Akamai Crushes the Competition

Don't be fooled by Akamai Technologies' (Nasdaq: AKAM  ) stock landing in the bargain bin today. Last night's earnings report was brilliant, and this is a buying opportunity.

Akamai's sales got a 12% year-over-year boost to $238 million, while non-GAAP earnings took a modest 1% hop to $0.46 per diluted share. These numbers significantly exceeded both the Wall Street consensus and the top end of management's own guidance.

More importantly, CEO Paul Sagan has a clear view of how to keep up that top-line growth for years to come. Akamai's data-distribution services are becoming ever more necessary to the continued health of the Internet, and high-definition video streams drive that trend in a big way.

Online video, like the clips found on Google's (Nasdaq: GOOG  ) YouTube, has proliferated over the last four years, placing new demands on network infrastructure everywhere. But you ain't seen nothin' yet. Apple (Nasdaq: AAPL  ) iPhones (and soon iPads), Google Androids, and other mobile devices with media know-how are growing in numbers. Just ask AT&T (NYSE: T  ) what that trend is doing to its data networks. Moreover, people are starting to expect high-definition video streams, which multiplies the bandwidth-sucking impact of each video.

Akamai stands head and shoulders above the competition from Limelight Networks (Nasdaq: LLNW  ) , InterNAP Network Services (Nasdaq: INAP  ) , and other bit players in terms of technology, market history, and sales. As video traffic continues to increase, more and more content providers should realize the need to optimize their network usage, as opposed to simply throwing more money and hardware at the problem. The Akamai solution to heavy traffic is to reduce the distance between consumer and producer, which removes numerous bottlenecks from your connection experience and lightens the load on the global backbone of the Internet.

In short, heavy traffic loads across the Internet are good news for Akamai, even more so than for networking hardware giants like Cisco Systems (Nasdaq: CSCO  ) . Cisco is doing its best to increase traffic, and thusly demand for its own products, but every such move Cisco makes also boosts Akamai in a very direct way.

I still believe that Akamai is the best stock for your portfolio in 2010. The sales today look like profit-taking after a masterful 61% gain in just six months -- a surge that crushed every competitor and market index. Akamai hasn't even ignited the real rocket fuel yet.