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Cloud Security Strength to Drive Akamai's (AKAM) Q1 Earnings

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Akamai Technologies AKAM is scheduled to release first-quarter 2021 results on May 4.

For the first quarter, Akamai expects revenues between $822 million and $836 million. The Zacks Consensus Estimate for quarterly revenues is pegged at $829.7 million, which indicates growth of 8.6% from the year-ago quarter.

Non-GAAP earnings are expected to be $1.28-$1.31 per share. The consensus mark for earnings has been steady over the past 30 days at $1.30, which reflects year-over-year growth of 8.3%.

Akamai Technologies, Inc. Price and EPS Surprise

Akamai Technologies, Inc. Price and EPS Surprise
Akamai Technologies, Inc. Price and EPS Surprise

Akamai Technologies, Inc. price-eps-surprise | Akamai Technologies, Inc. Quote

Factors to Note

Akamai’s first-quarter performance is expected to have benefited from continued robust demand for its security solutions including application-layer firewall and DDoS prevention.

Demand for security solutions is being driven by higher instances of cyber-attacks as hackers are taking advantage of the ongoing pandemic to accelerate attacks on enterprises across all industries.

In fact, during the quarter under review, the company rolled out a new phish-proof offering — Akamai MFA — that offers business enterprises with FIDO2 multi-factor authentication deployment without the need for hardware security keys.

The company’s Prolexic offering is expected to have witnessed incremental adoption given the increases in DDoS attacks. Also, rising instances of credentials’ theft might have driven demand for Akamai’s bot management offering.

Moreover, Page Integrity Manager Solution is anticipated to have witnessed robust uptake in the first quarter. The solution protects websites and end users from malware-infected content that resides on third-party sites.

Further, ongoing momentum for the company’s new Zero Trust enterprise security solutions is likely to have contributed to revenues in the to-be-reported quarter.

During the first quarter, Akamai also inked deal to acquire Montreal-based Inverse, with an aim to enhance its enterprise security capabilities and boost its portfolio of zero trust and secure access service edge solutions for IoT.

The Zacks Consensus Estimate for Cloud Security Solutions’ first-quarter revenues is currently at $292 million, which suggests a rise of 21.5% on a year-over-year basis.

Akamai’s Media and Carrier division revenues are likely to reflect positive impact of strong traffic on the company’s platform, courtesy of continued demand for OTT video services and increase in gaming activity during the first quarter.

The rise in infections following another wave of coronavirus spread is likely to have compelled people follow shelter-in-place guidelines, which, in turn, is expected to have driven the upside in gaming and demand for streaming services.

The Zacks Consensus Estimate for Media and Carrier Division’s first-quarter revenues is pegged at $400 million, which indicates growth of 11.6% on a year-over-year basis.

Moreover, the Zacks Consensus Estimate for Internet Platform Customers revenues for the first quarter stands at $51 million, suggesting an improvement of 14.1% on a year-over-year basis.

Further, the consensus for Web Division revenues for the first quarter is currently pegged at $430 million that indicates growth of 5.9% on a year-over-year basis.

Nonetheless, rising expenses on account of product innovation along with increasing bandwidth costs is likely to have weighed on margin expansion in the quarter under review.

Noteworthy Developments in Q1

Akamai unveiled Akamai Vaccine Edge based on salesforce.com’s CRM Vaccine Cloud to facilitate processes pertaining to the online distribution of COVID-19 vaccines.

Moreover, the company teamed up with Plume to boost broadband experience for subscribers. Per the terms of the partnership, Akamai will extend Plume’s Smart Home Services platform to its sales and go-to-market teams as well as its worldwide customer network.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Akamai this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Akamai has an Earnings ESP of 0.00% and a Zacks Rank #3, at present, making earnings beat prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some other stocks, which you may consider, as our proven model shows that these have the right mix of elements to beat estimates this time around:

Vishay Intertechnology, Inc. VSH has an Earnings ESP of +5.22% and a Zacks Rank #2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Microchip Technology Incorporated MCHP has an Earnings ESP of +1.44% and a Zacks Rank #2, presently.

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Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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