Cowabunga, Akamai!

Motley Fool Rule Breakers recommendation Akamai Technologies (Nasdaq: AKAM  ) has a caught a wave, and it shows no signs of letting go. Second-quarter sales increased 56% year over year to $100.6 million while per-share earnings rose 67% to $0.20 after excluding special times. Both easily exceeded Street expectations.

Accordingly, investors -- doused yesterday by news of a $130 million funding deal for rival Limelight Networks -- have regained their enthusiasm: Akamai's shares are up a breathtaking 15% in early trading. And no wonder; sales growth just keeps accelerating.

Quarter

Revenue

Y-O-Y Growth

Q3 2005

$75.7 mil

42.1%

Q4 2005

$82.7 mil

43.6%

Q1 2006

$90.8 mil

51.1%

Q2 2006

$100.6 mil

55.7%

Sources: Capital IQ, Akamai

In a statement, CEO Paul Sagan attributed the gains to increasing adoption of broadband, which, in turn, fuels demand for streaming media and downloads. The massive growth of Apple's (Nasdaq: AAPL  ) iTunes music store, which Akamai serves, bears witness to the trend. So does research. IDC says that broadband adoption in the U.S. will grow by 18.4% annually from 2004 to 2009, edging out the global rate of 16.6%.

That may be why Akamai sees no end to its own growth. For the third consecutive quarter, the company raised guidance. This time, Akamai expects full-year sales to be at least $415 million (up from $380 million) and full-year normalized per-share earnings to be at least $0.83 (up from $0.73). All told, Akamai looks to grow by roughly 47% during 2006.

And even more growth could be on the way. Akamai ended the quarter with $367 million in the bank, all of which is available to fund a deal. Management would certainly entertain the right one, Chief Financial Officer J.D. Sherman said in an interview.

By the "right one," Sherman is referring to something like the deal that made Speedera a part of Akamai. That deal has fueled massive growth while retiring nagging litigation between the two firms. With a new suit targeting Limelight, it's worth asking whether Akamai's latest rival, which has gathered roughly $145 million in funding to date, could be a target.

Of course, that's merely speculation regarding what's to come. The more immediate reality is that Akamai's business has never been stronger than it is right now. This Fool plans to ride the wave as far as it'll take him. Cowabunga, baby.

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Despite the bearish doldrums, Fool contributorTim Beyersremains a happy Akamai shareholder. You can find out what else is in his portfolio by checking Tim's Foolprofile. The Motley Fool has an ironcladdisclosure policy.


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