital experiences that will delight consumers for years to come.”
GE says that it intends to integrate the capabilities offered by Google Cloud across its entire appliance development process, from concept to production.
>>> UK government advises firms to use cloud to reduce carbon emissions
By Fin Strathern
17th August 2021
UK businesses are being told to accelerate cloud adoption in an upscaled effort to tackle climate change, the UK government’s Department for Business, Energy and Industrial Strategy (BEIS) has advised.
The recommendation is part of a series of steps that businesses are being told to consider to help curb their carbon emissions by making changes to their technological habits.
This in turn is part of a wider push by the government to encourage businesses to get behind its climate change-tackling net-zero emissions campaign, in which firms across the country are being challenged to halve their carbon footprints by 2030.
Businesses are also being encouraged to join the BEIS-backed UK Business Climate Hub initiative, which challenges its members to become net-zero entities by 2050.
“Net-zero means that you are putting no more carbon into the atmosphere than you are taking out of it,” said the advisory notice. “Through the government’s United Nations-backed commitment process, you’re joining an international community of thousands of like-minded businesses.”
From a technology purchasing perspective, BEIS said one action companies should take is to consider moving more of their on-premise IT infrastructure to the public cloud instead of continuing to house it within their own private datacentres.
“Large cloud providers are generally more energy efficient than traditional enterprise datacentres,” said the advisory note. “That’s thanks to IT operational and equipment efficiency, datacentre infrastructure efficiency and a higher utilisation of renewable energy. So consider moving from on-premise servers to the cloud.”
Andrew Griffith, the government’s business net-zero champion, said the advice issued by BEIS is a positive step that all businesses can take to help curb their carbon emissions.
“From buying energy-efficient equipment to sourcing large cloud providers, these small steps can collectively make a big difference in helping us fight climate change and create a brighter and more sustainable future,” he pointed out.
>>> NSA quietly awards $10 billion cloud contract to Amazon, drawing protest from Microsoft
By Aaron Gregg
August 11, 2021
The National Security Agency has quietly awarded a contract worth up to $10 billion to Amazon Web Services, setting off another high-stakes fight among rival tech giants over national security contract dollars.
On July 21 the Redmond, Wash.-based Microsoft filed a formal bid protest with the Government Accountability Office, an independent federal agency that handles contract disputes, after Microsoft applied for the opportunity and was rejected. A decision is expected by Oct. 29.
The contract award comes on the heels of a protracted and bitter dispute over a Pentagon contract, also worth up to $10 billion, which was given to Microsoft before getting bogged down in lawsuits and ultimately scrapped. If the NSA can fight through an often bruising bid protest process, the new contract could extend Amazon’s lead in the fast-growing cloud computing market where rivals are gaining on it.
Pentagon cancels $10 billion JEDI contract challenged by Amazon, ending long-contested cloud procurement deal
The NSA has offered few details about the purpose of the contract. An NSA spokesman said the agency had awarded a contract for “cloud computing support services,” but declined to elaborate or specify who won it. “The agency will respond to the protest in accordance with appropriate federal regulations,” the spokesman said.
Two people with direct knowledge of the contract, speaking on the condition of anonymity to discuss proceedings that haven’t been made public, confirmed that Amazon is the awardee, and that the maximum value of the cloud deal is $10 billion. Amazon’s receipt of the contract was first reported by Washington Technology and later confirmed by NextGov. Both are trade publications focusing on military technology and procurement issues. Both publications said the contract carries the code name “WildandStormy.”
A Microsoft spokeswoman confirmed the company has protested the NSA’s decision. “We are exercising our legal rights and will do so carefully and responsibly,” the spokeswoman said. An Amazon spokesman referred questions to the National Security Agency.
Amazon founder Jeff Bezos owns The Washington Post.
The NSA’s decision to award such a large contract to a single company is sure to stir up controversy in a national security ecosystem where large deals with big tech companies have occasionally been fraught with allegations of bias and undue influence.
“Any time you have these large contracts with hundreds of millions of dollars in spending, without much knowledge of the competition, it draws intense scrutiny. … It just depends on whether the agency can withstand that scrutiny,” said Alan Chvotkin, a government contracts attorney with the law firm Nichols Liu.
The Defense Department recently pulled the plug on a different long-planned cloud computing award after years of bid protests and dueling allegations of corruption. That contract, the Joint Enterprise Defense Infrastructure, or JEDI for short, was given to Microsoft shortly after former president Donald Trump took interest in the procurement. There are also allegations that Amazon had an unfair advantage due to its relationships with federal officials.
The NSA award is likely to improve Amazon’s prospects in the insular national security sector, where untold billions in spending from the Pentagon and the intelligence community represent a lucrative growth market.
The e-commerce giant has been making inroads there for years. It got an early foothold in 2013 when it secured a $600 million cloud contract with the CIA. That work accelerated Amazon’s capabilities with respect to handling classified and top secret data, while also allowing other government agencies to access its services.
Microsoft’s surprise 2019 JEDI win upended the federal IT world and, for a time, allowed Microsoft to say it was the U.S. military’s favored cloud provider. Microsoft had already been gaining on Amazon; updating its technology with defense work in mind, and obtaining new security clearances required for sensitive national security work.
Amazon’s bid protest ultimately halted Microsoft’s progress, as a protest-weary Pentagon opted to start a new procurement open to both companies. AWS also won a seat on a different intelligence community contract, estimated to be worth tens of billions of dollars, that was given jointly to five major cloud providers.
The nature of the NSA’s work makes it hard to determine what sort of business, if any, Amazon has with the famously secretive agency. Last year the company added Keith Alexander, a former NSA director who is influential in the cybersecurity industry, to its board.
John Weiler, a former Oracle employee who now works with the IT Acquisition Advisory Council, said the NSA’s strategy bears an unfortunate similarity to the Pentagon’s JEDI contract.
“Amazon is still sitting as the dominant force in government cloud, but Microsoft had preexisting monopolies of its own,” Weiler said. “You have two monopolists fighting to dominate a market that is very rich and very large.”
ExlService Holdings - >>> EXL, AWS Extend Partnership To Drive Cloud Migration of Enterprise Business Processes
by Anusuya Lahiri
June 30, 2021
ExlService Holdings Inc (NASDAQ: EXLS) expanded its Amazon.com Inc’s
Amazon Web Services collaboration to help EXL clients operationalize AI, Analytics, Automation, and Cloud technologies within enterprise business processes.
EXL addresses the challenges of operationalizing data-driven technologies through its robust AI Operating System architecture, known as AI: OS.
AWS capabilities were critical to meet the aggressive transformation timelines and impact expectations of EXL’s clients, EXL Chief Digital Officer Ankor Rai said.
EXL also leveraged AWS infrastructure and AWS Training & Certification services to drive the development and deployment of domain-specific cloud solutions across the client enterprise and their corporate learning and development programs to drive a new cohort of EXL Digital employees.
>>> 81% of firms have accelerated their cloud computing plans due to COVID-19
By Duncan MacRae
June 14, 2021
The global pandemic, and associated surge in remote work, has accelerated a massive move to cloud with cloud-first organisations now outnumbering on premise organizations by a ratio of three-to-one.
This was highlighted in a study by Devo Technology, a cloud-native logging and security analytics company, which assessed the current state and pace of change with regards to enterprise cloud transformation initiatives and the ramifications on teams running a Security
As many as 81% of organisations voicing that COVID had accelerated their cloud timelines and plans. Across these companies, there was a 200% jump in organizations planning to move more than 75% of their apps/workloads to the cloud, with 86% of companies placing cloud options in their decision process for new applications, and more than 40% choosing the cloud as their first option.
Jon Oltsik, senior principal analyst & ESG fellow, said: “It could not be more clear from our conversations with these companies that cloud considerations are no longer a project-based decision, but an ‘all-in’ business strategy.
“Even at a time of increasing regulations and risks—and increasing IT complexity driven by cloud computing proliferation – organisations are moving aggressively to transform their businesses.”
With such a massive and rapid shift, the current infrastructure of technology and people are not well aligned with these new realities, according to Devo Technology. Respondents cited significant issues of complexity and overload – most notably, 80% citing as much as 40% more security data on which they need to analyze and act. The staffing costs are also high with 41% citing challenges of increased workload, and 35% identifying a security skill mismatch – all resulting in higher exposure. In 60% of organisations, they have seen an increase in threat and attack complexity and in more than 60%, it has exposed weaknesses in legacy security toolsets.
Ted Julian, SVP of product at Devo, said: “While dramatic change is a constant in security, it’s safe to say that 2020 challenged security professionals in unprecedented ways.
“An amazing and encouraging finding of this study is that nearly a quarter of organizations didn’t just weather the storm of change, they turned it into an opportunity to build for the future.”
ESG designated the 22% of organisations deemed high performing as ‘Cloud Evangelists’, characterising them as businesses with high adoption rates of cloud and cloud-based security controls.
With nearly 80% of these organisations seeing an increase in security spending for cloud, those moving aggressively to transform their security made substantive changes, including:
More than 40% have implemented automated security processes to detect and respond to attacks on cloud workloads.
More than half have instituted cloud security training for the SOC, and 36% added security staff.
Nearly 90% believe their organisation’s public cloud security spending will increase over the next 12 months
The all-in approach taken by Cloud Evangelists has not only allowed organisations to keep pace with change, but also positively affect the operational strength of the business overall, according to Devo Technology. More than 50% said these security changes increased the pace of application development and deployment, and 62% indicated it eased the ability to adopt new technologies. Finally, 56% cited “high confidence” in security visibility into cloud workloads.
These changes by Cloud Evangelists highlight the organisational differences from another group identified in the report, Cloud Adopters (11% of survey participants), which represents organisations that are adopting cloud computing but are not as aggressive toward adoption of cloud-based security controls. When it comes to this group that are on the right track of shifting to the cloud, the report findings showed:
Adopters report a less significant positive impact of cloud computing on adopting new technologies, with only 42% reporting positive impact.
Adopters are also playing catch up to Evangelist when it comes to resources. 36% of Adopters are adding capacity or resources to security compared to 48% among Evangelists.
Adopters are nearly neck-and-neck with Evangelists with 24% strongly agreeing that adopting cloud computing exposed limitations of existing tools in providing security visibility.
The survey was conducted by the Enterprise Strategy Group (ESG) and involved 500 IT and security personnel in the ‘SOC chain of command’ at enterprise-class (i.e., more than 1,000 employees) organisations in North America and Western Europe in January 2021.
Snowflake - >>> 3 Software Stocks to Pick Up in the Next Market Crash
Software stocks could be in for a nasty correction this year. Here are three to keep on your watchlist if that happens.
by Billy Duberstein
Feb 2, 2021
Some of the biggest winners from the very odd year of 2020 were cloud software stocks. In fact, business was so good that many software unicorns decided to go public amid surging stock prices. If your product enabled work-from-home, facilitated better and faster data use, or secured enterprise infrastructure, your stock likely rocketed higher.
However, after a stunning 2020, these names could be in for a correction. Many trade at nosebleed valuations. Meanwhile, recent short squeezes may cause hedge funds to sell other big winners, including these enterprise software stocks. The rollout of vaccines may cause investors to gravitate toward "reopening" stocks in travel, financials, and other cyclical stocks at the expense of cloud software.
But while SaaS stocks may face a challenging year ahead, all are ushering in a powerful new data era. So if there's a pullback in the space, long-term investors may get an attractive entry position. The following three cloud leaders are currently on my radar.
JFrog (NASDAQ:FROG) is one of the high-flying SaaS companies that went public in the busy month of September 2020. JFrog's tools enable "liquid software" updates, or continuous updates and patching of applications, rather than the traditional method of constructing an entirely new code every few months (or longer).
Source code must transform into binary code in order to be deployed, and JFrog's platform allows for the storage, organization, automation, and deployment of these binary code packages. Even better, it works across all clouds, on-premises data centers, and programming languages.
As of last quarter, JFrog software was used by 75% of the Fortune 100 and 27% of the Global 2000. That may seem like JFrog has already penetrated a lot of its market. However, the company's 136% net expansion rate suggests existing customers increase their JFrog usage over time and upgrade to higher-priced tiers.
Though revenue grew "only" 40% last quarter, this may have been due to the pandemic slowing the sales cycle to new customers. Still, 40% growth is pretty good. JFrog has also shown the ability to expand gross margins and operating margins as it grows, and the company is already generating free cash flow (though it still has GAAP losses due to stock-based compensation).
JFrog anticipates it will end the year with about $150 million in revenue. At the current $5.7 billion market cap, it seems expensive, at around 38 times sales.
Nevertheless, being a cloud-neutral first-mover in an important niche is a great place to be. That's why JFrog is on my radar in case software stocks pull back in 2021.
Like JFrog, Okta (NASDAQ:OKTA) is a cloud-neutral first-mover with mission-critical functionality. Okta's identity-as-a-service software allows employees of an organization to access critical data and applications, no matter where they are. Okta has therefore been tremendously helpful in the current work-from-home environment, and should remain a strong grower as workforces become more distributed.
In fact, Okta identifies its workforce identity market opportunity at $30 billion. If the company can expand into customer-facing identity sign-on, that's another $25 billion opportunity. Meanwhile, Okta projects only $823 million in revenue for its current fiscal year, so there's a lot of room to grow.
Last quarter, Okta showed strength across the board. Customers grew 27%, and high-value customers grew 34%. Net expansion of 123% accelerated from 117% in the year-ago quarter, leading to 42% revenue growth. Remaining performance obligations, which take into account future revenue yet to be recognized, grew an even higher 53%. Gross margins, operating margins, and free cash flow margins all expanded, showing profitability is in Okta's future, even if the company currently posts GAAP losses.
Despite all this goodness, Okta currently trades at 42 times trailing 12-month sales, or about 40 times its enterprise value to FY 2021 estimates. That's high. Even if Okta hits its growth target of 35% revenue growth through 2024 and hits its free cash flow margin target of 25%, it would still make only about $683 million in free cash flow. That means the stock currently trades at 49 times its 2024 estimated cash flow. As great a company as Okta is, that doesn't give it a whole lot of margin of safety. Still, it will surely be at the top of my list should the SaaS sector fall out of favor.
Perhaps was Snowflake (NYSE:SNOW) was arguably the poster child for the 2020 IPO mania. Like the two aforementioned names, Snowflake is a first-mover in cloud-based data warehousing and data management. It offers a cloud neutrality that's resonating with customers. Snowflake's founders decided to go all-in on the cloud early, ignoring traditional on-premises data management. The results of that early decision have been downright impressive.
Snowflake is growing the fastest of any large software company that you might find, but it's also the most expensive. Revenue grew a stunning 118% last quarter, but like JFrog, its remaining performance obligations -- essentially pre-payments toward future usage -- doubled that rate at 240%. Customers grew 84%, and customers who spend over $1 million grew 110% as well. Fortune 500 customers grew 56% to 165. Net expansion with existing customers grew a ridiculous 162%. Over the past two years, gross margins have expanded 10 percentage points from 58% to 68%.
Snowflake's cloud platform is clearly resonating, as it's broken down the barriers and silos that previously separated various forms of data. Companies large and small can dump everything into Snowflake to discover, manipulate, and run machine learning on its data cloud. Snowflake's revolutionary data exchange allows different enterprises and data providers to safely and securely share data with each other, leading to even more and better insights. Twenty-three percent of Snowflake's customers currently use data sharing capabilities. That's likely to increase going forward.
Despite all this great news, Snowflake's stock is quite pricey indeed, having more than doubled over its IPO price of $120, which itself was raised 50% from the expected IPO price. It also trades at a lofty 158 times sales. At that height, it's possible for the business to do quite well even as the stock stagnates.
Snowflake is currently too rich for my blood, but it's an impressive company with a promising management team and future. Add it to your watchlist in the event of a market or tech sector meltdown.
MongoDB - >>> 3 Tech Stocks That Are Better Than Snowflake
Investors can still win big with these fast-growing stocks.
Chris Neiger, Danny Vena, And Brian Withers
Dec 13, 2020
Shares of Snowflake, a cloud data company, have soared since the company went public back in September. Some investors have flocked to the tech stock because of its massive opportunity in the cloud data space, and the fact that Warren Buffett's Berkshire Hathaway is an investor in the company.
But despite all of the attention Snowflake has received, there are still a lot of fast-growing companies that could be even better long-term investments. Here's why MongoDB (NASDAQ:MDB), Okta (NASDAQ:OKTA), and Square (NYSE:SQ) fit the description.
MongoDB: Creating a home for messy data
Danny Vena (MongoDB): One of the key takeaways from 2020 is that cloud-based solutions are no longer a luxury but a necessity, providing access anywhere, anytime. That's one of the reasons investor demand for Snowflake has been off the charts. Unfortunately, Snowflake's valuation is also off the charts, with the stock trading at 214 times its trailing-12-month sales of $490 million, making it one of the most expensive growth stocks around.
Investors looking for a less expensive cloud alternative should consider MongoDB. One of the challenges with legacy databases is that they couldn't accommodate any data that didn't fit neatly into rows or columns. That's where MongoDB comes in. The company offers a cloud-native solution that houses data and electronic information of all types, including photos, audio, social media posts, video, and even full documents.
MongoDB offers a free version of its flagship database that customers have downloaded more than 90 million times since it was introduced in 2009, and over 35 million times in 2019 alone. After experiencing firsthand the ease and utility of MongoDB's flagship product, many developers take the plunge and sign up for Atlas -- the company's cloud-centric, fully managed database-as-a-service product.
While the pandemic temporarily stunted MongoDB's growth, the company has come roaring back. In the third quarter, revenue grew 38% year over year, while subscription sales increased 39%. More importantly, adoption of Atlas grew even faster, as revenue climbed 61% year over year and now accounts for roughly 47% of the company's total sales. Not bad for a product that was introduced just four years ago.
The customer metrics are equally compelling. MongoDB added more than 2,400 customers during the quarter, bringing the total customer count to 22,600, up 42% year over year. Atlas customers grew more quickly -- to 21,100, up 49%. Those contributing at least $100,000 in annual recurring revenue climbed to 898, up 31%. Finally, the company's net AR expansion rate, which tracks the rate at which existing customers spend more, remained above 120% for the 24th consecutive quarter.
The company's customer satisfaction scores are also enviable. Atlas commands a net promoter score of 74. That's a remarkably high score; 50 or higher is considered excellent, and any number above 70 is considered world-class.
The digital transformation is ongoing and the data that needs to be stored is growing exponentially. The database software market is estimated to be $71 billion in 2020, growing to $97 billion by 2023. Considering MongoDB's revenue topped out at $422 million last year, it has a long runway for growth.
Oh, and did I mention that at just 34 times sales, it's a steal compared to Snowflake.
Okta: Taking advantage of the cloud trend
Brian Withers (Okta): Even though Snowflake is putting up massive growth, investors can get in on the cloud trend without a triple-digit nosebleed valuation. As enterprises move more of their software to the cloud, Okta's identity management platform is a key enabler to keep their infrastructure secure. It makes it easy for information technology teams to secure their cloud applications and provides authorized users the ability to sign on to all of their apps with a single password.
Cloud software is still in the early stages of adoption. IDC reports that 81% of enterprise organizations have at least one core application in the cloud, but only 13% of large companies are 100% dependent on the cloud. As businesses extend their use of cloud-based software tools, the need for a robust identity management solution like Okta's only grows stronger.
With these tailwinds, the company has grown to a $768 million trailing-12-month revenue business. For the upcoming fiscal year, its top line is expected to surpass the $1 billion mark, representing a 29% year-over-year growth. This is a decline from the current year's expected 40%, but it is likely to beat its guidance as it's done frequently in the past.
One indicator that Okta's revenue growth forecast could be light is the solid increase in its remaining performance obligations (RPO). RPO represents the total value of all customer contracts, which grew at an impressive 53% last quarter. Additionally, the company had an important win last quarter as Amazon Web Services (AWS) now includes Okta as part of its marketplace. This opens up the platform to a whole new set of customers. With stable subscription revenue accounting for 95% of its top line, investors can be confident growth will continue long into the future.
Even though Snowflake is growing faster at triple-digit rates, that growth comes at a tremendous price. Not that Okta is cheap, but its lofty price-to-sales ratio of 39 looks like a bargain next to Snowflake's 224. Okta is a better way for investors to profit as organizations continue their move to the cloud.
Square - This company is betting on the shift to digital payments
Chris Neiger (Square): For years, Square has been helping merchants of all sizes shift from physical cash to a digital payment world. The company's point-of-sale terminals are often used with digital card readers and near-field communication devices that make paying with a phone or tapping a credit card to pay easier than ever.
The pandemic has accelerated the shift to digital payments as many people have preferred not to handle physical money. This has helped boost Square's business, with third-quarter revenue skyrocketing 148% year over year (excluding its Caviar business). Square users are also spending a lot more through the company's payment platform, as gross payment volume jumped 91% in the recent quarter to $31.7 billion.
Additionally, the company's popular Cash App, which allows users to send money to friends, saw the number of its daily transacting customers nearly double year over year in the third quarter. Cash App sales also popped 174% in the quarter.
Digital payments were already becoming mainstream before the pandemic, but the trend is even more solidified now. This year the digital payment market will reach $910 billion, and by 2024 it'll be worth an estimated $1.5 trillion. For investors looking for a fast-growing tech stock that's tapping into this massive money trend, Square looks like a great long-term bet.