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Saturday, December 10, 2022

Call Cloud Computing for Technical Security. ETF Trends

Growth stocks are struggling, and the tech name is a big reason why. Over the course of 2022, some market observers noted that cloud computing is one of the culprits on stocks.

While this is true, there are some large and mega-cap tech names that are not dedicated cloud firms but major players in the space showing astonishing flexibility on the earnings front, relatively speaking. This could be a positive for exchange traded funds such as First Trust ISE Cloud Computing Index Fund (NASDAQGM: SKYY),

SKYY follows the ISE CTA Cloud Computing Index, and its 71 constituents have an average market capitalization of $18.47 billion, confirming that it is not dependent on mega-caps. Still, there are some favorable traits with Skye.

“The practice of running computing applications remotely for customers in data centers the size of a football field is booming. This trend continued in the first quarter, with Amazon, Google parent Alphabet and Microsoft all reporting higher-than-expected cloud revenue. were, and it demonstrated the benefit of moving away from consumer-oriented businesses,” reports Jordan Novett for CNBC.

With respect to Amazon, its Amazon Web Services (AWS) is the largest cloud computing firm, and it saw revenue increase 37% in the first quarter.

According to CNBC, “even as consumer demand eases, Amazon’s cloud business is more profitable than ever, showing operating profit of $6.52 billion, up 57% from a year ago.”

Microsoft’s Azure is that company’s rival to AWS, a complement to the Office 365 suite that’s growing at a rapid rate.

“Overall, Microsoft’s revenue from Azure and other cloud services, including cloud services from its recently acquired speech-recognition software maker Nuance Communications, grew 46% in the first quarter,” notes CNBC.

Google parent Alphabet has a growing cloud computing arm of its own, and while it isn’t profitable yet, revenue is rising, and it offers an opportunity to offset some of the risks posed by the decline in digital advertising.

“We’re also expanding specifically in our go-to market, and I think that will play out well,” Alphabet CEO Sundar Pichai said on the company’s recent earnings conference call. “And over time as we focus on converting bookings to consumption, I think it will go well, taking a longer-term approach and systematically scaling up and executing better.”

In order, Microsoft, Amazon, and Alphabet account for 10.4% of SKYY’s weight. Other large-cap names in the ETF include Oracle (NYSE: ORCL) and Cisco Systems (NASDAQ: CSCO).

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