Akamai Sinks Despite Multi-Year High Revenue Growth


Shares in Akamai Technologies (AKAM) pulled back 2% in Tuesday’s after-hours trading, despite the company posting impressive second quarter earning results.

Specifically, Q2 Non-GAAP EPS of $1.38 beat Street estimates by $0.17 while GAAP EPS of $0.98 also topped consensus expectations by $0.20. Revenue of $795M surged 12.8% year-over-year (14% when adjusted for foreign exchange) and easily beat estimates by $27.62M.

Most impressively, AKAM’s Cloud Security Solutions revenue was $259M, up 27% year-over-year, while Web Division revenue was $404M (up 7%) and Media and Carrier Division revenue was $390M (up 19%).

“Akamai’s outstanding top and bottom line results in the second quarter were powered by the strong growth of our Security and Media solutions and our continued operational excellence,” said Dr. Tom Leighton, Akamai’s CEO.

Looking forward, Q3 & FY20 Guides came in modestly above Street, with a few notable drag factors (i.e. the banning of Chinese apps in India, Summer Web traffic moderation & IP revenue hits as two of the largest contracts were renewed down).

Following the report, RBC Capital analyst Mark Mahaney reiterated his hold rating on the stock while boosting his price target from $94 to $105.

“AKAM posted Beat & Raise Q2 results w/ multi-year high Revenue Growth & record high EBITDA Margin (45%), thanks to very strong Web traffic growth, robust Cloud Security growth & opex efficiency” he cheered.

However he notes that AKAM shares have already surged 30% year-to-date and that “Revenue Growth Deceleration is highly likely (implied in H2 guide), which likely checks the current multiple and may modestly pressure it over the next 12 months.”

Overall, AKAM scores a cautiously optimistic Moderate Buy consensus from the Street, alongside a $123 average analyst price target (9% upside potential). (See Akamai stock analysis on TipRanks).

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