Akamai Earnings: Revenues Growth Continues During The Quarter

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Akamai (NASDAQ:AKAM) reported its revenues for the fourth quarter of 2016 on February 7th. [1] In line with our expectation, the company reported that its revenues grew to $616 million, up by 6% year over year or 7% on constant currency basis. Growth once again was constrained by its largest customers, who have deployed content delivery networks (CDNs) of their own. Thus, excluding the impact of Amazon, Apple, Facebook, Google, Microsoft and Netflix from its results, then the Q4 revenue grew by 15% year over year (or 16% adjusting foor foreign echange). The growth in revenue was driven by performance and security solutions division, which targets the value-added (VAS) services domain.

Akamai Result

Decline In Media Delivery Solutions Continues

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Revenue from Akamai’s six big technology clients (Amazon, Apple, Google, Facebook, Microsoft, and Netflix) has been declining at a rapid pace as these companies have been investing and delivering content through their own content delivery networks. As a result, the company reported that its media division experienced 10.2% decline in revenue. Nevertheless, the company stated that since these businesses only form 10% of its revenues, the future negative impact from these businesses will be minimal.

New Products Boost Revenues For Performance & Security Solutions

Performance & Security Solutions reported 16.7% growth on the back of new products that were launched in 2015. Its newly launched products, which include Bot Manager, Image Manager and Enterprise Application Access, have witnessed excellent traction.

We are in the process of updating our model. At present, we have a $53.09 stock price estimate for the company,  which is 25% below the current market price.

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Notes:
  1. Sec 8-K Fillings []