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Akamai earnings and revenue beat estimates in Q1

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Akamai reported first quarter earnings that beat expectations. Akamai CEO Tom Leighton joins Yahoo Finance Live to discuss.

Video Transcript

ZACK GUZMAN: Welcome back to Yahoo Finance Live. I want to spotlight another stock we're seeing bounce on earnings. That would be Akamai Technology is up by about 4% here today after the company reported earnings that impressed investors overall cloud services and cyber security, which are, obviously, always in focus here when we get the updates from the company, but revenue jumped to 10% versus a year ago to hit $843 million. That included a 29% jump in the company's security business, which now accounts for about 37% of overall revenue.

And for more on that, I want to bring on the CEO of Akamai. Tom Leighton joins us right now. And Tom, appreciate you being here with us, alongside Yahoo Finance's Brian Sozzi, of course. When you dig into the results here of the quarter, we've been talking about cyber security being a big push and big focus area for investors last year as more things shifted online, but specifically in this quarter, what stood out to you in terms of strength?

TOM LEIGHTON: We had the strength, really, across the board, all of our services, to protect web applications, to stop denial of service attacks, to stop account takeovers. And of course, most recently, there have been some pretty spectacular breaches in the software that a lot of enterprises use. And we have services that stop that from happening as well. So just across the board, great performance of our security products.

BRIAN SOZZI: Tom, yeah, I think the security results surprised a lot of folks on the Street. Are there acquisitions to be had out there to bulk up that business even further for you guys?

TOM LEIGHTON: Oh, sure, there's plenty of companies for sale in the security area. The valuations, a lot of them are pretty crazy. And we're very disciplined buyers. We're investing a lot organically in innovation and R&D. For example, one of our really hot selling new products is called Page Integrity Manager. And that protects websites and apps from malware that gets embedded into third party content. And the malware is designed to expose personal information like credit cards from users of the site. And that's a service that largely we developed organically and really very important today to protect the major websites and apps.

BRIAN SOZZI: What makes those valuations on security companies crazy right now? Is it that corporations still can't get out in front of hackers?

TOM LEIGHTON: Well, there's a lot of bad things happening, a lot of attacks. The adversaries are very large, some major countries, organized crime. The prize is higher than ever now that more and more business is being done online. You see now ransom DDoS attacks, account takeovers. So it's a really challenging environment. And enterprises need to change the way that they handle security. And that creates an opportunity for companies to develop new products that will defend companies going forward.

AKIKO FUJITA: So Tom, when you talk about some companies you're potentially watching or looking at as potential acquisition targets, what do you see as the missing pieces when you look at the broader portfolio for Akamai right now? And what are you looking to fill?

TOM LEIGHTON: I think Akamai has a really strong portfolio. And you see it now that we're well over a billion dollars in revenue and growing at 29% year over year. When it comes to protecting websites and apps, we have all the pieces you need. We stop the account takeover. We stop the bots. We stop the denial of service. We stop the corruption of content. And most recently, I mentioned with Page Integrity Manager, we stop the embedded malware that causes the release of personal data. On the enterprise side of the house, there are areas there we're looking at to have a more complete portfolio. But already, we can stop a lot of the enterprise data breaches. We have a very strong zero trust solution there.

ZACK GUZMAN: And, Tom, too, I mean, when you ahead, forward guidance, you guys up to your revenue guidance there, now in a range of $3.4 billion to 3.44. That was up from 3.37 to $3.42 billion. You also upped full year earnings forecasts as well. So I mean, when you look ahead, we've talked so much about what happened in the pandemic and companies turning to companies like yours to help in having an online presence. But when you look ahead here to the return to normal, what's giving you the confidence to up those guidance-- that guidance now?

TOM LEIGHTON: Yeah, I think we've already had the one year lapping the start of the pandemic. And so, we're now in sort of normal operations. We're still working remotely in that sense. But in terms of the business and the growth, things are in a pretty good place. And I think we see the tremendous strength of the security business. And that's what led to the increase in guidance for the year. And we took the growth up that we anticipate for security from 18% to 20% to the low 20s. And that's a significant bump up, just really great strength in the business. And I think there will be long-term continued demand for our security solutions.

BRIAN SOZZI: And Tom, is your growth being constrained by the chip shortage?

TOM LEIGHTON: No, you know, and that's something we put a lot of effort into, is having plenty of supply for our servers. We did a tremendous amount of buildout in the early days of COVID to increase our capacity. And we're really in a good place there today.

AKIKO FUJITA: Tom Leighton, Akamai CEO, it's good to talk to you today. And our thanks to Brian Sozzi as well for joining in on the conversation.