Akamai Technologies, Inc. Earnings: Can the Growth Continue?

Akamai Technologies (NASDAQ: AKAM  ) will release its quarterly report on Wednesday, and investors have been nervous over the last quarter about the content-delivery specialist's prospects in a rapidly changing industry. As moves from Netflix (NASDAQ: NFLX  ) to develop its own content-delivery network and Verizon (NYSE: VZ  ) to offer its own services rather than reselling Akamai's could weigh on results, the big question is whether major Akamai user Apple (NASDAQ: AAPL  ) will move forward with its own network.

Akamai has helped to revolutionize the Internet, helping avoid traffic jams as the volume of data transmission has skyrocketed over the years. Yet now, those volumes have increased so much that content delivery has become a commodity service, and that has encouraged many of Akamai's customers to look into their own customized solutions for their own specific needs. Does that trend leave Akamai enough profit opportunities to justify the high hopes that investors have for the stock? Let's take an early look at what's been happening with Akamai Technologies over the past quarter and what we're likely to see in its report.

Source: Wikimedia Commons, courtesy Twp.

Stats on Akamai Technologies

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$422.39 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Can Akamai earnings keep heading higher?
Analysts have largely kept their views unchanged about Akamai earnings in recent months, cutting their full-year 2014 projections by just a penny per share. The stock has also been little changed, with a decline of just 1% since late October following a steep 10% decline after its third-quarter earnings report.

The reason investors reacted so negatively to Akamai's quarterly results in October was that it failed to deliver the earnings growth that investors had wanted to see. Revenue jumped by 15%, and net income actually soared by 65% from the year-ago quarter's level. But many had hoped for even stronger growth. With guidance for fourth quarter failing to inspire rising hopes for the content-delivery specialist, Akamai's shares suffered despite the announcement of a $750 million stock buyback program.

The biggest challenge that Akamai faces is that some of its most important customers have chosen to become less reliant on the company for content delivery. The Netflix move has been of special concern, but equally troubling was Verizon's purchase of EdgeCast Networks in December. With EdgeCast potentially helping Verizon streamline its own video streaming service, Akamai will likely lose a major reseller of its delivery network services. Recent rumors that Apple could be developing its own content delivery network have also raised the threat level, even though many believe that the impact of a move on Akamai wouldn't be as bad as feared.

Despite the defections, though, Akamai has high hopes for its future. A deal with Cisco Systems (NASDAQ: CSCO  ) should help Akamai technology make its way into high-end router products that the networking giant sells. By encouraging customers to buy third-party products with Akamai's proprietary accelerators built in, Akamai could put itself in position to reap the benefits of the success of Cisco and other network hardware makers as network infrastructure spending finally starts to pick up. Moreover, Akamai's recent purchase of Prolexic for $370 million should help it build up its security offerings at a time when cyberattacks are becoming ever more common.

In the Akamai earnings report, watch to see how the company positions itself for future growth. As cloud computing becomes more important, Akamai needs to keep looking for ways to provide high-margin services that keep revolutionizing Internet data flow. Otherwise, the growth that the company has enjoyed could slow or stop in the years to come.

Find your forever stock
Some companies come and go, but a rare few give their shareholders long-term riches. To guide you toward the latter, our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love. 

Click here to add Akamai Technologies to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2822224, ~/Articles/ArticleHandler.aspx, 9/4/2015 9:28:24 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

Today's Market

updated 12 minutes ago Sponsored by:
DOW 16,102.38 -272.38 -1.66%
S&P 500 1,921.22 -29.91 -1.53%
NASD 4,683.92 -49.58 -1.05%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/4/2015 3:59 PM
AAPL $109.27 Down -1.10 -1.00%
Apple CAPS Rating: ****
AKAM $72.58 Down -0.68 -0.93%
Akamai Technologie… CAPS Rating: ****
CSCO $25.52 Down -0.38 -1.47%
Cisco Systems CAPS Rating: ****
NFLX $98.79 Down -2.27 -2.25%
Netflix CAPS Rating: ***
VZ $44.82 Down -0.90 -1.97%
Verizon Communicat… CAPS Rating: ****