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Akamai (AKAM) Updates Guidance, shares Down More Than 2%

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Shares of Akamai Technologies Inc. AKAM fell around 2.5% yesterday, after the company updated guidance for the second quarter and fiscal year 2018.

For second-quarter 2018, the company now envisions revenues between $658 million and $663 million, down from the previous guidance of $658 million and $670 million. The Zacks Consensus Estimate is pegged at $665.80 million.  Non-GAAP earnings are now projected in the range of 79-81 cents per share, down from the previous guided range of 79-83 cents per share. The Zacks Consensus Estimate is pegged at 80 cents. The company lowered outlook citing a stronger dollar since it issued guidance on Apr 30.

Owing to currency headwinds, Akamai now expects full-year 2018 revenues between $2.675 billion and $2.705 as compared with the previous guidance of $2.69 billion and $2.72 billion. The Zacks Consensus Estimate is pegged at $2.72 billion. However, non-GAAP earnings are now projected in the range of $3.20 per share to $3.30 per share, up from the previous outlook of $3.15-$3.25 per share. The Zacks Consensus Estimate is pegged at $3.27 per share. The increase was primarily due to anticipated expansion in the company's operating margins.

Akamai Technologies, Inc. Price

Akamai Technologies, Inc. Price | Akamai Technologies, Inc. Quote

Bottom Line

Akamai is likely to continue witnessing high level of network traffic on its platform, which is a major tailwind for the company. Further, the company completed the Nominum acquisition in November last year. This has helped the company expand presence among carrier and enterprise customers.

We believe rising demand for cloud-infrastructure solutions, security, mobile products, and online video and adoption of cloud services on a large scale by data centers pose significant growth opportunities for Akamai.

Moreover, expansion of the security-product portfolio will lower Akamai’s dependence on media delivery solutions. Further, rapid growth in security is expected to offset loss of large customers in the CDN space.

However, declining revenue contribution from large customers in the Internet Platform group namely Amazon.com AMZN, Apple AAPL, Facebook FB, Google, Microsoft and Netflix due to their do-it-yourself (DIY) initiatives remains a concern.

Akamai carries a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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