Free Trial

3 Cloud Software Leaders Positioned for AI Upside

Cloud Computing — Photo

Key Points

  • ServiceNow leverages AI-driven workflows and virtual agents to boost enterprise efficiency and drive strong subscription revenue growth.
  • Salesforce is embedding generative AI into its CRM platform, expanding margins and attracting thousands of new enterprise customers.
  • Datadog offers advanced observability and machine learning tools to help DevOps teams monitor, secure, and optimize cloud infrastructure.
  • Interested in Datadog? Here are five stocks we like better.

Why were the Magnificent Seven stocks so impressive in 2024, and why are they expected to lead the market for years to come? For many of them, the driving factors were two themes: cloud computing and artificial intelligence (AI). In fact, three of these Mag 7 tech stocksAmazon.com Inc. NASDAQ: AMZNMicrosoft Corp. NASDAQ: MSFT, and Alphabet Inc. NASDAQ: GOOGL, are the top three cloud computing companies based on revenue from cloud services.

These hyperscalers are driving global data center demand. For those seeking alternative opportunities in cloud software, several SaaS companies stand out. They incorporate AI into their platforms, built on top of providers like AWS, Azure, and Google Cloud. These firms are essential for strengthening customer engagement, increasing productivity, and opening new revenue channels.

While their stock prices are high, the growing enterprise investment in AI solutions suggests these three cloud software stocks still have significant growth potential.

ServiceNow: Automating Workflows With AI

ServiceNow Today

ServiceNow, Inc. stock logo
NOWNOW 90-day performance
ServiceNow
$971.24 -42.47 (-4.19%)
As of 03:45 PM Eastern
This is a fair market value price provided by Polygon.io. Learn more.
52-Week Range
$678.66
$1,198.09
P/E Ratio
132.09
Price Target
$1,068.23

ServiceNow NYSE: NOW is incorporating AI into its Now Platform to help customers automate workflows across HR, customer service, and operations. Customers get AI-powered virtual agents that use predictive intelligence to help cut costs and improve response times.

The company’s pricing power is seen in its strong quarter, in which it exceeded the high end of its subscription revenue guidance. ServiceNow is expecting growth in the mid-20% range. However, in its latest earnings report, it did limit its guidance.

That's had no impact on the stock, which has been up 40% since the earnings report. At 18x forward sales, NOW stock is not cheap, and it is showing some resistance near its consensus high. However, several analysts recently raised their price targets. A strong earnings report could push the stock past this consolidation period, which could put a new all-time high in play.

Salesforce: Embedding AI Across the Customer Journey

Salesforce Today

Salesforce Inc. stock logo
CRMCRM 90-day performance
Salesforce
$264.40 -6.52 (-2.41%)
As of 03:45 PM Eastern
This is a fair market value price provided by Polygon.io. Learn more.
52-Week Range
$230.00
$369.00
Dividend Yield
0.63%
P/E Ratio
41.41
Price Target
$348.68

As its ticker symbol indicates, Salesforce Inc. NYSE: CRM is a leader in customer relationship management. The company is embedding generative AI across its cloud ecosystem through its Agentforce platform. This is an add-on and extension to the company’s core products, and has attracted over 4,000 paying customers since its October 2024 launch.

After strong growth in 2024, CRM stock is down about 18% in 2025. However, analysts don’t expect that to last long. The Salesforce analyst forecasts on MarketBeat give the stock a consensus price target of $349.08, which is 27% above its closing price on July 8.

CRM stock is also attractively valued at approximately 7x forward sales, a valuation in line with its historical average. Analysts expect steady earnings growth in the mid-teens and have generally positive views, though some caution that near-term upside may be more moderate after recent gains. Still, the company’s pivot to profitable growth and AI monetization has improved sentiment considerably.

Datadog: The Digital Control Room for the Cloud

Datadog Today

Datadog, Inc. stock logo
DDOGDDOG 90-day performance
Datadog
$137.99 -4.76 (-3.33%)
As of 03:45 PM Eastern
This is a fair market value price provided by Polygon.io. Learn more.
52-Week Range
$81.63
$170.08
P/E Ratio
300.36
Price Target
$144.27

With a $50 billion market cap, Datadog Inc. NASDAQ: DDOG is the smallest company on this list. But if the past three months are any indication, it may have the most upside. DDOG stock is up more than 67% over that span, and the stock has pushed positive year-to-date. Some of that growth is due to the company’s inclusion in the S&P 500. However, it’s important to understand why the company was added to that exclusive list.

Datadog is a leader in log management and observability software. The company’s platform functions as a “digital control room” for all the apps, websites, and servers that are in use. Customers can see everything that’s happening so as to monitor performance better, address issues early, understand system usage, and proactively secure systems.

Datadog is integrating machine learning-driven anomaly detection and forecasting into its platform. That aligns with the need for DevOps teams to proactively spot issues before they disrupt services.

Should You Invest $1,000 in Datadog Right Now?

Before you consider Datadog, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Datadog wasn't on the list.

While Datadog currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

Metaverse Stocks And Why You Can't Ignore Them Cover

Thinking about investing in Meta, Roblox, or Unity? Enter your email to learn what streetwise investors need to know about the metaverse and public markets before making an investment.

Get This Free Report
Chris Markoch
About The Editor

Chris Markoch

Editor & Contributing Author

Value Investing, Retirement, Dividend Stocks, Individual Investing

Like this article? Share it with a colleague.

Companies Mentioned in This Article

CompanyMarketRankâ„¢Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
ServiceNow (NOW)
4.4397 of 5 stars
$975.44-3.8%N/A132.39Moderate Buy$1,068.23
Salesforce (CRM)
4.9112 of 5 stars
$264.61-2.3%0.63%41.39Moderate Buy$348.68
Datadog (DDOG)
4.2198 of 5 stars
$138.17-3.2%N/A299.72Moderate Buy$144.27
Amazon.com (AMZN)
4.7569 of 5 stars
$222.07-0.2%0.09%36.16Moderate Buy$247.17
Microsoft (MSFT)
4.6863 of 5 stars
$501.95-0.3%0.66%38.75Moderate Buy$534.14
Alphabet (GOOGL)
4.2539 of 5 stars
$177.620.6%0.47%19.82Moderate Buy$199.61
Compare These Stocks  Add These Stocks to My Watchlist 

Featured Articles and Offers

Related Videos

This Unique Robotaxi Play Could Deliver 10X Returns
Magnificent 7 Stocks Shift Toward Stability and Selective Growth
5 Blowout Earnings Winners That Could Soar Even Higher

Stock Lists

All Stock Lists

Investing Tools

Calendars and Tools

Search Headlines