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Akamai (AKAM) Tops Q3 Earnings and Revenues, Ups '18 View
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Akamai Technologies Inc. (AKAM - Free Report) delivered non-GAAP third-quarter 2018 earnings of 94 cents per share beating the Zacks Consensus Estimate of 83 cents.. The figure also surged 51.6% from the year-ago quarter and came ahead of management’s guided range of 80-86 cents per share.
Better-than-expected year-over-year growth can be attributed to robust increase in revenues, lower tax rate and favorable impact of the cost reduction initiatives.
Revenues of $670 million outpaced the Zacks Consensus Estimate of $663 million and increased 7% from the year-ago quarter (up 8% adjusted for foreign exchange). Further, revenues were near the top end of management’s guided range of $656-$668 million.
The top line benefited from robust performance of security products and growth in Media and Carrier Division.
Excluding Internet Platform Customers, revenues increased 9% year over year (up 10% adjusted for foreign exchange) to $627 million. Revenues from Internet Platform Customers were $43 million, down 15% year over year.
Akamai has returned 18.6% year over year, against the industry’s decline of 20.5%.
Robust Cloud Security Solutions Growth
Cloud Security Solutions (25% of total revenues) revenues were $169 million, surging almost 37% year over year (up 39% adjusted for foreign exchange). Solid growth was driven by strong demand for Kona Site Defender, Bot Manager and Prolexic Solutions. The traction gained by Enterprise Application Access and Enterprise Threat Protector also aided growth.
Management remains optimistic over the growing influence of its security solutions during the reported quarter among media customers, in particular.
Notably, Akamai is one of the largest cloud security providers. It exited the quarter at a run-rate of around $700 million for security business.
Segment Details
Web Division (almost 53% of total revenues) revenues increased 8% year over year (up 9% adjusted for foreign exchange) to $357 million. Solid cloud security solutions growth as well as strong performance from Image Manager, mPulse and Digital Performance Management solutions drove growth.
Management noted that revenues from the new solutions have more than tripled on a year-over-year basis and revenue run-rate is well over $220 million per year.
Media and Carrier Division (47% of total revenues) revenues of $313 million increased 6% (up 7% adjusted for foreign exchange) from the year-ago quarter. Akamai stated that growth was primarily aided by the successful integration of Nominum and initiatives to improve traffic growth across its top 250 global media accounts.
Traffic growth was especially strong in OTT and gaming sectors. Management also remains elated on the recent record download of Epic Games’ new game,Fortnite. The game registered traffic of over 22 terabits per second on the company’s platform.
U.S. revenues were $413 million (61.6% of total revenues), flat year over year. International revenues (38.4% of total revenues) were $257 million, up 21% year over year (up 24% adjusted for foreign exchange) primarily driven by strong growth in Asia Pacific and EMEA region.
Management stated that foreign exchange volatility negatively impacted revenues by $5 million from the year-ago quarter. Further, the foreign exchange movement negatively impacted revenues by $6 million sequentially.
Operating Details
Adjusted EBITDA margin of 41%, registered an expansion of 400 basis points (bps) on a year-over-year basis. This can primarily be attributed to higher revenues and improving operational efficiency.
Non-GAAP cash gross margin expanded over a point from the year-ago quarter to 77%.
Non-GAAP operating margin expanded 300 bps from the year-ago quarter to 27%, exceeding management’s guided range on the back of improving operating efficiency.
Balance Sheet & Cash Flow
As of Sep 30, 2018, Akamai’s cash and cash equivalents (and marketable securities) were $1.80 billion as compared with $1.86 billion recorded at the end of the previous quarter.
The company generated cash flow from operations of $310.5 million as compared with $219.7 million in the previous quarter.
In the quarter under review, Akamai repurchased around 6 million shares for $440 million. Further, the company announced authorizing of a new $1.1 billion share repurchase program.
Guidance
For fourth-quarter 2018, Akamai envisions revenues between $692 million and $709 million (mid-point at $700.5 million). Management anticipates unfavorable foreign exchange and seasonal summer traffic care to impact revenues. The Zacks Consensus Estimate is pegged at $704 million.
Non-GAAP operating expenses are projected between $254 million and $259 million, up sequentially due to higher compensation expenses.
Adjusted EBITDA margin is anticipated to be 42%. Non-GAAP operating margin is projected to be 28% for the fourth quarter.
Non-GAAP earnings are envisioned in the range of 97 cents to $1.03 per share. The Zacks Consensus Estimate is pegged at 91 cents.
Akamai had updated guidance for 2018 during the third quarter. Owing to currency headwinds, the company expects full-year 2018 revenues between $2.693 billion and $2.71 billion as compared with the previous guidance in the range of $2.68 billion and $2.71 billion. The Zacks Consensus Estimate is pegged at $2.7 billion.
Non-GAAP earnings are now projected in the range of $3.53 per share to $3.59 per share, up from the previously updated outlook of $3.26 per share to $3.38 per share. The Zacks Consensus Estimate is pegged at $3.35 per share.
Adjusted EBITDA margin is anticipated to be around 40%. Non-GAAP operating margin is projected to be 26%.
Akamai anticipates further improvement in margins by the end of 2018 backed by the additional cost reduction initiatives that it undertook in the second and third quarters.
Management maintains its plans to achieve non-GAAP operating margin of 30% in 2020.
NetApp, Intel and Upland Software have a long-term earnings growth rate of 14.1%, 8.4% and 20%, respectively.
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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Akamai (AKAM) Tops Q3 Earnings and Revenues, Ups '18 View
Akamai Technologies Inc. (AKAM - Free Report) delivered non-GAAP third-quarter 2018 earnings of 94 cents per share beating the Zacks Consensus Estimate of 83 cents.. The figure also surged 51.6% from the year-ago quarter and came ahead of management’s guided range of 80-86 cents per share.
Better-than-expected year-over-year growth can be attributed to robust increase in revenues, lower tax rate and favorable impact of the cost reduction initiatives.
Revenues of $670 million outpaced the Zacks Consensus Estimate of $663 million and increased 7% from the year-ago quarter (up 8% adjusted for foreign exchange). Further, revenues were near the top end of management’s guided range of $656-$668 million.
The top line benefited from robust performance of security products and growth in Media and Carrier Division.
Excluding Internet Platform Customers, revenues increased 9% year over year (up 10% adjusted for foreign exchange) to $627 million. Revenues from Internet Platform Customers were $43 million, down 15% year over year.
Akamai has returned 18.6% year over year, against the industry’s decline of 20.5%.
Robust Cloud Security Solutions Growth
Cloud Security Solutions (25% of total revenues) revenues were $169 million, surging almost 37% year over year (up 39% adjusted for foreign exchange). Solid growth was driven by strong demand for Kona Site Defender, Bot Manager and Prolexic Solutions. The traction gained by Enterprise Application Access and Enterprise Threat Protector also aided growth.
Management remains optimistic over the growing influence of its security solutions during the reported quarter among media customers, in particular.
Notably, Akamai is one of the largest cloud security providers. It exited the quarter at a run-rate of around $700 million for security business.
Segment Details
Web Division (almost 53% of total revenues) revenues increased 8% year over year (up 9% adjusted for foreign exchange) to $357 million. Solid cloud security solutions growth as well as strong performance from Image Manager, mPulse and Digital Performance Management solutions drove growth.
Management noted that revenues from the new solutions have more than tripled on a year-over-year basis and revenue run-rate is well over $220 million per year.
Media and Carrier Division (47% of total revenues) revenues of $313 million increased 6% (up 7% adjusted for foreign exchange) from the year-ago quarter. Akamai stated that growth was primarily aided by the successful integration of Nominum and initiatives to improve traffic growth across its top 250 global media accounts.
Traffic growth was especially strong in OTT and gaming sectors. Management also remains elated on the recent record download of Epic Games’ new game,Fortnite. The game registered traffic of over 22 terabits per second on the company’s platform.
U.S. revenues were $413 million (61.6% of total revenues), flat year over year. International revenues (38.4% of total revenues) were $257 million, up 21% year over year (up 24% adjusted for foreign exchange) primarily driven by strong growth in Asia Pacific and EMEA region.
Management stated that foreign exchange volatility negatively impacted revenues by $5 million from the year-ago quarter. Further, the foreign exchange movement negatively impacted revenues by $6 million sequentially.
Operating Details
Adjusted EBITDA margin of 41%, registered an expansion of 400 basis points (bps) on a year-over-year basis. This can primarily be attributed to higher revenues and improving operational efficiency.
Non-GAAP cash gross margin expanded over a point from the year-ago quarter to 77%.
Non-GAAP operating margin expanded 300 bps from the year-ago quarter to 27%, exceeding management’s guided range on the back of improving operating efficiency.
Balance Sheet & Cash Flow
As of Sep 30, 2018, Akamai’s cash and cash equivalents (and marketable securities) were $1.80 billion as compared with $1.86 billion recorded at the end of the previous quarter.
The company generated cash flow from operations of $310.5 million as compared with $219.7 million in the previous quarter.
In the quarter under review, Akamai repurchased around 6 million shares for $440 million. Further, the company announced authorizing of a new $1.1 billion share repurchase program.
Guidance
For fourth-quarter 2018, Akamai envisions revenues between $692 million and $709 million (mid-point at $700.5 million). Management anticipates unfavorable foreign exchange and seasonal summer traffic care to impact revenues. The Zacks Consensus Estimate is pegged at $704 million.
Non-GAAP operating expenses are projected between $254 million and $259 million, up sequentially due to higher compensation expenses.
Adjusted EBITDA margin is anticipated to be 42%. Non-GAAP operating margin is projected to be 28% for the fourth quarter.
Non-GAAP earnings are envisioned in the range of 97 cents to $1.03 per share. The Zacks Consensus Estimate is pegged at 91 cents.
Akamai had updated guidance for 2018 during the third quarter. Owing to currency headwinds, the company expects full-year 2018 revenues between $2.693 billion and $2.71 billion as compared with the previous guidance in the range of $2.68 billion and $2.71 billion. The Zacks Consensus Estimate is pegged at $2.7 billion.
Non-GAAP earnings are now projected in the range of $3.53 per share to $3.59 per share, up from the previously updated outlook of $3.26 per share to $3.38 per share. The Zacks Consensus Estimate is pegged at $3.35 per share.
Adjusted EBITDA margin is anticipated to be around 40%. Non-GAAP operating margin is projected to be 26%.
Akamai anticipates further improvement in margins by the end of 2018 backed by the additional cost reduction initiatives that it undertook in the second and third quarters.
Management maintains its plans to achieve non-GAAP operating margin of 30% in 2020.
Zacks Rank & Stocks to Consider
Currently, Akamai carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are NetApp, Inc. (NTAP - Free Report) , Intel Corporation (INTC - Free Report) and Upland Software, Inc. (UPLD - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NetApp, Intel and Upland Software have a long-term earnings growth rate of 14.1%, 8.4% and 20%, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>