Is Alphabet the Best Cloud Stock to Buy Now? This 1 Metric Says So

Most investors are familiar with the "Big Three" in the cloud computing industry: Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Microsoft (NASDAQ: MSFT), and Amazon (NASDAQ: AMZN). Combined, these corporations account for more than 60% of the market. But which one of these is the most attractive cloud stock? It's not an easy question to answer. However, let's look at one metric in their most recent quarterly updates that points toward Alphabet being the best of the bunch.

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Alphabet's cloud growth is accelerating

In the first quarter, Alphabet's revenue came in at $109.9 billion, up 22% compared to the year-ago period. The company's advertising business still accounts for the lion's share of its top line, but the tech giant's cloud computing arm is growing much faster. Alphabet's cloud sales were $20 billion, up 63% from the prior-year quarter. How fast did Microsoft Azure and Amazon Web Services (AWS) grow during the comparable period?

The former posted a year over year revenue increase of 40%, while the latter's was 28%. All three cloud giants saw faster sales growth in this niche than they did in the previous quarter, but Alphabet was far more impressive in this department, too, going from 48% during the previous quarter to 63% this time around. Microsoft Azure barely improved from 39% to 40%, while AWS jumped from 24% to 28%.

There is (much) more to the story

It's important to put Alphabet's much stronger cloud sales growth over the past two quarters into perspective. The company lags its two peers in this market. It's easier to post strong sales growth from a smaller sales base. Even so, Alphabet's business looks unstoppable right now. The company's artificial intelligence (AI) efforts are paying off. AI has helped the company strengthen its search business through features like AI overviews and AI mode, and it is also helping the tech leader's cloud business. Alphabet's cloud backlog continues to rise significantly, reaching $460 billion in the period, up almost 92% quarter over quarter.

This suggests the company could maintain its cloud momentum over the next few quarters. But is the stock a buy for long-term investors? My view is that it is. Putting aside Alphabet's cloud business -- which should remain one of its fastest-growing segments -- the company boasts several long-term growth opportunities. We can, for instance, point to Alphabet's streaming ambitions through YouTube. We can even consider the company's still small but highly promising autonomous vehicle segment, an industry where it is a leader.

Alphabet's self-driving car business could become a growth driver over the next decade, provided the industry's adoption continues. There are other reasons to consider the stock, too, including its wide moat from its brand name and switching costs, as well as its dividend program. So, is Alphabet the best cloud stock to buy right now? Maybe, maybe not. But it is definitely a great cloud stock to buy right now.

Prosper Junior Bakiny has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool has a disclosure policy.