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Akamai Technologies Inc AKAM

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Q3 Profit Stands out for Akamai as Security Remains Strong and CDN Languishes

Matthew Dolgin, CFA Equity Analyst

Analyst Note

| Matthew Dolgin, CFA |

Akamai’s third quarter followed a similar script to most recent quarters and was consistent with the performance we expect long-term. Security continues growing at a rapid pace and has shown little sign of slowing down, even as it now makes up 40% of total revenue and will have more than $1.3 billion in sales in 2021, more than all but a handful of cybersecurity firms. The content delivery network, or CDN, business, which Akamai rebranded earlier this year as its Edge Technology Group, struggles to grow and is one where we see little opportunity for a competitive advantage, hence our no-moat rating on the company. Still, Akamai’s execution remains stellar, judged by its continually expanding margins and seamless integration of numerous security acquisitions. We are slightly boosting our long-term forecast for security revenue growth and raising our fair value estimate by $2, to $80.

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Company Profile

Business Description

Akamai operates a content delivery network, or CDN, which entails locating servers at the edges of networks so its customers, which store content on Akamai servers, can reach their own customers faster, more securely, and with better quality. Akamai has over 325,000 servers distributed over 4,000 points of presence in more than 1,000 cities worldwide. Its customers generally include media companies, which stream video content or make video games available for download, and other enterprises that run interactive or high-traffic websites, such as e-commerce firms and financial institutions. Akamai also has a significant security business, which is integrated with its core web and media businesses to protect its customers from cyber threats.

145 Broadway
Cambridge, MA, 02142
T +1 617 444-3000
Sector Technology
Industry Software - Infrastructure
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Aggressive Growth
Employees 8,368