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Msg  9073 of 9073  at  8/10/2022 5:27:00 PM  by

jerrykrause


Akamai Earnings Top Estimates. Where Its CEO Sees Opportunity.

 

Akamai Earnings Top Estimates. Where Its CEO Sees Opportunity.

 
 

Akamai Technologies posted better-than-expected second-quarter earnings, as a slowdown in the company's content delivery business was offset by strong growth in both security software and cloud computing.

For the quarter, Akamai (ticker: AKAM) on Tuesday after the market close posted revenue of $903 million, up 6%, or 9% adjusted for foreign currency—toward the high end of the company's forecast range of $890 million to $905 million, and ahead of the Street consensus forecast of $898 million.

Akamai posted adjusted earnings of $1.35 a share, above both the guidance range of $1.28 to $1.33 a share, and the Street consensus forecast at $1.31 a share. Under generally accepted accounting principles, the company earned $120 million, or 74 cents a share.

Akamai said its core content delivery business had revenue of $417 million in the quarter, down 11%, or 8% adjusted for currency.

On the other hand, security software revenue was $381 million, up 17% from a year ago, or 21% adjusted for currency. And the company's cloud computing business had revenue of $106 million up 74%, or 78% adjusted for foreign-exchange headwinds.

In an interview with Barron's, Akamai CEO Tom Leighton said that despite the challenging macroeconomic environment, the company is "really excited" about the opportunity in both security and computing, which together are growing at a 30% constant currency rate. Leighton says Akamai's computer business, built around the company's recent $900 million Linode acquisition , is now competing head-to-head with the cloud giants—Amazon.com's (AMZN) Amazon Web Services, Microsoft (MSFT) Azure and Alphabet's (GOOGL) Google Cloud. "Anything you can do in their clouds, you can do in Akamai's cloud," he says.

On the soft results in the content delivery network business, Leighton noted that the company has seen slower traffic growth from videogame, media and advertising customers, reflecting a weaker macroeconomic environment—and a shift away from Covid-era stay-at-home restrictions.

These macro conditions, however, could actually help the cloud computing business, with media companies looking to save money on infrastructure costs. "Many enterprises are interested in diversifying their cloud spend," he says. "A common concern is getting locked into a very expensive contracts. They are open to alternatives."

Leighton says that security will surpass content delivery as the company's biggest business next year—and he thinks computing could eventually become the largest part of the company's mix.

For the third quarter, Akamai is projecting revenue of $868 million to $883 million, up 1% to 3%— or 5% to 7% in constant currency. The company said foreign currency headwinds will reduce revenue by $36 million compared with the year-ago quarter. Akamai projects adjusted earnings of $1.21 to $1.26 a share for the period. Street consensus previously called for $900.5 million in revenue and profits of $1.30 a share.

For the full year, the company now sees revenue of $3.57 billion to $3.61 billion, and non-GAAP earnings between $5.19 and $5.37 a share; Akamai's previous forecast had called for $3.62 billion to $3.67 billion in revenue, and profits of $5.32 to $5.44 a share.

In premarket trading Wednesday, Akamai shares were off 1.7% at $93.47.

 


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