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Akamai Technologies Inc AKAM

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Akamai Again Reports Strong Revenue in Q4 but Elevated Costs and Muted Guidance Weigh on Stock

Matthew Dolgin, CFA Equity Analyst

Analyst Note

| Matthew Dolgin, CFA |

As it has done nearly every quarter for the past several years, Akamai beat consensus revenue expectations, as compiled by FactSet, by a wide margin in the fourth quarter. Currency tailwinds and inflated costs tempered our enthusiasm for the results somewhat, but more relevant, in our view, is management’s expectation for some deceleration in the fast-growing cloud security business and our reservations that the media business will build upon the traffic spike it saw due to the pandemic. Until the pandemic hit, security had been the sole source of sales growth for the past half decade, and given our view that the core content delivery network, or CDN, business lacks a moat, we believe security is critical to keep the top line growing at a high rate. We don’t intend to materially change our $72 fair value estimate and view the stock as overvalued.

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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 Dec 31, 2020
Fiscal Year End Dec 31, 2021
Stock Type Classic Growth
Employees 8,368