Three Cloud Stocks to Watch Following the AWS Outage

Amazon’s [AMZN] AWS blackout on October 20 brought much of the digital world screeching to a halt, with the outage affecting apps as diverse as Snapchat [SNAP], Robinhood [HOOD] and Uber [UBER], several financial and government portals in the UK, and even online learning platforms for US college students. Caused by a minor server update, the incident was quickly likened to CrowdStrike’s [CRWD] IT outage in July 2024.

In the immediate wake of the incident, however, Amazon stock rose, closing the week up nearly 5%. While that rise might partly be the result of enthusiasm ahead of its Q3 earnings call in October 30, it also stems from the nature of the outage. Rather than exposing a potential security risk, as in the case of the CrowdStrike outage, it underlined AWS’ dominant position in the cloud infrastructure space.  

AWS currently commands a 31% share of the cloud market, well ahead of Microsoft’s [MSFT] Azure, at 25%, and Alphabet’s [GOOGL] Google Cloud, at 11%. The division is expected to generate over $126bn in revenue this fiscal year, with at least $100bn in investment in data centers expected to further boost its capacity.

Despite AWS’ swift recovery — the issue was largely resolved within a 15-hour time span — some observers saw the outage as a sign that a secure cloud ecosystem is likely to come from diversification, rather than the current outsized reliance on a few big tech companies for the services that power the world. Additionally, growing demand for artificial intelligence-specific (AI) cloud services means the market is set to grow even further, opening new opportunities for smaller players. Let’s look at three cloud stocks that might benefit from this diversification.

Arista

As a cloud and data center infrastructure company, Santa Clara-based Arista Networks [ANET] is an AWS partner, rather than a direct competitor. However, its platforms for AI-focused cloud data centers, coupled with a recent strategic acquisition, give it room to grow in the space. 

In July, it acquired VeloCloud SD-WAN from Broadcom [AVGO], enhancing its edge networking and automation solutions. The company serves over 10,000 cloud customers worldwide, with hyperscalers such as Broadcom and Oracle [ORCL] representing 50% of its revenue.

Arista reported revenue of $2.21bn in Q2 2025, up 30.4% year-over-year and above Wall Street estimates, with a non-GAAP gross margin of 65.6%. Additionally, the company’s non-GAAP operating income passed the $1bn mark for the first time in the quarter. Arista set guidance for Q3 at revenue of $2.25bn and a non-GAAP gross margin of 64%, and raised its full-year revenue target to $8.75bn, representing growth of 25%. OPTO covered the earnings release, as well as Arista’s position in the Ethernet switch market, on Foresight back in August.

The ANET share price closed at an all-time high of $156.77 on October 28, putting it up 41.83% in the year to date, and up 59.13% in the past 12 months.

Upbeat guidance, and expanding, AI-focused solutions point to significant growth opportunities for the company. That said, it faces stiff competition from similar players like Cisco [CSCO], and larger tech firms seeking to increase their production of in-house solutions. In mid-October, for example, ANET stock fell almost 6% after Nvidia [NVDA] announced Oracle and Meta [META] would use its data center switches, representing its entry into one of Arista’s key markets. Additionally, with half of its revenue coming from hyperscaler customers, the loss of one customer could have an outsized impact on Arista’s overall financial health.

The company is due to release its Q3 earnings on November 4.

CoreWeave

Livingston, New Jersey-based CoreWeave [CRWV] provides a cloud platform specifically tailored for generative AI, and has been a major benefactor of the industry’s growth push, with strategic partnerships and an ongoing acquisition highlighting its already substantial pull in the cloud market.

In Q2 2025 the company reported revenue of $1.21bn, more than triple the $395m reported in the year-ago quarter. Revenue backlog was $30.1bn as of June 30, suggesting a sustainable medium-term revenue flow.

In September, the company reached a $6.3bn backstop deal with Nvidia in which the larger company will purchase any CoreWeave cloud capacity not leased to other customers.

CoreWeave is also entering the US federal market, with CEO Michael Intrator reporting on October 28 that the company would provide secure, compliant, high-performance AI cloud services to US government agencies.

Meanwhile, a proposed merger with data center operator Core Scientific [CORZ], announced in July, is growing increasingly unlikely due to shareholder resistance. On October 21, Intrator told CNBC that it would not raise its $9bn offer, commenting that “we are going to just kind of proceed as we have, in the event that the transaction does not go through. It is a nice to have, not a need to have for us.”

CoreWeave debuted on Nasdaq on March 27, at an IPO price of $40, with the subsequent rally bringing shares to an all-time high of $187.00 on June 20. CRWV shares closed at $134.80 on October 28, up 237% since its IPO but down 27.91% from its June high.

As an explicitly generative AI-focused company, CoreWeave has much to win — or lose — from the AI boom. Rapid growth figures appear promising, though the concentration of revenue from major customers and the questionable sustainability of growth through mega-contracts — such as its agreement with OpenAI, expanded to $6.5bn in September — may constitute warning signs. Similarly, the uncertainty surrounding the Core Scientific merger may create further volatility for the stock.

CoreWeave reports earnings on November 11.

DigitalOcean

New York-headquartered DigitalOcean [DOCN] differs from its much larger competitors by offering cost-effective cloud solutions to developers, startups and small to mid-sized businesses in what it calls Droplets, scalable virtual private servers that are the basic unit of its cloud platform.

Like many of its peers, DigitalOcean has focused on expanding its AI-related offerings in recent years, but the deliberateness of its progress sets it apart, according to analysts. “The company largely sidestepped the training-driven rush of 2023, instead focusing on building a credible foundation of GPU infrastructure and developer tooling aligned with real customer demand,” Canaccord Genuity analyst Kingsley Crane and Daniel Reagan wrote in an investor note in October 9, alongside a reiterated ‘buy’ rating and an increased price target of $55. DigitalOcean helps power Advanced Micro Devices’ [AMD] Developer Cloud, and has built out a supply of Nvidia H100 GPUs to support Droplets for AI model training.

This approach seems to be paying off, with revenue from AI and machine learning customers doubling year-over-year in Q2. In the quarter the firm recorded revenue of $219m, up 14% on the year-ago quarter, and incremental annual recurring revenue reaching $32m, the highest figure since Q4 2022.

In mid-October, a Betaville alert circulated suggesting DigitalOcean had attracted takeover interest. Last September, Cloudflare [NET] had reportedly approached DigitalOcean with a $55 per share cash and stock deal, although no agreement was reached.

In general, DigitalOcean’s approach to AI-related expansion appears to be paying off, and its scalable cloud solutions could capture a sizeable portion of the $140bn, 4m-customer digital native enterprises segment. That said, its small size and relatively slow growth present challenges, and its conservative expansion may continue to underwhelm investors.

DOCN share prices have remained largely at or below $40 since June 2022. Closing at $39.73 on October 28, the stock was up 16.61% year-to-date but down 3.19% in the past year.

In its Q2 earnings report the firm raised its full year revenue guidance to $888m–892m, and its adjusted EBITDA margin guidance to 39–40%. It expects revenue of up to $227m and non-GAAP diluted net income per share of up to $0.50. DigitalOcean will report its Q3 earnings on November 5. 

Here are how the fundamentals of the three companies compare:

Conclusion

Arista Networks, CoreWeave and DigitalOcean all represent plays on the cloud market, although they cater to different segments. All three face competition from much larger companies, notably Amazon and Nvidia, but could benefit from an increased push to diversify cloud providers, especially as all three capitalize on the increased cloud and data center capacity requirements for AI.

A bursting of the AI bubble or the expansion of cloud giants into new segments represent key risks for all three firms.