Edge Computing: Identifying Potential Multibagger Stocks

Market Leaders in Edge Computing

Cisco, Google, IBM, Amazon (AWS), and Microsoft are leading the edge computing market through strategic innovation, significant investments in technical infrastructure, and advanced analytics capabilities. These companies are leveraging their strengths in security, cloud, and data management to maintain and enhance their market leadership.

"And so we very quickly made a set of product decisions and did the important alignment to ensure that we could go hard after this market, delivering the right level of innovation and really capitalizing on what we believe to be a tremendous opportunity ahead of us.And we think the leadership that we have in security, combined with the interesting assets that we have broadly in observability and the market leadership position we've established there only gets better within Cisco." --- (CSCO, event transcript, 2024/06/04)

"And it really goes to Sundar's comment, opening comment, that we're very committed to making the investments required to keep us at the leading edge in technical infrastructure to support the growth in Cloud, all the innovation and search that he and Philip have spoken about and our lead with Gemini." --- (GOOG, earning call, 2024/Q1)

"We continue to invest in emerging technology as well, bringing new innovations to the market." --- (IBM, earning call, 2024/Q1)

"And we have a meaningful edge on the AWS side so that as companies are now getting into the phase of seriously experimenting and then actually deploying these applications to production, people want to run their generative AI on top of AWS." --- (AMZN, earning call, 2024/Q1)

"us in how we came to market from an analytics standpoint. So it brought together things like our real time monitoring, BI, data warehousing, all of that into this notion of fabric, aggregating into a data lake called One Lake." --- (MSFT, conference, 2024/05/21)

Emerging Players in Edge Computing

Fastly and Akamai are emerging players in edge computing, focusing on moving compute power closer to end users for better performance and scalability. Both companies are innovating and expanding their edge solutions, positioning themselves as potential multibagger stocks in this growing market.

"It also includes the emergence of a new, but growing, edge computing market which aims to move compute power and logic as close to the end user as possible." --- (FSLY, sec filing, 2024/Q1)

"And over time, that will grow. And by getting compute instances closer to the end user and really at the edge, again, you get a better performance and better scalability." --- (AKAM, conference, 2024/05/21)

"We are continuing to bring a durable, consistent, and predictable pipeline of new innovations to our edge cloud platform and software-defined modern network architecture, and are seeing interest from customers in our existing product lines like Network Services and Security, and newer product lines like Compute and Observability." --- (FSLY, sec filing, 2024/Q1)

"The key factors that influence our financial success are our ability to build on recurring revenue commitments for our security and performance offerings, increase traffic on our network, continue to develop, scale and successfully bring to market our cloud computing platform and compute-to-edge solutions that meet the needs of professional users and enterprises, effectively manage the prices we charge for our solutions, develop new products and appropriately manage our capital spending and other expenses." --- (AKAM, sec filing, 2024/Q1)

"Todd Nightingale: I think customers who are moving to Fastly are looking for sort of next-gen solutions, serverless compute, edge storage, that type of technology that we're delivering." --- (FSLY, earning call, 2024/Q1)

Technological Advancements in Edge Computing

Qualcomm's innovative Snapdragon platform, Intel's AI strategy, AMD's adaptive computing, and Nvidia's collaboration with HPE are driving significant advancements in edge computing technology, enabling new business models and operational efficiencies across various domains.

"Yes. Thank you. Hello, everyone. At ASUS, we have been huge admirers of Qualcomm's innovative mobile chipsets, especially the cutting edge Qualcomm Orion cores in the powerful MPUs in the Snapdragon platform. These advancements have resulted in many" --- (QCOM, conference, 2024/06/03)

"We're strengthening our position in accelerators and our AI everywhere strategy, the PC, the edge, the on prem data center in the cloud, gaining momentum." --- (INTC, event transcript, 2024/04/02)

"Powering the Next Wave of Edge AI InnovationAMD showcased how its AI and adaptive computing technology is powering the next wave of AI innovation at the edge." --- (AMD, press release, 2024/06/02)

"With offerings spanning Cloud Services, Compute, High Performance Computing & AI, Intelligent Edge, Software, and Storage, HPE provides a consistent experience across all clouds and edges, helping customers develop new business models, engage in new ways and increase operational performance. For more information, visit: www.hpe.com." --- (NVDA, press release, 2024/06/18)

"Let me share some key highlights from the business. As we drive intelligent computing everywhere, we are enabling the ecosystem to develop and commercialize on-device GenAI applications across smartphones, next-generation PCs, XR devices, vehicles, industrial edge, robotics, networking, and more." --- (QCOM, earning call, 2024/Q2)

Strategic Partnerships in Edge Computing

Strategic partnerships in edge computing are driving innovation and efficiency. IBM's collaborations enhance AI and hybrid cloud capabilities, while Lenovo and Cisco's joint efforts streamline integrated solutions from edge to cloud. AWS and SAP's expanded partnership boosts cloud ERP experiences, highlighting the critical role of strategic alliances in advancing edge computing.

"And I think around what we're going to announce around RelAI, OpenShift AI, our Watson X tech stack, our embedded software assistance and new innovation we're going to bring to market, around our new strategic partnerships, can go on and on and on and around our consulting business." --- (IBM, conference, 2024/05/20)

"Our combined leadership in advanced networking and end-to-end server and data management infrastructure will deliver fully integrated, co-engineered solutions that seamlessly connect, protect and analyze data to propel AI-powered innovation for our customers from the edge to the cloud. The integrated solutions from Lenovo and Cisco will streamline operational deployment and significantly enhance business outcomes for our shared customers, as well as provide tremendous opportunities for our joint partners." --- (CSCO, press release, 2024/05/30)

"The NVIDIA IGX platform's new capabilities deliver powerful enterprise-grade software from the cloud to the industrial edge, giving customers increased performance, safety and scalability. Amazon Web Services (AWS), an Amazon.com, Inc. (NASDAQ:AMZN) company, recently announced an expanded, strategic collaboration with SAP SE to transform modern cloud enterprise resource planning (ERP) experiences and to help enterprises drive new capabilities and efficiencies with generative artificial intelligence (AI)." --- (MSFT, press release, 2024/06/05)

"Our strategic partnerships still have great velocity, book-to-bill well north of 1.2, our Red Hat book of business is now $2.8 billion ARR around hybrid cloud, and we are seeing very nice acceleration in GenAI and digital transformation around core workflow use case areas of finance, supply chain, HR and talent." --- (IBM, earning call, 2024/Q1)

"The strategic partnership will deliver integrated infrastructure solutions and services that are tested and optimized for interoperability, allowing customers to accelerate go-to-market initiatives and business outcomes." --- (CSCO, press release, 2024/05/30)

Financial Performance of Edge Computing Companies

Edge computing companies like IBM, Cisco, Amazon (AWS), and Alphabet (Google Cloud) are demonstrating strong financial performance through revenue growth, margin expansion, and better-than-expected earnings. IBM and Cisco highlight solid fundamentals and operating leverage, while AWS and Google Cloud anticipate significant growth driven by high demand and strategic investments.

"Our debt balance at the end of the second-quarter was flat with year-end 2023 at $56.5 billion, including $11.1 billion from our financing business. Putting this all together, our business fundamentals remain solid with continued revenue growth, margin expansion, cash generation, and a strong balance sheet with financial flexibility to support our business. Turning to the segments." --- (IBM, earning call, 2024/Q2)

"Strong operating leverage across our business drove gross margins to exceed the high end of our expectations, resulting in better-than-anticipated earnings per share performance." --- (CSCO, earning call, 2024/Q3)

"which is adding to the number of companies moving their AI focus to AWS. We expect the combination of AWS' reaccelerating growth and high demand for gen AI to meaningfully increase year-over-year capital expenditures in 2024, which given the way the AWS business model works is a positive sign of the future growth." --- (AMZN, earning call, 2024/Q1)

"Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023. However, in the third quarter operating margins will reflect the impact of both the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure, as well as the increase in cost of revenues due to the pull-forward of hardware launches into Q3." --- (GOOG, earning call, 2024/Q2)

"Financial Performance Summary — Three Months Ended March 31: In the first quarter of 2024, we reported $14.5 billion in revenue, income from continuing operations of $1.6 billion and operating (non-GAAP) earnings of $1.6 billion." --- (IBM, sec filing, 2024/Q1)

Regulatory Impacts on Edge Computing

Regulatory impacts on edge computing are significant, with companies like Alphabet and Cisco highlighting the need to mitigate regulatory risks and address increasing regulatory requirements. Amazon suggests that regulatory changes will take a long time, indicating a prolonged period of adaptation for edge computing initiatives.

"As long term shareholders we want Alphabet to succeed over the long run which means our company must do what it can today to mitigate the generative AI risks of tomorrow not only the risk to society but to the company itself regulatory risk, legal risk, reputational risk, these are only a few and while Alphabet touts its current reporting we've only seen principles and platitudes." --- (GOOG, event transcript, 2024/06/07)

"And we spent a lot of time making sure that as a team and as individual teams, the majority of our energy, the vast majority of our energy and attention goes towards trying to provide the best possible customer experience that we can deliver for customers.I think that the all the machinations around what will happen in the regulatory world will take a long time." --- (AMZN, event transcript, 2024/05/22)

"Our customers are facing increasing regulatory requirements. As we know, we see this a lot." --- (CSCO, event transcript, 2024/06/04)

Competitive Landscape in Edge Computing

IBM, Cisco, Amazon, and Microsoft are leveraging AI and innovative technologies to build competitive advantages in the edge computing market. IBM's collaboration with the Spanish government, Cisco's strategic pricing, Amazon's advanced server designs, and Microsoft's strong cloud edge position them as key players in this evolving landscape.

"The coordination within the government institutions in this field will facilitate both widespread use of AI across national, regional, and local economies, as well as the timely and sufficient resources needed to build competitive advantages within a rapidly evolving AI-driven commercial landscape." --- (IBM, press release, 2024/04/05)

"Maybe you can talk about the competitive landscape for your business and why should we not assume that pricing pressures are going to significantly rise in this environment as everybody is trying to fight for footprint?" --- (CSCO, earning call, 2024/Q1)

"The compact design also reduces the overall weight and size of the server, making it easier to transport and install. Enhanced Reliability: The immersible design improves hardware longevity and reliability, reducing downtime and maintenance costs. 'Avant's revolutionary AI software platform is poised to transform the landscape of data center management,' said William Hisey, CEO of Avant." --- (AMZN, press release, 2024/06/05)

"This allows users to easily find and recall actions from months ago. Experts are already labeling Microsoft as a "frontrunner in the generative AI race", with analysts expecting big things from the software giant, citing a "strong competitive cloude edge" coming, as they estimate Microsoft's Copilot deployments could add around $25 billion to the company's trajectory by fiscal year 2025." --- (MSFT, press release, 2024/06/21)

"If you look at it though, IT and technology has always been a form of competitive advantage." --- (IBM, conference, 2024/05/20)

Future Growth Potential in Edge Computing

Cisco, IBM, and Microsoft are all projecting significant growth in edge computing. Cisco anticipates accelerated growth in 2026, IBM is identifying future portfolio gaps to target, and Microsoft reports a 35% quarter-over-quarter increase in paid subscribers, indicating strong adoption across various industries.

"I mean, you're mixing towards Splunk and software and therefore, the math would -- therefore have you guys on a normalized basis after, you know, after the organic growth is very muted in 2025, accelerating by several hundred basis points to the higher single-digits in 2026, if that's true." --- (CSCO, earning call, 2024/Q3)

"And just as we think about the potential targets in the future, where do you believe you have gaps that you can still fill within your portfolio?" --- (IBM, earning call, 2024/Q1)

"We now have 1.8 million paid subscribers with growth accelerating to over 35% quarter-over-quarter and continues to see increased adoption from businesses in every industry, including Itau, Lufthansa Systems, Nokia, Pinterest and Volvo cars." --- (MSFT, earning call, 2024/Q3)