Akamai's earnings forecast tops, but its core content distribution business softens

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Akamai

The Technology segment beat expectations in second quarter earnings. This was as a slowdown in the company’s content delivery business was offset by strong growth in both security software and cloud computing.

Akamai’s (NYSE: AKAM) revenues were $903 million in the fourth quarter, up 6% and 9% after adjusting for foreign currency. That’s towards the high end of the company’s expected range of $890 million for him to $905 million for him, and above consensus on the street. $898 million forecast.

Akamai reported adjusted earnings of $1.35 per share, beating both its guidance range of $1.28 to $1.33 per share and the Street Consensus forecast of $1.31 per share. Under generally accepted accounting principles, the company earned him $120 million, or 74 cents per share.

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

Meanwhile, security software revenue was $381 million, up 17% year-over-year and up 21% after adjusting for currency. Also, the company’s cloud computing business revenue was $106 million, up 74%, and after adjusting for foreign exchange headwinds, he was up 78%.

in an interview with barons, Akamai CEO Tom Leighton said despite the difficult macroeconomic environment, the company is “very excited” about both security and computing opportunities, both of which are at a constant exchange rate of 30%. growing in Leighton said his Akamai computer business, which was built around Akamai’s recent $900 million acquisition of Linode, now competes head-on with the cloud giant.

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(AMZN) Amazon Web Services,

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(GOOGL) Google Cloud. “Anything you can do in their cloud, you can do in Akamai’s cloud,” he says.

Regarding the weak results in the content delivery network business, Leighton pointed to slowing traffic growth from video game, media and advertising customers. This reflects a weakening macroeconomic environment and a shift away from Covid-era stay-at-home restrictions.

However, these macro situations can actually help cloud computing businesses, as media companies look to save on infrastructure costs. “Many companies are interested in diversifying their cloud spending,” he says. “The common concern is being locked into a very expensive contract. They are open to alternatives.”

Layton said security will overtake content delivery and become the company’s biggest business next year, and he believes computing could eventually become the biggest part of the company’s make-up. increase.

For the third quarter, Akamai expects revenues of $868 million to $883 million. Foreign currency headwinds will reduce sales by $36 million year over year, according to the company. Akamai expects adjusted earnings for the quarter to be between $1.21 and $1.26 per share. Street’s consensus was that previously earnings were $905 million and he wanted earnings of $1.30 per share.

Full-year sales of $3.57 billion to $3.61 billion and non-GAAP earnings of $5.19 to $5.37 per share. Akamai had previously forecast revenue of $3.62 billion to $3.67 billion and earnings per share of $5.32 to $5.44.

In late trading, Akamai’s stock fell 2% to $93.

Write to Eric J. Savitz at eric.savitz@barrons.com.