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Akamai (AKAM)
NASDAQ:AKAM
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Akamai
(NASDAQ:AKAM)67Neutral
Positive Factors
Growth Opportunities
Akamai is transitioning to high growth areas such as Cloud Infrastructure Services and API security, which are showing promise with significant growth in revenue and customer adoption.
Strategic Positioning
AKAM has a significant opportunity ahead, particularly in security and compute, underpinned by its category-leading positioning in content distribution.
Negative Factors
Earnings Guidance
The muted FY25 guidance of 3% growth versus a consensus of 7% implies that this year is likely a year of transition.
Akamai (AKAM) vs. S&P 500 (SPY)
Market Cap
$12.13B
Dividend YieldN/A
Average Volume (3M)3.06M
Price to Earnings (P/E)24.8
Beta (1Y)0.81
Revenue Growth4.70%
EPS Growth-7.33%
CountryUS
Employees10,250
SectorTechnology
Sector Strength48
IndustrySoftware
Share Statistics
EPS (TTM)3.26
Shares Outstanding150,317,540
10 Day Avg. Volume5,604,018
30 Day Avg. Volume3,063,406
Financial Highlights & Ratios
PEG Ratio8.27
Price to Book (P/B)N/A
Price to Sales (P/S)3.04
Price to Cash Flow (P/CF)8.80
P/FCF Ratio8.70
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$103.41Price Target Upside25.83% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering19
Akamai Business Overview & Revenue Model
Company DescriptionAkamai Technologies, Inc. is a global leader in content delivery network (CDN) services, cybersecurity, and cloud service solutions. Headquartered in Cambridge, Massachusetts, Akamai operates in sectors including information technology and internet services. The company provides solutions that enhance the delivery and security of digital content, applications, and online experiences, helping businesses optimize their web performance, improve security measures, and reduce the risk of cyber threats.
How the Company Makes MoneyAkamai makes money primarily through the sale of its CDN services, security solutions, and cloud services. The CDN services help businesses distribute their digital content efficiently and reliably, which is a major revenue driver. Akamai also generates significant income from its cybersecurity offerings, which include web application firewalls, bot management, and threat intelligence services, designed to protect clients from cyber threats. Furthermore, the company's cloud solutions, which enable businesses to enhance their online applications and infrastructure, contribute to its revenue. Akamai's strategic partnerships with major technology companies and its extensive network infrastructure are critical factors that bolster its earnings by expanding its customer base and service capabilities.
Akamai Financial Statement Overview
Summary
Akamai demonstrates consistent revenue growth with a strong cash flow. However, declining net income affects profitability margins, and ROE has decreased, reflecting some pressure on profitability.Income Statement
Akamai has demonstrated consistent revenue growth with a healthy gross profit margin of 57.5% in TTM. However, there is a decline in net income affecting the net profit margin, currently at 12.6%. The EBIT and EBITDA margins are solid at 13.5% and 26.9% respectively, indicating strong operational efficiency, although there is a noticeable drop in EBIT margin from the previous year.75
Positive
Balance Sheet
The company's balance sheet shows a stable equity ratio of 47.0%, suggesting a balanced approach to financing. The debt-to-equity ratio is manageable at 0.95, showing prudent leverage usage. However, the return on equity (ROE) has decreased to 10.4%, indicating a lower profitability on shareholder equity compared to previous years.70
Positive
Cash Flow
Akamai's cash flow is robust with a strong operating cash flow to net income ratio of 3.01, indicating excellent cash conversion from operations. Free cash flow has grown by 34.8% in the TTM, which is a significant improvement. The free cash flow to net income ratio is also healthy at 1.65, reflecting good cash generation relative to net income.80
Positive
| Breakdown | |||||
| TTM | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 | Dec 2019 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 3.99B | 3.81B | 3.62B | 3.46B | 3.20B | 2.89B | Gross Profit |
| 2.30B | 2.17B | 2.23B | 2.19B | 2.07B | 1.91B | EBIT |
| 537.69M | 707.33M | 676.27M | 783.15M | 658.53M | 548.92M | EBITDA |
| 1.08B | 1.24B | 1.26B | 1.35B | 1.16B | 1.02B | Net Income Common Stockholders |
| 504.92M | 547.63M | 523.67M | 651.64M | 557.05M | 478.04M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 864.44M | 864.44M | 1.11B | 1.08B | 1.10B | 1.54B | Total Assets |
| 9.90B | 9.90B | 8.30B | 8.14B | 7.76B | 7.01B | Total Debt |
| 4.54B | 4.54B | 3.17B | 2.86B | 2.78B | 2.67B | Net Debt |
| 4.05B | 4.05B | 2.63B | 2.32B | 2.42B | 2.13B | Total Liabilities |
| 5.30B | 5.30B | 3.94B | 3.61B | 3.51B | 3.35B | Stockholders Equity |
| 4.60B | 4.60B | 4.36B | 4.53B | 4.25B | 3.66B |
| Cash Flow | Free Cash Flow | ||||
| 833.90M | 618.40M | 816.37M | 859.33M | 483.13M | 496.23M | Operating Cash Flow |
| 1.52B | 1.35B | 1.27B | 1.40B | 1.22B | 1.06B | Investing Cash Flow |
| -798.68M | -1.85B | -622.31M | -646.90M | -1.04B | -1.52B | Financing Cash Flow |
| -538.79M | 443.38M | -634.18M | -562.00M | -223.64M | -35.68M |
Akamai Technical Analysis
Negative
82.18
Price Trends
93.85
Negative
96.02
Negative
95.85
Negative
Market Momentum
-4.78
Positive
35.38
Neutral
23.00
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AKAM, the sentiment is Negative. The current price of 82.18 is below the 20-day moving average (MA) of 91.78, below the 50-day MA of 93.85, and below the 200-day MA of 95.85, indicating a bearish trend. The MACD of -4.78 indicates Positive momentum. The RSI at 35.38 is Neutral, neither overbought nor oversold. The STOCH value of 23.00 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for AKAM.
Akamai Risk Analysis
Akamai disclosed 31 risk factors in its most recent earnings report. Akamai reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Akamai Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $16.86B | 28.27 | 18.38% | ― | 3.02% | 31.36% | |
74 Outperform | $251.67B | 27.72 | 20.18% | 2.52% | -5.34% | -30.57% | |
73 Outperform | $22.64B | 23.40 | 11.31% | ― | 3.05% | 55.96% | |
68 Neutral | $22.50B | 30.01 | -72.04% | ― | 4.31% | 1.07% | |
67 Neutral | $12.13B | 24.82 | 10.35% | ― | 4.70% | -7.33% | |
67 Neutral | $49.31B | ― | -398.06% | ― | 28.76% | 58.13% | |
59 Neutral | $22.39B | 11.53 | -18.05% | 2.31% | 5.00% | -25.89% |
* Technology Sector Average
Performance Comparison
AKAM
Akamai
82.18
-27.20
-24.87%
CSCO
Cisco Systems
63.26
15.81
33.32%
FFIV
F5 Networks
280.11
92.65
49.42%
VRSN
Verisign
237.04
45.67
23.86%
ZM
Zoom Video Communications
74.93
8.44
12.69%
NET
Cloudflare
140.93
44.96
46.85%
Akamai Earnings Call Summary
Earnings Call Date: Feb 20, 2025 | % Change Since: -16.17% | Next Earnings Date: May 6, 2025
Earnings Call Sentiment Neutral
Akamai reported strong growth in its security and cloud computing segments, with record-breaking revenue achievements in these areas. However, challenges such as the decline in delivery revenue and the impact of the largest customer's DIY strategy present ongoing concerns. While the company shows promising growth potential and strategic advancements, these challenges balance out the positives.Highlights
Record Revenue from Security Segment
Security revenue surpassed $2 billion for the first time in Akamai's history in 2024, growing at 16% year-over-year.
Cloud Computing Growth
Cloud computing portfolio recorded $630 million in revenue, growing 25% over 2023, with cloud infrastructure services growing 32%.
Strong ARR Growth in Key Areas
Guardicore platform ARR reached $190 million, up 31% year-over-year, and API security solution ARR grew to $57 million from just $1 million in 2023, surpassing growth goals.
Larger Enterprise Engagements
Approximately 300 enterprises spent at least $100,000 in ARR for cloud infrastructure services, with the total ARR for these services reaching $259 million, up 35% year-over-year.
Strategic Improvements and Partnerships
Akamai signed a $5.8 million contract with Petrobras and partnered with Deloitte, strengthening their market position.
Lowlights
Delivery Revenue Decline
Delivery revenue was $318 million, down 18% year-over-year, though there are signs of stabilization.
Impact of Largest Customer's DIY Strategy
The largest customer's move towards a DIY strategy presents a headwind of about 1% to 2% per year on overall revenue growth for the next couple of years.
Foreign Exchange Headwinds
Foreign exchange fluctuations negatively impacted 2025 expectations by approximately $18 million in revenue, 30 basis points in non-GAAP operating margin, and $0.09 in non-GAAP EPS.
Company Guidance
In the recent earnings call for Akamai Technologies, the company provided guidance indicating strong performance and future growth prospects. For the fourth quarter of 2024, Akamai reported revenue of $1.02 billion and non-GAAP earnings per share of $1.66, both exceeding expectations. Security became the largest revenue contributor, surpassing the $2 billion milestone with a 16% year-over-year growth. The cloud computing portfolio generated $630 million, growing 25% over 2023, with cloud infrastructure services reaching $230 million, up 32% from the previous year. Akamai's Guardicore platform and API security solution contributed significantly to this growth, ending the year with $247 million in annualized recurring revenue (ARR). The company aims to maintain a CAGR of 10% for security products over the next three to five years, projecting security revenue to exceed $3 billion by the decade's end. In 2025, Akamai expects its cloud infrastructure services to grow ARR by 40% to 45% and foresees overall cloud computing revenue growth of 15%. The company also anticipates stabilizing delivery revenue with a decline of about 10% this year and aims for double-digit revenue growth by the end of the decade. Despite challenges from its largest customer and foreign exchange fluctuations, Akamai remains optimistic about its future, targeting a return to non-GAAP EPS growth in 2026 and operating margins of over 30% in the long term.Akamai Corporate Events
Other
Akamai CEO Invests $3 Million in Company Stock
Positive
Feb 27, 2025
On February 27, 2025, Akamai Technologies’ CEO, F. Thomson Leighton, made a significant personal investment by purchasing approximately $3 million of the company’s common stock on the open market. This move could indicate confidence in the company’s future prospects and may have implications for investor sentiment and market perception.
Executive/Board ChangesBusiness Operations and Strategy
Akamai Approves 2025 Executive Compensation Program
Neutral
Feb 25, 2025
On February 19, 2025, Akamai Technologies’ Board of Directors approved a 2025 bonus and equity compensation program for its top executives, including CEO F. Thomson Leighton and CFO Edward McGowan. The program ties executive bonuses to corporate performance objectives, with a focus on revenue and adjusted operating income targets, and includes a modifier based on environmental, social, and governance (ESG) objectives. Executives will receive bonuses in the form of vested common stock, and restricted stock units (RSUs) will be granted on March 3, 2025. These RSUs will vest based on both corporate performance and stock performance relative to the S&P 500 Index over a three-year period, impacting Akamai’s strategic focus on long-term growth and shareholder value.
Business Operations and StrategyFinancial Disclosures
Akamai Reports Strong Revenue Growth in 2024
Positive
Feb 20, 2025
On February 20, 2025, Akamai Technologies reported its financial results for the fourth quarter and full year of 2024, showing a steady increase in revenue, with a 3% rise in the fourth quarter and a 5% increase for the full year, despite challenges in delivery revenue. Security and compute revenue saw significant growth, with 16% and 25% year-over-year increases, respectively. The company is undergoing a transformation to cement its role as a leader in cybersecurity and cloud solutions, maintaining robust profitability with a strategic focus on long-term success.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.