Akamai Shares Slide on Weak Delivery Revenues, Guidance By Investing.com

CAMBRIDGE, Mass. – Akamai Technologies, Inc. (NASDAQ: NASDAQ:) posted first-quarter financial results that showed a slight beat in adjusted earnings per share (EPS) but a narrow miss on revenue expectations.

The cloud services company announced an adjusted EPS of $1.64, which was $0.03 above the analyst estimate of $1.61. However, revenue for the quarter was $987 million, falling short of the consensus estimate of $989.03 million.

Despite the mixed results, Akamai’s stock plummeted more than 10% in premarket trading Friday as the company’s guidance for the second quarter and full fiscal year 2024 came in below analyst expectations.

For the first quarter ended March 31, 2024, Akamai’s revenue represented an 8% increase year-over-year (YoY) from the first quarter of 2023, which stood at $916 million. The company’s security and compute solutions, which accounted for 64% of total revenue, grew by 22% YoY. Akamai’s GAAP net income per diluted share surged by 79% YoY to $1.11, while the adjusted EPS saw a 17% increase YoY.

Dr. Tom Leighton, Akamai’s CEO, expressed satisfaction with the company’s performance, particularly in the security and compute solutions, which had a robust start to 2024. He also highlighted the planned acquisition of Noname Security, which is expected to enhance Akamai’s API Security solution.

Looking ahead, Akamai’s guidance for the second quarter of 2024 forecasts an adjusted EPS range of $1.51 to $1.56, below the analyst consensus of $1.64. Revenue is projected to be between $967 million and $986 million, which also falls short of the consensus estimate of $1.002 billion.

For the full year 2024, the company anticipates an adjusted EPS between $6.20 and $6.40, compared to the consensus of $6.73, and revenue in the range of $3.95 billion to $4.02 billion, against a consensus of $4.084 billion.

The company’s executive vice president and CFO, Ed McGowan, attributed the updated guidance to the strengthening U.S. dollar, cost optimization by a large social media customer, and a general slowdown in traffic growth across the industry. However, he noted increased full-year expectations for the security and compute solutions.

Morgan Stanley analysts reiterated an Equal Weight rating on AKAM stock following the report. 

“As margins contract and surprise lower, share upside is limited, given single-digit top-line growth capped by several headwinds.” they wrote.

“Investors likely need to look to 2025 to get interested, but with new challenges within an already difficult macro in 2024, we don’t have conviction in 2025 path yet,” analysts added.

Meanwhile, Evercore ISI analysts said the company’s delivery weakness and reduced guidance will introduce an overhang, however, they see an opportunity “for the faster growing and margin accretive portions of the portfolio to take center stage in FY24, demonstrating the multi-years of investments,” analysts wrote, reaffirming an Overweight rating on the stock but trimming the target price from $115 to $105 to reflect lower near-term EPS.

Akamai also announced a new three-year, $2.0 billion share repurchase program, underscoring its commitment to returning value to shareholders while maintaining the flexibility to pursue strategic opportunities.

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