What happened
Shares of Akamai Technologies (AKAM -0.17%) are plunging on Wednesday morning, trading down by 14% near 1 p.m, EDT.
So what
The cloud-based content-delivery specialist reported second-quarter results on Tuesday night. Earnings fell 3% year over year, to $0.62 per share, while top-line sales increased 6.5%, to land at $609 million. Both results exceeded Wall Street's consensus estimates, but shares fell anyway because management's third-quarter sales guidance came in below expectations.
The Street was looking for next-quarter revenues near $619 million, but the official guidance range topped out at $616 million. Akamai's non-GAAP earnings guidance, on the other hand, was right in line with Wall Street's expectations at roughly $0.61 per share.
Image source: Getty Images.
Now what
Investors were spooked by a soft revenue forecast, to the point of ignoring perfectly solid second-quarter results and a respectable third-quarter bottom-line projection. The revenue guidance includes about $3 million of negative currency-exchange effects, and Akamai is up against a difficult year-over-year comparison since the third quarter of 2016 included online media streaming of the Rio Summer Olympics.
I would argue that the price drop today is an overreaction to a perfectly understandable revenue slowdown. Note that Akamai supplemented its sputtering content-delivery services with a 35% year-over-year jump in security sales, taking the whole company in a different direction. Investors would be smart to treat this drop as an invitation to learn more about Akamai, and maybe even start a long position.
