Top Cloud-First Software Stocks for Growth: ServiceNow, Adobe, Twilio

January 30, 2025
Top Cloud-First Software Stocks for Growth: ServiceNow, Adobe, Twilio

The cloud-first software sector is transforming the technology landscape by offering scalable and cost-effective solutions that meet the needs of modern businesses. Cloud-first companies prioritize cloud-native applications that allow businesses to operate with increased flexibility and efficiency. As enterprises continue to adopt cloud-based tools, the demand for cloud-first software is on the rise. To capitalize on this growing trend, it might be worthwhile to consider investing in shares of well-positioned cloud-first software companies like ServiceNow, Inc. (NOW), Adobe Inc. (ADBE), and Twilio Inc. (TWLO), which are poised for significant growth.

The Rise of Cloud-First Software

Subscription-Based Revenue Models

Cloud-first companies benefit from subscription-based revenue models, which provide predictable income streams and foster long-term customer relationships. This model ensures that customers have immediate access to products and allows for continuous updates and improvements. As a result, users always benefit from the latest features and security enhancements. This revenue model has made cloud-first companies more attractive to investors due to their steady cash flow and consistent growth.

The integration of artificial intelligence (AI) into cloud-first software is further driving growth in the sector. Companies are leveraging AI to enhance user experiences, which range from automated meeting summaries to real-time language translations. The market for AI-enhanced cloud software is growing rapidly, with more businesses recognizing the benefits of integrating AI to improve operational efficiency and customer engagement. The cloud computing market is projected to reach $2.29 trillion by 2032, with a compound annual growth rate (CAGR) of 16.5%, solidifying the sector’s position at the forefront of the tech industry. Gartner forecasts that worldwide end-user spending on public cloud services will reach $723.40 billion in 2025, up from $595.70 billion in 2024.

ServiceNow, Inc. (NOW)

Intelligent Workflow Automation

ServiceNow, Inc. (NOW) is a digital workflow company providing intelligent workflow automation platform solutions for digital businesses worldwide. The company offers end-to-end digital transformation, AI, machine learning, robotic process automation, process mining, performance analytics, and collaboration tools through its Now platform. On January 17, ServiceNow announced the acquisition of Cuein, a leader in AI-native conversation data analysis and insights, to advance ServiceNow’s roadmap in agentic AI. This acquisition will enhance ServiceNow’s next-generation AI agents’ ability to understand, process, and transform data from siloed customer interactions into comprehensive analysis with actionable insights.

ServiceNow has consistently been at the forefront of innovation, continuously integrating advanced technologies to improve its offerings. The incorporation of AI and machine learning into its services allows clients to benefit from smarter, more efficient processes. Workflow automation not only speeds up operations but also reduces the margin of error, leading to significant cost savings. Clients in various industries, including healthcare, finance, and manufacturing, have reported improved outcomes and higher satisfaction levels after implementing ServiceNow’s solutions. This approach has solidified ServiceNow’s position as a leader in the cloud-first software sector.

Strategic Collaborations and Financial Performance

Additionally, on December 3, 2024, ServiceNow announced an expanded strategic collaboration with Amazon Web Services (AWS) to accelerate AI-driven business transformation across enterprises. This collaboration includes a new connector that enables the seamless use of multimodal models developed and trained on Amazon Bedrock for generative AI-powered workflows in the Now Platform. These collaborations enhance ServiceNow’s capabilities, making it an even more attractive choice for businesses looking to embrace digital transformation.

For the fiscal third quarter ended September 30, 2024, ServiceNow’s total revenue increased by 22.2% year-over-year to $2.79 billion. The company reported a non-GAAP gross profit of $2.31 billion, up 23.2% from the prior year, with a non-GAAP gross margin of 83% (up 100 basis points year-over-year). Non-GAAP operating profit amounted to $872 million, reflecting a 29% increase from the prior quarter’s value. Non-GAAP net income came in at $775 million, up 28.5% year-over-year, with non-GAAP earnings per share (EPS) growing 27.4% from the year-ago value to $3.72. Non-GAAP free cash flow rose 140.3% year-over-year to $471 million.

For the full year 2024, ServiceNow forecasted subscription revenues to be between $10.655 billion and $10.660 billion, with a non-GAAP free cash flow margin of approximately 31%. Analysts expect ServiceNow’s revenue for the fourth quarter ended December 2024 to increase by 21.5% year-over-year to $2.96 billion, with EPS for the same period expected to grow by 17.6% to $3.66. ServiceNow has consistently surpassed revenue and EPS estimates in each of the trailing four quarters. This strong financial performance reflects the company’s commitment to growth and innovation.

Adobe Inc. (ADBE)

Digital Media and Experience Solutions

Adobe Inc. (ADBE) operates as a global diversified software company, providing products, services, and solutions used worldwide to create, manage, deliver, measure, and optimize digital content and experiences. The company operates through three segments: Digital Media, Digital Experience, and Publishing and Advertising. On December 10, Adobe announced a partnership with Box, Inc. (BOX) to redefine how digital media is managed, created, and shared in enterprises. This partnership allows every Box user to create and edit visual content directly in Box with Adobe Express as the default image editor. This seamless integration brings efficiency and ease of use, ensuring that Adobe remains a vital tool for digital media professionals.

Adobe has a long history of leading the digital media space with its creative and document solutions, such as Photoshop, Illustrator, and Acrobat. The company continuously updates and expands its suite of tools to meet the evolving demands of digital creators. With the rise of content creation and digital marketing, Adobe’s products have become essential for businesses and individuals aiming to produce high-quality media and interactive experiences. Adobe’s strong brand reputation and commitment to innovation have resulted in a loyal customer base and a steady stream of subscription revenues.

Financial Performance and Market Projections

In the same month, Adobe extended its partnership with Amazon Web Services (AWS) to make Adobe Experience Platform (AEP) available on AWS. This will enable brands to deliver real-time customer experiences with greater flexibility and personalization at scale using AEP-driven insights and workflows. Such strategic partnerships enhance Adobe’s capabilities and market reach, reinforcing its position as a leader in digital experience solutions.

During the fourth quarter that ended on November 29, Adobe’s total revenues stood at $5.61 billion, up 11.1% year-over-year, with a gross profit of $4.99 billion, representing a 13% growth from the prior-year quarter. Adobe’s non-GAAP operating income of $2.59 billion showed a 10.8% increase from the prior-year quarter. The company’s non-GAAP net income stood at $2.13 billion, or $4.81 per share, up 8.8% and 12.6% year-over-year, respectively.

For the fiscal year 2025, Adobe expects its total revenue to be between $23.30 billion and $23.55 billion, with Digital Experience subscription revenue forecasted to range from $5.375 billion to $5.425 billion. Additionally, the company expects its non-GAAP EPS to fall in the range of $20.20 to $20.50. Analysts project Adobe’s revenue for the fiscal first quarter (ending February 2025) to increase by 9.3% year-over-year to $5.66 billion, with EPS for the same period expected to improve by 10.9% year-over-year to $4.97. Adobe has consistently surpassed consensus revenue and EPS estimates in each of the trailing four quarters. This consistent performance underscores Adobe’s robustness in the market.

Twilio Inc. (TWLO)

Customer Engagement and Personalized Solutions

Twilio Inc. (TWLO) offers a customer engagement platform comprising international communications application programming interfaces. The company operates through two segments: Twilio Communications and Twilio Data & Applications. On December 2, Twilio announced the public beta availability of Linked Audiences in the Twilio Segment for Amazon Redshift, enhancing audience building, customer profile enrichment, and scalable personalization for Twilio Segment and AWS users. This feature allows businesses to create more targeted and effective marketing campaigns, improving overall engagement and customer satisfaction.

Twilio’s platform is designed to help businesses manage and optimize their interactions with customers across various channels, including SMS, voice, video, and chat. By providing APIs that developers can easily integrate into their applications, Twilio ensures that businesses can quickly deploy and scale their communication solutions. This flexibility is crucial for companies looking to maintain strong customer relationships in an increasingly digital world. Twilio’s commitment to innovation and customer-focused solutions has made it a key player in the cloud communications market.

Financial Performance and Strategic Partnerships

The cloud-first software sector is radically changing the tech landscape by providing scalable and cost-effective solutions for modern businesses. These cloud-first companies focus on cloud-native applications that offer businesses greater flexibility and efficiency. As more enterprises adopt cloud-based tools, there’s a growing demand for cloud-first software. This trend opens up investment opportunities in well-positioned cloud-first software firms such as ServiceNow, Inc. (NOW), Adobe Inc. (ADBE), and Twilio Inc. (TWLO).

These companies are at the forefront of innovation and are well-suited to capitalize on the increasing shift towards cloud technologies. ServiceNow offers enterprise software platforms to automate IT, employee, and customer workflows. Adobe’s suite of creative and marketing tools is widely used in various industries, while Twilio enables developers to build communication platforms with its powerful APIs.

For investors, these cloud-first companies represent solid potential for significant growth. By investing in these market leaders, one can potentially benefit from the ongoing migration to cloud-based solutions. As the demand for digital tools and services continues to rise, so does the potential for these companies to deliver substantial returns. Embracing this shift and investing in these high-growth stocks could be a strategic move for those looking to tap into the flourishing cloud-first software industry.

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