Akamai Technologies Drops 7% Following Q4 Results

Akamai Technologies (NASDAQ:AKAM) received an increased price target of $120, up from $115, with a Buy rating maintained by DA Davidson.

In a recent investor call, Akamai's CFO Ed McGowan and Head of IR Mark Stoutenberg provided additional insights, expressing strong confidence in the company's Compute business, which is expected to see further growth acceleration, particularly as the enterprise segment continues to expand.

While there were conflicting reports about market share shifts in the Delivery segment, overall traffic growth remains weak. However, management expressed optimism about the growth potential of Noname, a key area of focus, and highlighted that operating margin expansion into the low 30% range is a top priority.

• Akamai Technologies (NASDAQ:AKAM) reported a significant uptick in its stock price following impressive second-quarter results.
• The company announced a 15% increase in security revenue to $498.7 million and a 23% jump in compute revenue to $151.5 million.
• Akamai has revised its full-year adjusted EPS guidance upwards, reflecting a positive outlook and continued demand for its products.

Akamai Technologies (NASDAQ:AKAM) recently made headlines with its impressive second-quarter results, which not only exceeded expectations but also led to a significant uptick in its stock price. As a leading provider of security and cloud computing products, Akamai's financial performance is closely watched by investors and industry analysts alike. The company's shares surged by 10% to $100.94, positioning it among the top gainers in the S&P 500. This surge was a direct response to the company's announcement of a 15% increase in security revenue, reaching $498.7 million, and a 23% jump in compute revenue to $151.5 million. However, it's important to note that delivery revenue saw a decline of 13% to $329.4 million.

The financial metrics provided by Akamai further underscore the company's strong quarter. With adjusted earnings per share (EPS) at $1.58 and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) at $408.9 million, Akamai not only surpassed analyst expectations but also showcased its robust financial health. The total revenue saw a 5% year-over-year increase to $979.6 million, which is a testament to the company's ability to grow its core business segments effectively.

In light of these strong results, Akamai has confidently revised its full-year adjusted EPS guidance upwards to between $6.34 and $6.47, from the previously forecasted range of $6.20 to $6.40. This adjustment reflects the company's positive outlook and the anticipated continued demand for its security and cloud computing products. CEO Tom Leighton's remarks about the quarter's achievements further highlight the strong customer interest in Akamai's offerings and the successful launch of new cloud services, indicating a strategic direction that aligns with market demands and emerging technology trends.

Despite the positive momentum, it's important to recognize that Akamai's shares have experienced some volatility, with a 15% decline for the year. This suggests that while the company is making significant strides in its operational and financial performance, external factors and market dynamics continue to influence its stock price. Investors and stakeholders will likely keep a close eye on Akamai's future performance, especially in the rapidly evolving sectors of security and cloud computing, where competition is fierce and innovation is key to maintaining a competitive edge.

Baird analysts upgraded Akamai Technologies (NASDAQ:AKAM) to Outperform from Neutral, raising the price target to $135 from $128. The firm’s upgrade stems from optimism around Akamai's expanding security business, which is anticipated to represent 50% of the company's total revenue in 2024, up from 39% three years earlier.

Highlighting the current valuation's significant discount compared to its historical five- and ten-year averages, the analysts see a compelling risk/reward scenario for investors. Despite the ongoing challenges in the delivery segment, the analysts believe this is already well accounted for in the market's expectations, and see potential upside in the compute segment by 2025 and beyond, which currently holds low investor expectations.

Akamai Technologies (NASDAQ:AKAM) shares jumped more than 8% on Wednesday after the company reported its Q1 earnings results, with EPS of $1.40 coming in better than the Street estimate of $1.32. Revenue was $916 million, beating the Street estimate of $910.51 million, driven by the Delivery upside, mostly offset by another Security miss.

For Q2/23, the company expects EPS in the range of $1.38-$1.42, compared to the Street estimate of $1.35, and revenue in the range of $923-$937 million, compared to the Street estimate of $919 million.

For the full year, the company anticipates EPS of $5.69-$5.84, compared to the Street’s $5.48, and revenue of $3.74-3.785 billion, compared to the Street’s $3.73 billion.

Akamai Technologies (NASDAQ:AKAM) shares rose more than 6% yesterday following the company’s reported Q3 results, with EPS of $1.26 coming in better than the Street estimate of $1.22. Revenue was $882 million, compared to the Street estimate of $875.83 million.

Compute and Security accounted for 55% of revenue, but Security has seen a major slowdown in growth, and its Delivery business declined 11% year-over-year. The company noted slowing sales cycles and media and advertising under pressure. Competitors with new platforms are more integrated and bundling (network, security, compute) at major price discounts with integrated functionality.

The company’s Q4 revenue guidance implies 3.3% year-over-year decline at the midpoint, driven by (1) FX headwinds, (2) lengthening sales cycles, (3) seasonality, and (4) contained pressure in CDN from recent price reductions.

Akamai Technologies, Inc. (NASDAQ:AKAM) reported its Q2 results, with EPS of $1.35 coming in better than the Street estimate of $1.31. Revenue was $903 million, slightly better than the Street estimate of $899 million.

Delivery performance was weak (down 11% year-over-year) on moderating traffic, recent renewals, and FX headwinds.

Key points from the earnings announcement include (1) delivery traffic is expected to be muted for several quarters and, to reduce costs, Akamai is now turning away some customers with extreme peak traffic, (2) Linode commentary was encouraging, (3) security deceleration suggests continued slowdown in more established products, and (4) guide doesn't assume an improving macro and commentary suggested worsening environment in some markets (e.g., Europe).