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Why Is Akamai Technologies (AKAM) Down 8.5% Since Last Earnings Report?
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It has been about a month since the last earnings report for Akamai Technologies (AKAM - Free Report) . Shares have lost about 8.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Akamai Technologies due for a breakout? 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 Beats Q4 Earnings Estimates on Top-Line Growth
Akamai reported relatively healthy fourth-quarter 2022 results with year-year-year growth in revenues despite a challenging macroeconomic environment and adverse currency translation effects. Both the bottom line and top line beat the Zacks Consensus Estimate on solid demand trends.
Quarter Details
GAAP net income in the reported quarter was $128.8 million or 82 cents per share compared with $160.5 million or 97 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 $216.4 million or $1.37 per share compared with $243.1 million or $1.49 per share a year ago. Non-GAAP earnings surpassed the Zacks Consensus Estimate by 10 cents.
In 2022, GAAP net income declined to $523.7 million or $3.26 per share from $651.6 million or $3.93 per share in 2021. Non-GAAP net income in 2022 was $857.7 million or $5.37 per share compared with $942.6 million or $5.74 per share a year ago.
Quarterly revenues of $927.8 million increased 2.5% year over year and beat the consensus estimate of $903 million. Growth in the Security Technology Group and Compute businesses primarily contributed to the top line. Region-wise, U.S. revenues were $482.8 million, up 1% year over year. International revenues were $445 million, up 4%.
In 2022, total revenues jumped to $3,616.6 million from $3,461.2 million in 2021.
By product groups, Security Technology Group revenues were $400.2 million, up 10% year over year, driven by growth in the application security business and solid performance from Guardicore. Revenues from Delivery aggregated $415.2 million, down 12% owing to non-renewals by some customers. Compute revenues increased 61% year over year to $112.4 million, led by incremental contributions from the Linode acquisition and the addition of improved enterprise capabilities to the compute platform.
Non-GAAP operating margin contracted to 28% from 31% in the prior year. Adjusted EBITDA declined to $381.7 million from $403.9 million a year ago for a margin of 41%, down from 45%.
Cash Flow & Liquidity
In 2022, Akamai generated $1,274.7 million in cash from operating activities compared with $1,404.6 million in 2021. As of Dec 31, 2022, the company had $542.3 million in cash and cash equivalents with $693.3 million of operating lease liabilities. During the reported quarter, Akamai repurchased 2.1 million shares for $178 million at an average price of $86.50 per share.
Guidance
For the first quarter of 2023, Akamai expects revenues between $900 million and $915 million with incremental contributions from Linode. It expects a non-GAAP operating margin of 27-28%. Non-GAAP earnings are envisioned in the range of $1.30-$1.34 per share.
For 2023, Akamai expects revenues between $3,700 million and $3,775 million. It expects a non-GAAP operating margin of 27-28%. Non-GAAP earnings are expected in the band of $5.40-$5.60 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Akamai Technologies has an average Growth Score of C, 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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Why Is Akamai Technologies (AKAM) Down 8.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Akamai Technologies (AKAM - Free Report) . Shares have lost about 8.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Akamai Technologies due for a breakout? 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 Beats Q4 Earnings Estimates on Top-Line Growth
Akamai reported relatively healthy fourth-quarter 2022 results with year-year-year growth in revenues despite a challenging macroeconomic environment and adverse currency translation effects. Both the bottom line and top line beat the Zacks Consensus Estimate on solid demand trends.
Quarter Details
GAAP net income in the reported quarter was $128.8 million or 82 cents per share compared with $160.5 million or 97 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 $216.4 million or $1.37 per share compared with $243.1 million or $1.49 per share a year ago. Non-GAAP earnings surpassed the Zacks Consensus Estimate by 10 cents.
In 2022, GAAP net income declined to $523.7 million or $3.26 per share from $651.6 million or $3.93 per share in 2021. Non-GAAP net income in 2022 was $857.7 million or $5.37 per share compared with $942.6 million or $5.74 per share a year ago.
Quarterly revenues of $927.8 million increased 2.5% year over year and beat the consensus estimate of $903 million. Growth in the Security Technology Group and Compute businesses primarily contributed to the top line. Region-wise, U.S. revenues were $482.8 million, up 1% year over year. International revenues were $445 million, up 4%.
In 2022, total revenues jumped to $3,616.6 million from $3,461.2 million in 2021.
By product groups, Security Technology Group revenues were $400.2 million, up 10% year over year, driven by growth in the application security business and solid performance from Guardicore. Revenues from Delivery aggregated $415.2 million, down 12% owing to non-renewals by some customers. Compute revenues increased 61% year over year to $112.4 million, led by incremental contributions from the Linode acquisition and the addition of improved enterprise capabilities to the compute platform.
Non-GAAP operating margin contracted to 28% from 31% in the prior year. Adjusted EBITDA declined to $381.7 million from $403.9 million a year ago for a margin of 41%, down from 45%.
Cash Flow & Liquidity
In 2022, Akamai generated $1,274.7 million in cash from operating activities compared with $1,404.6 million in 2021. As of Dec 31, 2022, the company had $542.3 million in cash and cash equivalents with $693.3 million of operating lease liabilities. During the reported quarter, Akamai repurchased 2.1 million shares for $178 million at an average price of $86.50 per share.
Guidance
For the first quarter of 2023, Akamai expects revenues between $900 million and $915 million with incremental contributions from Linode. It expects a non-GAAP operating margin of 27-28%. Non-GAAP earnings are envisioned in the range of $1.30-$1.34 per share.
For 2023, Akamai expects revenues between $3,700 million and $3,775 million. It expects a non-GAAP operating margin of 27-28%. Non-GAAP earnings are expected in the band of $5.40-$5.60 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Akamai Technologies has an average Growth Score of C, 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.