Tag Archives: cdn

Akamai Revenue Guidance Light Amid Concern Over Apple, Facebook

Akamai Technologies ( AKAM ) late Tuesday reported Q1 earnings and revenue that topped expectations, though its current-quarter revenue guidance slightly missed Wall Street expectations. Still, Akamai stock was up 7.5% in early trading in the stock market today , touching a four-month high of 57.50. Cambridge, Mass.-based Akamai is the biggest provider of content delivery network (CDN) services. Worries that customers such as Apple ( AAPL ) and Facebook ( FB ) are shifting some of their data traffic to their own CDNs has pressured Akamai stock, and analysts have lowered Q1 estimates. Akamai said Q1 EPS ex items rose 8% to 66 cents per share, with revenue also rising 8% to $567.7 million. Analysts polled by Thomson Reuters had modeled 63 cents and $564 million. For Q2, Akamai forecasts revenue of $574 million at its midpoint of guidance and adjusted profit of 62 cents to 65 cents per share vs. consensus estimates of $578.4 million and 65 cents. “Revenue guidance is slightly under consensus, due to year-over-year decline in revenue from two major media delivery customers (Apple and Facebook) that are taking more of their volume in-house,” Michael Olson, a Piper Jaffray analyst, said in a research report. “Importantly, the impact from these customers is becoming less material as they go from 11% of revenue in 2015 to around 6% in 2016.” Colby Synesael, an analyst at Cowen & Co., says Akamai’s guidance might be too conservative. “While we appreciate management’s decision to err on the side of being overly cautious after its surprising revelation regarding these two customers on its Q3 (2015) call, it highlights management’s lack of visibility with its own top customers,” he said in a report. Akamai competes with  Level 3 Communications ( LVLT ) and  Limelight Networks ( LLNW ), as well as startups Fastly and CloudFlare.  Verizon Communications ( VZ ),  Amazon.com ‘s ( AMZN ) Amazon Web Services,   IBM ( IBM ) and  Comcast ( CMCSA )  are also emerging as new rivals in some parts of the CDN market. “Akamai has been very clear that the first half of 2016 would be marked by slower growth in the media segment, but then it expects (Internet TV) video to begin to accelerate growth. Similar to other large, secular growth opportunities, it is often difficult to project the exact timing of the opportunity, but we believe growth from (Internet TV) will begin to manifest in second half 2016,” said Michael Bowen, an analyst at Pacific Crest Securities, in a report.

Akamai Web Security Bet May Help Offset Apple, Facebook Issues

Akamai Technologies ’ ( AKAM ) push into cloud and security services could offset challenges in its media business related to Apple ( AAPL ), Facebook ( FB ), Amazon.com ( AMZN ) and Microsoft ( MSFT ), says RBC Capital, which initiated coverage with a sector perform, or neutral, rating. RBC analyst Mark Mahaney set a price target of 62. Akamai stock was down a fraction, near 55, in midday trading in the stock market today . Shares have edged up about 4% in 2016 but are down 24% in the past 12 months. Cambridge, Mass.-based Akamai is the No. 1 provider of content delivery network (CDN) services to media and entertainment companies. Akamai’s CDN technology speeds up e-commerce transactions, business software downloads and video streaming to mobile devices. Akamai has expanded into higher-margin cloud infrastructure services and security, aiming to offset price cuts in the CDN business. “We believe the company can continue to see double-digit revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) growth driven primarily by cloud security and Web performance,” wrote Mahaney in a research report. “Excluding the company’s two largest media customers (presumably Apple and Facebook), we expect media delivery to remain in the very low double digits/very high single digits. “Given deceleration in revenue contribution from Akamai’s top two media customers (Apple and Facebook) in 2016, our estimates call for 9% year-over-year topline growth in 2016.  The company would need to grow 20% over the next four years to reach its $5 billion target. This would be impressive acceleration. Management has pointed to (Internet video) volumes, international revenue and strategic M&A as the key levers to support this growth inflection.” Amazon Web Services, part of the e-commerce leader, is not yet a serious rival to Akamai, while Microsoft has partnered with Akamai, noted Mahaney. Microsoft and Amazon are Akamai customers, though both also  operate commercial CDNs. “Microsoft and Akamai recently announced a partnership whereby (Microsoft’s) Azure CDN would leverage Akamai’s platform. Microsoft already uses Akamai for delivering software updates to the Xbox platform as well as updates to Office products, such as Windows 10 and Office 365,” Mahaney wrote. “Amazon’s use of Akamai is unknown, but since the company’s commercial CDN, AWS CloudFront, targets the low end of the market, we suspect Amazon leverages Akamai for large applications that have a high-performance standard and are delivered globally.” On Apple, Mahaney added: “We believe Akamai’s material OTT (over-the-top video) investments in 2015 targeted a potential Apple TV launch in Q4 2015 that never materialized. If Apple can make the economics work and moves forward with a new OTT offering, we expect Akamai will deliver a portion of this content.” IBD’s Internet-Network Solutions group ranks No. 88 out of 197 industry groups that IBD tracks. Akamai has a composite rating of 67 out of a possible 99. Image provided by Shutterstock .

Akamai Stock Jumps On Q1 Beat, Despite Apple, Facebook Trend

Akamai Technologies ( AKAM ) stock jumped Wednesday after the CDN services provider late Tuesday reported Q1 earnings and revenue that topped analysts’  lowered expectations and gave in-line current-quarter profit  guidance. Shares of Cambridge-based Akamai were up 23% in midday trading in the stock market today , near 49. Akamai is the biggest provider of content-delivery network (CDN) services to media and entertainment companies. Akamai said it earned 72 cents per share in Q4, up 3% from the year-earlier period, with revenue rising 8% to $579.2 million. Analysts had modeled EPS of 62 cents and revenue of $569 million. The beat included a 6-cent tax benefit. Akamai bought back $100 million in its own stock, lowering share count and boosting EPS. Even with Wednesday’s gain, Akamai stock is down 7% in 2016. The stock had plunged 47% through Tuesday’s market close since Oct. 27, when the company  gave disappointing December-quarter guidance. For the current quarter, Akamai forecasts revenue of $562 million at the midpoint of its range, with adjusted EPS of 61 cents to 64 cents, vs. consensus estimates of $568 million and 63 cents. Full-year 2015 revenue rose 12% to $2.2 billion. On the company’s earnings conference call, management backed off of its 2020 revenue goal of $5 billion, said Colby Synesael, an analyst at Cowen & Co., in a research note.   Akamai’s technology speeds up video streaming to mobile devices, e-commerce transactions and business software downloads. Akamai has expanded into higher-margin cloud-infrastructure services and security, aiming to offset price cuts in the CDN business that average 15% to 20% a year. “The security segment, now at a $300 million (annual revenue) run rate, provided the (Q4) upside,” said UBS analyst Steven Milunovich in a report. Akamai’s stock has been pressured as some big customers shift to their own internal CDNs. Apple ( AAPL ), believed to be Akamai’s biggest customer, and Facebook ( FB ) have been moving data traffic to their own CDNs. Akamai has renegotiated contracts and lowered prices in some cases, says Tim Horan, an analyst at Oppenheimer. “The top two customers (likely Apple/Facebook) represented an average of 13% of revenue and likely closer to 11% in Q4, but that should decrease to 6% by mid-2016,” wrote Horan in a report. “The next two (likely Microsoft ( MSFT )/Google) likely represent 5% and have likely re-priced. This should result in less revenue volatility in the second half of 2016, with upside if overall traffic volumes pick up.” Google is the main business of Alphabet ( GOOGL ).   He says Akamai could gain from video streaming tied to the Olympics this summer, the presidential election and National Football League games. Aside from longtime rivals Level 3 Communications ( LVLT ) and Limelight Networks ( LLNW ), Akamai is facing increased competition from Amazon Web Services, part of Amazon.com ( AMZN ), as well as Verizon Communications ( VZ ).