What happened
Shares of content delivery network (CDN) providers Fastly (FSLY 4.62%), Cloudflare (NET +4.17%), and Akamai Technologies (AKAM 3.38%) were all trading higher Wednesday. Fastly and Cloudflare in particular had jumped sharply, up 7% and 6%, respectively, as of 1:10 p.m. EDT; Akamai was up about 1% as of this writing.
The tech stocks were likely up for two main reasons: a bullish day in the overall market (particularly for tech stocks) and a note from a Piper Sandler analyst saying a new security feature from Apple (AAPL 0.27%) could benefit CDN specialists Fastly, Cloudflare, and Akamai.
Image source: Getty Images.
So what
When Apple unveiled iOS 15 earlier this year, the iPhone maker said the new operating system will include a security feature called iCloud Private Relay, making it available to users with iCloud subscriptions.
"Private Relay protects users' web browsing in Safari, DNS resolution queries, and insecure http app traffic," Apple says on its website about the feature that will debut with iOS 15. "Internet connections set up through Private Relay use anonymous IP addresses that map to the region a user is in, without divulging the user's exact location or identity."
With a "dual hop" architecture likely to involve content delivery networks (CDNs) like Fastly, Cloudflare, and Akamai, Piper Sandler analyst James Fish estimates the feature creates an incremental annual opportunity for CDNs of approximately $40 million to $74 million over the next five years.
Also helping the three stocks on Wednesday seems to be an upbeat day in the stock market, especially for tech stocks. Highlighting the market's optimism, the tech-heavy Nasdaq Composite was up 0.7% as of this writing. And many tech growth stocks were up even more sharply.
Now what
Fastly's gain today adds to its momentum in recent weeks as it rebounds from year-to-date lows around $35. But the edge computing specialist's shares are still notably down 47% year to date. The company's revenue growth slowed significantly in the second quarter as it lapped tough comparisons and suffered a brief outage that hurt revenue. But revenue will likely reaccelerate over time thanks to easier comparisons, recent acquisitions, and a track record of strong dollar-based net expansion rates (a measure of increasing spend from existing customers).
Akamai, which is a slower-growing company than Fastly, has similarly seen a slowdown as it laps tough comparisons from 2020. But management remains optimistic about its long-term opportunity, noting in its second-quarter earnings call that its customers are turning to it "more than ever to power and protect exceptional online experiences."
Cloudflare isn't having any trouble lapping its year-ago comps. Revenue grew 53% year over year, and management's guidance suggests there's more strong growth ahead.
