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Why Akamai Technologies, Inc. Gained 31% in October

By Anders Bylund – Nov 7, 2016 at 9:21AM

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The former content performance specialist is turning to security services these days, and the strategy shift is paying big dividends.

Image source: Getty Images.

What happened

Shares of Akamai Technologies (AKAM 1.33%) rose 31.1% in October, according to data from S&P Global Market Intelligence. The stock was already well on its way toward a positive monthlong campaign but jumped another 16% higher on Oct. 26 thanks to a solid third-quarter earnings report.

So what

In the third quarter, Akamai's sales rose 6% year over year to $584 million. Earnings landed at $0.68 per share, showing a 10% increase. Analysts would have settled for earnings near $0.61 per share on something like $572 million in quarterly revenue.

AKAM Chart

AKAM data by YCharts

Now what

Akamai's strong quarter rested on newfound traction in the data security market, as the company's content delivery services have turned out to be useful for preventing so-called distributed denial of service (DDoS) attacks. The company's leadership is not shy about pursuing this revenue-generation strategy.

"Enterprises need solutions capable of defending against massive botnets that are exploiting millions of online devices," said CEO Tom Leighton in a prepared statement. "This is an area where Akamai's unique architecture and ongoing investments in global scale and security innovation continue to make a critical difference."

In a conference call with analysts, Leighton noted that the number of DDoS attacks against the company's clients has more than doubled in 2016, and that the worst is yet to come. In other words, you should expect Akamai to lean even more heavily on the security aspect of its services in future reports.

Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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