We recently published a list of 7 Best Software Infrastructure Stocks to Invest in Now. In this article, we will look at where Adobe Inc. (NASDAQ:ADBE) ranks against the other best software infrastructure stocks to invest in now.
Technology powers virtually every facet of modern businesses, from individual tasks to common operations, goods and services. When integrated effectively, it improves communication, increases efficiency and increases productivity. Both technical and non-technical companies rely on software infrastructure and 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 critical components of the software infrastructure.
One of the largest segments of the software infrastructure market is the cloud infrastructure industry. As companies increasingly adopt cloud solutions to reduce costs and improve efficiency, demand for these services continues to grow. According to Synergy Research Group, global enterprise spending on cloud infrastructure services reached $79 billion in the second quarter, up $14.1 billion or 22% from the same period in 2023. This represents the third consecutive quarter of substantial growth, with annual on-year annual increases of more than 20%.
Specifically, Software-as-a-Service (SaaS) emerged as a rapidly growing segment within the cloud infrastructure industry. Leading companies like Salesforce offer powerful features through subscription-based models delivered over the Internet. This approach ensures lower upfront costs, easy implementation and continuous updates, making advanced tools accessible to companies of all sizes. In the SaaS model, providers grant customers access to application software and databases via the cloud. By 2023, the global SaaS market will generate approximately $197 billion in revenue, representing nearly two-thirds of the total public cloud services market. Although SaaS revenues are expected to continue to grow, the SaaS market’s 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 predicted that global IT spending would reach $5.26 trillion by 2024, an increase of 7.5% from 2023. However, rapid expansion of technology investments could lead to technology proliferation, with new tools are often not compatible. According to a report from Zylo, organizations have wasted an average of $18 million this year alone due to inefficient SaaS management.
On another front, cybersecurity has emerged as a critical part of software infrastructure, with spending soaring since the start of the COVID-19 pandemic. As cloud computing and remote working have become an integral part of business operations, organizations have faced new security challenges. According to the Identity Theft Resource Center, data breaches reached an all-time high in 2023, up 71% from the previous record in 2021 and up 78% from a slight decline in 2022. Given these trends, that’s not the case. Surprisingly, global cybersecurity spending is expected to exceed $200 billion by 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 involved in the sector. From that list, we selected the top 7 companies with the highest number of hedge fund investors, according to Insider Monkey’s 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 shows that we can outperform the market by imitating the best stock picks from 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 the benchmark by 150 percentage points (see here for more details).
A team of engineers and scientists working together at 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 for students and creative professionals, including web design, digital arts 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 was $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 increased by 9%. A standout performance came from net new annual recurring revenue from digital media, which was $487 million, well above the company’s expectations of approximately $440 million.
Adobe Inc. (NASDAQ:ADBE) has rapidly integrated AI capabilities into its product suite and now offers more than 100 AI features across Creative Cloud, Document Cloud and Experience Cloud. The company’s Firefly family of generative AI models is gaining traction, and its Express mobile app with Firefly has significantly increased its monthly active user base.
In the second quarter, 107 hedge funds held stakes in Adobe Inc. (NASDAQ:ADBE), with a combined value of $11.8 billion. Fisher Asset Management was the largest shareholder, with 4.76 million shares.
In short, ADBE is in 2nd place on our list of the best software infrastructure stocks to invest in now. While we recognize ADBE’s potential as an investment, we believe that certain AI stocks hold promise because they can deliver high returns within a shorter time frame. If you’re looking for an AI stock that’s more promising than ADBE but trades at less than five times earnings, check out our report on the cheapest AI stocks.
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Disclosure: None. This article was originally published on Insider Monkey.
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