Why Is Akamai’s R&D Efficiency Falling?

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AKAM
Akamai

Akamai is losing its major technology clients, who are investing in their own content delivery networks instead of outsourcing the service to Akamai. Revenue from the company’s six biggest technology companies has come down from 18% of revenue to 11% over the past year. Amid this shift, which appears a permanent one, Akamai is putting in extra resources into its R&D to develop technologies that will convince its customers to stay with Akamai instead of building their own server networks. This is why the ratio of gross profit dollars generated per dollar of R&D have been coming down.  We believe the ratio is likely to trend this way, at least in the near future. In the long run though, we expect the figure to stabilize.

AKAM gross profit table

AKAM gross profit per R&D

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Akamai
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