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Akamai Technologies (AKAM) Up 7.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Akamai Technologies (AKAM - Free Report) . Shares have added about 7.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Akamai Technologies due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Akamai Surpasses Q4 Earnings & Revenue Estimates

Akamai reported fourth-quarter 2021 adjusted earnings of $1.49 per share that beat the Zacks Consensus Estimate by 4.9% and improved 12% year over year.

Revenues of $905.4 million surpassed the Zacks Consensus Estimate by 0.7% and increased 7% year over year. Growth in the security business contributed to the top line.

Region-wise, U.S. revenues were $476 million, up 2% year over year. International revenues were $429 million, up 13%.

By product groups, Security Technology Group revenues were $365 million, up 23% year over year. Revenues from Edge Technology Group amounted to $541 million, down 2%.

Web Division revenues increased 4.6% year over year to $454.4 million, led by growth in the security business. Media and Carrier Division revenues of $450.9 million rose 9.4%.

Other Details

Operating margin expanded 600 basis points (bps) year over year to 22%. Non-GAAP operating margin grew 100 bps to 31%. Adjusted EBITDA margin of 45% increased 200 bps.

Akamai has inked a deal to acquire Linode, a leading Infrastructure-as-a-service platform provider, for almost $900 million. The move will combine Linode’s developer-friendly cloud computing capabilities with Akamai’s market-leading edge platform and security services. Together with Linode, Akamai will likely become the world’s most distributed compute platform, from cloud to edge. The deal is expected to close in the first quarter of 2022.

Cash Flow & Liquidity

In 2021, Akamai generated $1,404.6 million of cash from operations compared with $1,215 million in 2020. Free cash flow was $859 million, up 78% year over year. As of Dec 31, 2021, the company had $536.7 million in cash and cash equivalents with $1,976.2 million of senior notes.

During the reported quarter, Akamai repurchased 2.4 million shares for $271 million.

Guidance

For the first quarter of 2022, Akamai expects revenues between $896 million and $910 million. Cash gross margin is estimated to be 76%. Adjusted EBITDA margin is expected to be 43%. Akamai expects a non-GAAP operating margin of 30%. Non-GAAP earnings are envisioned in the range of $1.39-$1.43 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -5.82% due to these changes.

VGM Scores

Currently, Akamai Technologies has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Akamai Technologies has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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