Akamai Earnings Preview: Will International Revenues Continue To Drive Growth?

Akamai (NASDAQ:AKAM) is scheduled to announce its second quarter earnings on July 31. The company has reported strong numbers in recent quarters, particularly due to growth from its Performance & Security Solutions segment. Service & Support Solutions have also contributed meaningfully to growth, while Media Content Delivery Solutions revenues have declined in recent years. The key reason for the decline in Media Content Delivery Solutions has been the fact that 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 the company will likely continue to report growth in CDN services from small and medium-sized businesses, the overall segment revenues are expected to decline in the coming quarters. Despite the lackluster CDN growth, we expect solid growth in revenues from Performance & Security Solutions to continue to drive overall results.

In terms of geographies, Akamai has reported strong growth from the international segment (particularly Asia-Pacific) as compared to U.S. segment. The company reported 2% growth in domestic revenues through 2017 to $1.65 billion, while international revenues were up 19% to $855 million through the year. This trend continued in the March quarter, with a 22% y-o-y increase in international revenues to $245 million, while revenues in the U.S. were up only 6% to $423 million.

For the June quarter, we expect both Performance & Security Solutions revenues and Services revenues to increase 12-14% y-o-y to $430 million and $60 million, respectively. On the other hand, Media Delivery Solutions revenues are expected to fall 7% to under $170 million. Resulting net revenues are forecast to increase 8% y-o-y to $663 million for the quarter. We forecast the company’s margins to be around 2 percentage points higher than the comparable prior year period at 26%. Consequently, we expect the net income and earnings per share to be 22-24% higher at $130 million and 76 cents a share, respectively. We have summarized our expectations on our interactive Akamai earnings preview dashboard. If you think differently or disagree with our forecasts, you can modify expected segment revenues and margins for the quarter to see how the EPS will be affected for the quarter.

See our complete analysis for Akamai

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