Akamai Earnings Preview: Revenue Set To Grow In Q3

by Trefis Team
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Akamai (NASDAQ:AKAM) is scheduled to report its Q3 2017 earnings on October 24. 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 such as Amazon, Apple, Facebook, Google, Microsoft, and Netflix 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 businesses, growth will likely once again be constrained by its largest customers. Despite the lackluster CDN growth, we expect solid growth in revenues from Performance & Security Solutions as secular growth is spurring demand for more secure content delivery.

See our complete analysis for Akamai here

Revenues For Performance & Security Solutions Set To Grow In Q3

Competition in the security solutions industry is intensifying, as incumbents are strengthening their offerings. Akamai has strengthened its offerings and continues to improve its portfolio through both organic and inorganic expansion. The company recently agreed to acquire Nominum to supplement its DNS and enterprise security solutions vertical. [1] Akamai now offers 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 in the first half of 2017. As a result, the segment witnessed double-digit growth in revenues for the first two quarters. We expect that this trend continued in Q3 and the revenue for this vertical should remain strong.

Revenue for CDN Business To Decline Despite Increase In Traffic

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 have set up independent content delivery networks. This contributed to a decline in revenues in the first half of 2017. However, Akamai said that it witnessed growth in network traffic on its platform during the quarter. This should help the company to offset the decline in revenues for the third quarter.

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Notes:
  1. Akamai Agrees to Acquire Nominum, October 11 []
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