What Has Been Driving Akamai Technologies’ Performance?

by Trefis Team
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Akamai Technologies (NASDAQ: AKAM) reported its Q3 results earlier this week – surprising the markets by surpassing revenue and EPS expectations. As has been the trend over recent quarters, Akamai’s upbeat performance was driven by strong gains in its security solutions business. The better-than-expected performance also led to the company raising its guidance for Q4 and full-year 2019.

Trefis captures trends in Akamai’s Revenues over recent years along with our forecast for 2019 and 2020 in an interactive dashboard.  Additionally, you will find more Trefis information technology data here.

A Quick Overview Of Akamai’s Business Model

What Need Does It Serve?

  • Akamai’s core business of content delivery (through caching customer data to minimize latency) has seen competition from some of its largest customers over recent years (including Amazon, Apple, Facebook, Google, Microsoft, and Google).
  • However, the reach and technical strength of Akamai’s network has allowed it to become an important player in the growing edge computing market. Building upon the reliability of its network, and keeping in mind the increasing security risks emanating at the edge, security has been a natural value-add for Akamai’s product portfolio.
  • Also, the company’s distributed platform helps it reach over 130 countries. Akamai’s access to the flow of traffic across the internet has helped it gain invaluable insights, which it then used to build its security business.

What Are The Alternatives?

  • Content delivery networks (CDNs) are important for reducing latency. This has given rise to large internet players such as Amazon, Apple, Facebook, Google, Microsoft, and Google having their own CDNs.
  • Third-party players similar to Akamai include Level3, Limelight, CDNetworks, and Fastly.

Has 2 Operating Segments

  • Media and Carrier Division: Segment revenues are derived from customers in the media and carrier business. CDNs are a major draw for customers requiring distributed reach such as gaming companies etc.  Media and Carrier Division revenue growth of around $100 million over the next two years is likely to be driven by growth in OTT traffic on the Akamai platform.
  • Web Division: Segment revenues are derived from customers in the web based businesses. Much of the security revenue is derived from web customers opting for protection from cyber attacks. Web Division revenue growth of ~$300 million over the next two years is likely to be driven by growth in cloud security revenues.

 

Additional details about how Akamai’s segment revenues have trended over recent years are available in our interactive dashboard along with our forecast for the next 2 years.

 

 

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