Strong Q1 Results Reinforce Akamai Technologies’ Growing Presence In The Cloud Business

Akamai Technologies (NASDAQ: AKAM) reported its Q1 earnings on Apr 30, and the company beat consensus expectations on revenue and earnings. The better-than-expected performance was primarily driven by Akamai’s strength in the cloud business, aided by growth in its internet platform customers. The company also appeared confident on delivering its fiscal 2019 guidance, which remains in-line with consensus.

We have a price estimate of $81 per share for Akamai. Our interactive dashboard on Akamai’s Price Estimate outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation. Additionally, you will find more Trefis information technology data here.

For Q1, the key takeaways were:

• Total revenue grew to $707 million (+6% y-o-y)
• Cloud Security Solutions: Revenues grew to $190 million (+27% y-o-y). The management continues to expect growth rates to remain above 20% over the next couple of years.
• CDN and Other Solutions: While revenues were flat at $516 million, the growth in internet platform customers (+6% y-o-y) helped offset a decline in the non-internet platform business. The company expects 2020 to be a particularly high-growth year on account of the Olympics, the U.S. Presidential Elections and a slew of other events that should keep traffic volumes high.
• The company also noted the revenue gains that are likely to accrue owing to its recently expanded partnership with Microsoft Azure.

For Q2 and fiscal 2019, the management has provided the following guidance:

• Q1 Guidance:
  • Revenue: $688-702 million (+4-6% y-o-y)
  • Non-GAAP operating margin: 28%
• Fiscal 2019 Guidance to
  • Revenue: $2.82- 2.86 billion (revised upwards from $2.81-2.85 billion)
  • Non-GAAP operating margin: 28%

We forecast Akamai’s EPS figure for full-year 2019 to be $2.19. Taken together with our forward P/E multiple of 37 for the company, this works out to a $81 price estimate for the company’s stock, which is around the current market price.

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