Analyst Note| Matthew Dolgin, CFA |
Akamai once again produced very strong sales growth during the first quarter, exceeding consensus FactSet revenue and EPS estimates. Results were driven by the security business, which saw its growth rate pick up again after decelerating recently. Overall comps will soon be tougher, though, as the firm has now lapped the beginning of the pandemic, which caused a massive spike in web traffic and led to growth in the previously stagnant content delivery network, or CDN, business (now renamed Edge Technology). Nonetheless, the company raised full-year guidance, and we’re raising our $72 fair value estimate to $76. Our fair value estimate is held back by our assessment that the core CDN business lacks sustainable competitive advantages. However, we acknowledge that the fate of Akamai is increasingly more dependent on its security business, which now exceeds one third of total revenue. Strength in that area is likely to continue.