Akamai Technologies (AKAM) is the $11.5 billion provider of content delivery networks (CDNs) and cloud infrastructure services.
The company’s solutions accelerate and improve the delivery of content over the Internet, enabling faster response to requests for web pages, streaming of video & audio, and business applications.
Its offerings are intended to reduce the impact of traffic congestion, bandwidth constraints and capacity limitations on customers, with the data-hog of high-definition video a particular specialty.
AKAM slipped into the cellar of the Zacks Rank after the company's Q1 report in May. The results were not disappointing, but the growth outlook was nothing to get excited about.
I'll give you the bottom line up front: With revenue growth between 3-5% this year and next, the company has slipped into growth that barely qualifies as an energy or utility company.
Insult to injury, EPS estimates for this year continue to drift in negative territory of about minus 3-5%.
Quarter Details
Akamai Technologies reported strong first-quarter 2025 results, with both the adjusted earnings and revenues surpassing the Zacks Consensus Estimate.
The company reported a top-line expansion year over year, driven by healthy demand trends in multiple end markets. Strong demand for the Guardicore platform, API security solutions and cloud infrastructure services is a key growth driver.
Net Income
GAAP net income declined to $123.2 million or 82 cents per share from $175.4 million or $1.11 per share in the year-ago quarter. High operating expenses affected the net income.
Non-GAAP net income was $256.1 million or $1.70 per share compared with $255.5 million or $1.64 per share a year ago. The bottom line beat the Zacks Consensus Estimate by 12 cents.
Revenue Metrics
Quarterly net sales were $1.02 billion compared with $987 million reported in the year-ago quarter. The 3% year-over-year uptick was driven by strong momentum in the Security and Compute verticals. Revenues surpassed the Zacks Consensus Estimate of $1 billion.
By product groups, revenues from Security Technology Group were $530.7 million compared with $490.7 million in the year-ago quarter. The 8% year-over-year growth was primarily backed by growing demand for Guardicore Segmentation Solution. The company is experiencing healthy traction for its API security solutions in various end markets, including financial services, retail, electric vehicles, and more. Net sales exceeded our estimate of $522.8 million.
The Delivery segment contributed $319 million, down from $351.8 million in the year-ago quarter. However, the segment’s revenues surpassed our estimate of $318.6 million.
The Compute segment registered $165.5 million in revenues, up from $144.5 million in the prior-year quarter. Solid traction among enterprise customers and multiple deal wins in various verticals, including financial services, retail, cybersecurity and transport, drove net sales in this segment. The segment’s revenues beat our estimate of $162.9 million.
Region-wise, net sales from the United States came in at $528.7 million, up 3% year over year. International revenues totaled $486.4 million, up from $474.6 million in the year-earlier quarter.
Management Outlook
For the second quarter of 2025, Akamai expects revenues in the range of $1.012 billion to $1.032 billion. Non-GAAP operating margin is projected to be 28%. Non-GAAP operating expense is projected to be in the range of $315-$320 million. EBITDA margin is forecasted to be in the band of 41%-42%.
Non-GAAP earnings are forecasted to be in the range of $1.52-$1.58 per share. Management anticipates capital expenditure to be in the band of $226-$236 million, which is approximately 22% to 23% of the projected total revenues. Non-GAAP tax rate is expected to be between 19% and 20%.
For 2025, Akamai expects revenues in the range of $4.050 billion to $4.2 billion. It expects a non-GAAP operating margin of 28%. Non-GAAP earnings are now projected to be in the range of $6.10-$6.40 per share. Capital expenditure is likely to be around 19-20% of total revenues. Non-GAAP effective tax rate is expected to be between 19% and 20%.
Bottom line: With explosive "AI Economy" growth in datacenter businesses, AKAM is overlooked even under 3X sales because there is so much more potential to offer in other names and industry niches. There may be a time to buy AKAM soon, and the Zacks Rank will let you know.
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Akamai Technologies, Inc. (AKAM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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