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What's in Store for Akamai Technologies (AKAM) Q1 Earnings?

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Akamai Technologies, Inc. (AKAM - Free Report) is slated to release first-quarter 2018 results on Apr 30. The question lingering in investors’ minds is whether or not this content delivery network (CDN) and cloud infrastructure-service provider will be able to post a positive earnings surprise in the quarter.

Notably, Akamai has delivered positive earnings surprises for 10 straight quarters. Over the trailing four quarters, the company came up with an average positive surprise of 5.2%.

In the last reported quarter, Akamai posted non-GAAP earnings of 69 cents per share, which beat the Zacks Consensus Estimate of 63 cents. Moreover, revenues of $663 million beat the Zacks Consensus Estimate of $647 million, and increased 8% from the year-ago tally.

We expect the huge level of network traffic catered to by Akamai’s cloud-delivery platform to have acted as a key top-line booster for the company. A growing customer base, Nominum’s acquisition, improvised portfolio of solutions, and robust over-the top (OTT) content viewing segment are other positives.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Akamai is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

It should be noted that stocks with a Zacks Rank #4 or 5 (Sell rated) are best avoided, especially when the company is seeing negative estimate revisions.

Akamai carries a Zacks Rank of 3 and has an Earnings ESP of -1.32%, which makes surprise prediction difficult. The Zacks Consensus Estimate for first-quarter earnings remained unchanged over the past 60 days.

However, on a year-over-year basis, the company is likely to record growth for revenues as well as earnings. The Zacks Consensus Estimate for earnings is pegged at 70 cents, representing a rise of 1.5% from the year-ago quarter. Analysts polled by Zacks project revenues of roughly $654 million, up 7.4% from the year-ago quarter.

Akamai Technologies, Inc. Price and EPS Surprise

Factors Likely to Influence Q1 Results

Akamai is likely to continue witnessing high level of network traffic on its platform, which is a major tailwind for the company. Also, the company completed the Nominum acquisition in November last year. This has helped the company expand its presence among carrier and enterprise customers.

We believe rising demand for cloud-infrastructure solutions, security, mobile products, and online video and adoption of cloud services on a large scale by data centers pose significant growth opportunities for Akamai.

The two recently-launched products — Enterprise Threat Protector and Bot Manager Premier — are likely to attract new customers. Akamai expects revenues from the security business to exceed $1 billion within the next four to five years, driven by strong adoption of Kona Site Defender, Prolexic, Bot Manager and Web Application Protector Product offerings.

Moreover, expansion of the security-product portfolio will lower Akamai’s dependence on media delivery solutions. Further, rapid growth in security is expected to offset loss of large customers in the CDN space.

However, declining revenue contribution from large customers in the Internet Platform group namely Amazon.com (AMZN - Free Report) , Apple (AAPL - Free Report) , Facebook , Google, Microsoft and Netflix due to their do-it-yourself (DIY) initiatives remains a concern for the company.

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