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Akamai (AKAM) Misses on Q1 Earnings Despite Higher Revenues

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Akamai Technologies, Inc. (AKAM - Free Report) reported relatively modest first-quarter 2022 results with year-year-year growth in revenues and adjusted earnings on per share basis. However, both the bottom line and top line missed the Zacks Consensus Estimate.

Quarter Details

GAAP net income in the reported quarter was $119.2 million or 73 cents per share compared with $155.7 million or 94 cents per share in the year-ago quarter. The decline in GAAP earnings despite top-line growth was primarily attributable to higher operating expenses. Non-GAAP net income in the quarter was $224.8 million or $1.39 per share compared with $227.8 million or $1.38 per share a year ago. The non-GAAP earnings came at the low end of the guidance and had an adverse tax impact of 3 cents per share. Non-GAAP earnings missed the Zacks Consensus Estimate by 3 cents.

Akamai Technologies, Inc. Price, Consensus and EPS Surprise

Akamai Technologies, Inc. Price, Consensus and EPS Surprise

Akamai Technologies, Inc. price-consensus-eps-surprise-chart | Akamai Technologies, Inc. Quote

Revenues of $903.6 million increased 7% year over year but missed the consensus estimate of $905 million. Growth in the security business primarily contributed to the top line. Region-wise, U.S. revenues were $481 million, up 4% year over year. International revenues were $422.6 million, up 11%.

By product groups, Security Technology Group revenues were $381.6 million, up 23% year over year, driven by growth in the application security business and solid performance from Guardicore. Revenues from Delivery aggregated $441.1 million, down 6% owing to non-renewals by some customers. Compute revenues increased 32% year over year to $77.9 million, led by incremental contribution from the Linode acquisition.

GAAP operating margin contracted 300 basis points (bps) year over year to 19%, while non-GAAP operating margin was down 100 bps to 30%. Adjusted EBITDA improved 4% to $391 million for a margin of 43%.

Cash Flow & Liquidity

In first-quarter 2022, Akamai generated $222.5 million of cash from operations compared with $249.8 million in the prior-year period. As of Mar 31, 2022, the company had $377.8 million in cash and cash equivalents.

During the reported quarter, Akamai repurchased 0.9 million shares for $103 million at $111.25 per share.

Guidance

For the second quarter of 2022, Akamai expects revenues between $890 million and $905 million with incremental contribution from Linode. Cash gross margin is estimated to be 75%. Adjusted EBITDA margin is expected to be 43%. Akamai expects a non-GAAP operating margin of 29%. Non-GAAP earnings are envisioned in the range of $1.28-$1.33 per share.

For 2022, Akamai expects revenues between $3.62 billion and $3.67 billion, up 5-6% year over year. Akamai expects a non-GAAP operating margin of 29%. Non-GAAP earnings are expected in the range of $5.32-$5.44 per share.

Zacks Rank & Stocks to Consider

Akamai currently has a Zacks Rank #4 (Sell).

Viavi Solutions Inc. (VIAV - Free Report) , carrying a Zacks Rank #2 (Buy), is a solid pick for investors in the broader industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Viavi delivered a modest earnings surprise of 15.6%, on average, in the trailing four quarters. Earnings estimates for the current year for the stock have moved up 8.2% since May 2021, while that for the next year is up 11.6%. Viavi boasts a comprehensive product portfolio that offers end-to-end network visibility and analytics that help build, test, certify, maintain and optimize complex physical and virtual networks. It expects growth to be driven by the secular demand for 5G wireless, fiber and 3D sensing.

KVH Industries, Inc. (KVHI - Free Report) , a Zacks Rank #2 stock, delivered an earnings surprise of 20%, on average, in the trailing four quarters.

Despite global supply chain disruptions, KVH Industries is driving growth and margin expansion through new product introduction and subscriber migration to High-Throughput Satellites. The company aims to make decisive inroads into the still-nascent autonomous transportation markets with a strong balance sheet and zero debt. If KVH Industries manages to effectively mitigate supply chain woes, there could be room for cash flow expansion.

Spirent Communications plc (SPMYY - Free Report) carries a Zacks Rank #2. Earnings estimates for the current year for the stock have moved up 9.2% since May 2021, while that for the next year is up 10.3%.

Founded in 1936 and headquartered in Crawley, the United Kingdom, Spirent offers a comprehensive, end-to-end solution that validates forwarding performance, latency and functional capabilities in an integrated approach that reduces cost of ownership. It is a leading provider of Ethernet validation solutions in the market.