Akamai Earnings Preview: Revenue To Report Mid Single Digit Growth
Akamai (NASDAQ:AKAM) will release its fourth quarter earnings report on February 7th. [1] We expect the company will report strong growth in its value-added (VAS) services, such as security solutions and app accelerators, as it continues to roll out new products for its clients. These services have high margins, which suggests that despite the increased competition within the content delivery network (CDN) business, Akamai can improve its profitability. During the first nine months of the year, Akamai witnessed strong revenue growth across all but one of its segment, suggesting a well-rounded performance for the company. Revenues from Akamai’s six big technology clients (Amazon, Apple, Google, Facebook, Microsoft, and Netflix), has been declining at a rapid pace because these companies have invested in their own content delivery networks. However, these companies now account for less than 10% of Akamai’s revenues. Excluding these clients, Akamai’s revenues were up 5% year over year driven by Cloud Security Solutions, Performance and Security Solutions, and Services and Support Solutions. The company has stated that the decline in revenues from these clients is behind it. Considering the company announcement, we expect the company to post mid-single digit gains in revenue, primarily due to a robust online holiday shopping season, as well as continued rapid growth of in its Cloud Security Solutions. Additionally, the decline in prices from some customers can impair the company’s margins in Q4.
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Our price estimate for Akamai stands at $53.09, which is 24% below the market price.
Have more questions about Akamai? See the links below:
- What’s Akamai’s Revenue & Earnings Breakdown Based On Expected 2016 Results?
- What’s Akamai’s Fundamental Value Based On Expected 2016 Results?
- How Has Akamai’s Revenue Composition Changed In The Last Five Years?
- What Has Led To A ~100% Increase In Akamai’s Revenues & EBITDA In The Last Five Years?
- By What Percentage Can Akamai’s Revenues Grow Over the Next Five Years?
- How Are Akamai’s Revenue & EBITDA Composition Expected To Change By 2020?
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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Notes:
- Akamai To Hold Fourth Quarter 2016 Investor Conference Call On Tuesday, December 7th At 4:30 pm ET, Akamai Press Release [↩]