Nowcasting Firms’ Fundamentals: Evidence from the Cloud

Abstract

Cloud computing has been widely adopted by businesses around the world. Using a proprietary data set on firm-level cloud data records from 2013 to 2021 from China, we find that year-on-year quarterly cloud data growth (CDG) contains value-relevant information for firm fundamentals, earnings surprises, and innovation performance. Specifically, CDG positively predicts assets growth, sales growth, ROA, standardized unexpected earnings (SUE), and patent outcomes. CDG also forecasts stock returns, especially around future earnings announcements. A long-short portfolio by buying (selling) stocks with the high (low) CDGs generates a 9.0% risk-adjusted return annually. The predictive power of CDG is robust to various controls and subsample cuts, superior compared to other nowcasters, and holds in other Asian countries as well.