Akamai Earnings Preview: Revenues Set To Grow Despite CDN Pressure
Akamai (NASDAQ:AKAM) will report its Q1 2017 earnings on May 2. [1] The company reported strong numbers last quarter and reported growth across Performance & Security Solutions and Service & Support solutions. However, media content delivery solutions revenue declined as some of the company’s largest customers deployed content delivery networks (CDNs) of their own. While we expect the company to report continued growth in CDN (content delivery network) services from small and medium-sized entities, growth will likely once again be constrained by its largest customers.
Despite the lackluster in growth across CDN, we expect solid growth in revenues from Performance & Security Solutions as growth in online businesses, increased online content and traffic is spurring demand for more secure content delivery.
See our complete analysis for Akamai here
Revenue for CDN business to decline
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Pure-play CDN is getting commoditized to a degree due to growing competition from major players, as well as the fact that many large companies such as Apple, Facebook, Google, Microsoft, and Netflix have set up independent content delivery networks. This has led to pressure on revenues. This pressure has, to an extent, has been offset by the increase in content delivery services for small and medium sized businesses. We expect these trends to persist in Q1.
New Products To Boost Revenues For Performance & Security Solutions
As Akamai’s competitors have strengthened their offerings, Akamai has positioned itself as a full services provider—touting its ability to offer multiple value-added services such as security solutions, app accelerators, delivery of targeted advertising and cloud-based services for its customers. Akamai’s growing niche in the value-added services market should enable the company to wield more pricing power in the coming years.
In 2015 and 2016, the company made a concerted effort to launch new applications and services for the performance and security division. These products – which include Bot Manager, Image Manager and Enterprise Application Access – have witnessed strong traction. As a result, this division witnessed double-digit growth in revenues. We expect that this trend continued in Q1 and the revenue for this vertical will remain strong.
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