Cloud Hosting

Because of the pandemic and the working from home initiative, you might have heard people talking about the cloud or cloud computing a lot this year.

Cloud computing is best described as the on-demand availability of computer system resources such as data storage and computing power, without direct active management by the user.

Its what allows you to stream endless hours of TV shows via Netflix, do your accounting at home with Xero Limited (ASX: XRO), or communicate with your colleagues via Zoom.

While the pandemic has accelerated the adoption of cloud-based products, theres still a long way to go before cloud computing growth plateaus.

Especially due to new technologies and the arrival of 5G internet. The latter is expected to create new cloud-based applications and opportunities that were impossible with previous networks.

This bodes well for companies with exposure to the cloud and could underpin strong demand for their products and services over the next decade.

Which companies will benefit on the Australian share market? Three ASX shares with exposure to cloud-computing are listed below:

Macquarie Telecom is a provider of telco and hosting services to corporate and government customers. It is the latter offering that is expected to be the key driver of growth for the company over the coming years. Its Hosting segment has been growing at a strong rate and appears well-positioned to continue this trend. Especially after recent capacity expansions were made in order to capture the increasing demand for data centre services in Australia.

Megaport offers scalable bandwidth for public and private cloud connections, metro ethernet, and data centre backhaul. It has networking equipment in hundreds of data centres around the world. This has created a software layer that provides an easy way for users to create and manage network connections. For example, through the Megaport network, users can create and run a global network with or without the need for physical infrastructure. Demand has been strong for its services this year, leading to Megaport reporting a 57% increase in monthly recurring revenue (MRR) to $5.7 million in FY 2020.

NEXTDC is an innovative data centre company which operates a collection of world class centres in key locations across Australia. Demand for its services has been growing very strongly in recent years and particularly in 2020. This has led to the company accelerating the construction of new centres in order to meet the rising demand. In addition to this, management recently revealed that it is looking into expanding into the Asia market in the near future.

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James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia has recommended MEGAPORT FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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How to benefit from the cloud computing boom with ASX shares - Motley Fool Australia