We recently published a list of 7 Best Software Infrastructure Stocks to Invest in Now. In this article, we’ll take a look at where Adobe Inc. (NASDAQ: ADBE) stacks up against the other best software infrastructure stocks to invest in now.
Technology powers almost every facet of modern business, from individual tasks to overall operations, goods and services. When integrated effectively, it improves communication, increases efficiency and increases productivity. Both technology and non-technology companies rely on infrastructure and software solutions to keep their operations running smoothly. To this end, these companies are investing heavily in servers, cloud migration, network monitoring and management, and communications tools, all crucial components of software infrastructure.
The cloud infrastructure industry is one of the largest segments of the software infrastructure market. As businesses increasingly adopt cloud solutions to reduce costs and improve efficiency, the demand for these services continues to grow. Global enterprise spending on cloud infrastructure services reached $79 billion in the second quarter, an increase of $14.1 billion, or 22%, compared to the same period in 2023, according to Synergy Research Group. This represents the third consecutive quarter of substantial growth, with a year-over-year increase. -annual increases greater than 20%.
Specifically, software as a service (SaaS) has become a rapidly growing segment within the cloud infrastructure industry. Leading companies like Salesforce offer powerful capabilities through web-based subscription models. This approach allows for low upfront costs, easy deployment, and continuous updates, making advanced tools accessible to businesses of all sizes. In the SaaS model, providers grant customers access to application software and databases through the cloud. In 2023, the global SaaS market generated approximately $197 billion in revenue, accounting for nearly two-thirds of the total public cloud services market. Although SaaS revenue is expected to continue to grow, its share of the overall cloud services market may decline as cloud platform and infrastructure services expand.
Meanwhile, IT leaders are turning to technology consolidation in response to global economic challenges such as inflation, recession and supply chain disruptions, as well as the need to reduce costs while modernizing IT infrastructure. Gartner predicts that global IT spending would reach approximately $5.26 trillion in 2024, an increase of 7.5% from 2023. However, the rapid expansion of technology investments can lead to technological proliferation, with new tools lacking often compatibility. According to a report from Zylo, organizations wasted an average of $18 million this year alone due to ineffective SaaS management.
On another front, cybersecurity has become an essential part of software infrastructure as spending has increased since the start of the COVID-19 pandemic. As cloud computing and remote working become an integral part of business operations, organizations face new security challenges. According to the Identity Theft Resource Center, the number of data breaches reached an all-time high in 2023, increasing 71% from the previous record set in 2021 and 78% from a slight decline in 2022. Considering These trends are not possible. Surprisingly, global cybersecurity spending is expected to exceed $200 billion in 2023, an increase of about 12% from 2022.
Our methodology
In this article, we used a stock screener to identify technology companies that provide various forms of software infrastructure and/or are actively engaged in the sector. From this list, we selected the top 7 companies with the largest number of hedge fund investors, according to the Insider Monkey database of 912 hedge funds as of the end of Q2 2024.
Why do we care what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the stocks selected by the best hedge funds. Our quarterly newsletter strategy selects 14 small and large cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of engineers and scientists collaborating around a workstation surrounded by their applications and solutions.
Adobe Inc. (NASDAQ:ADBE)
Number of hedge fund holders: 107
Adobe Inc. (NASDAQ: ADBE), based in San Jose, California, is a leading software company that offers a wide range of tools and services to students and creative professionals, including web design, digital art and content creation.
The software company reported strong results for the second quarter of fiscal 2024, beating expectations with non-GAAP earnings per share of $4.48, compared to the consensus estimate of $4.39. Additionally, revenue reached $5.31 billion, slightly above the expected $5.29 billion, representing a 10% year-over-year increase. The digital media segment grew by 11%, while the digital experience segment saw an increase of 9%. A standout performance came from new digital media net annual recurring revenue, which reached $487 million, well above the company’s forecast of around $440 million.
Adobe Inc. (NASDAQ: ADBE) has rapidly integrated AI capabilities into its product suite, now offering more than 100 AI capabilities across Creative Cloud, Document Cloud, and Experience Cloud. The company’s Firefly family of generative AI models is gaining traction, and the Express mobile app featuring Firefly has significantly increased monthly active users.
As of the second quarter, 107 hedge funds owned stakes in Adobe Inc. (NASDAQ: ADBE), worth a combined $11.8 billion. Fisher Asset Management was the largest shareholder, with 4.76 million shares.
Global ADBE ranks 2nd on our list of the best software infrastructure stocks to invest in now. While we recognize the potential of ADBE as an investment, we believe that some AI stocks show promise in terms of high returns and in a shorter time frame. If you’re looking for an AI stock that’s more promising than ADBE but is trading at less than 5x earnings, check out our report on cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.
