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Akamai (AKAM) Q2 Earnings Beat Estimates on Higher Revenues
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Akamai Technologies, Inc. (AKAM - Free Report) reported solid second-quarter 2023 results, with the bottom and the top line surpassing the respective Zacks Consensus Estimate. The company reported a top-line expansion year over year, driven by healthy demand trends in the Security and Compute verticals. Management’s emphasis on the emerging market of API security solutions and acquisition of Neosec to expand portfolio and expedite innovation also supported the top line.
Net Income
Net income on a GAAP basis was $128.8 million or 84 cents per share compared with $137.8 million or 85 cents per share in the year-ago quarter. Higher operating expenses negatively impacted the bottom line during the quarter.
Non-GAAP net income was $228 million or $1.49 per share compared with $216.4 million or $1.35 per share a year ago. The bottom line beat the Zacks Consensus Estimate by 8 cents.
Akamai Technologies, Inc. Price, Consensus and EPS Surprise
Net sales in the June quarter totaled $935.7 million compared with $903.3 million reported in the prior-year quarter. Solid growth in the Compute and Security verticals boosted the top line. Despite declining trends, the company continues to boast a leadership position in the delivery segment by offering reliable, seamless online experiences to top brands. Revenues beat the Zacks Consensus Estimate of $932 million.
By product groups, Security Technology Group contributed $432.9 million in revenues, up from $380.7 million in the prior-year quarter. The 13.7% year-over-year growth was driven by strength in web application firewall, Bot Manager and segmentation solutions. The introduction of various products strengthened the security solution portfolio during the quarter. Net sales surpassed our estimate of $426.2 million.
Net sales from Delivery aggregated $379.7 million, down 8.9% from $416.7 million in the year-earlier quarter due to declining traffic growth rate among some large customers and the pricing impact of renewals. The segment’s revenues surpassed our estimate of $374.5 million.
Compute segment generated $123.1 million in revenues, up from $106 million in the prior-year quarter. Price increase combined with healthy demand trends for compute solutions led to 16.1% year-over-year growth. The top line fell short of our revenue estimate of $127.6 million.
Region-wise, net sales from the United States were $480.1 million, up 0.6% year over year. International revenues were $455.7 million, up from $426.2 million in the year-earlier quarter. Foreign exchange fluctuations had a negative impact of $6 million on revenues on a year-over-year basis.
Other Details
In the June quarter, Akamai’s total operation expenses rose to $785.9 million from $728.3 million reported in the prior-year quarter. Non-GAAP operating margin slightly improved to 29.2% from 29.1% recorded in the year-ago quarter. Adjusted EBITDA was relatively flat at $388.2 million, with respective margins of 41% and 43%.
Cash Flow & Liquidity
In the second quarter of 2023, Akamai generated $366.3 million in cash from operating activities compared with $341.4 million in the prior-year quarter. As of Jun 30, 2023, the company had $298.6 million in cash and cash equivalents with $758.3 million of operating lease liabilities. During the reported quarter, Akamai repurchased approximately 1.6 million shares for around $137 million.
Outlook
For the third quarter of 2023, Akamai expects revenues between $937 million and $952 million. The company expects a non-GAAP operating margin of 29%. Non-GAAP earnings are projected in the range of $1.48-$1.52 per share. Capital expenditure is anticipated to be in the band of $162-$170 million.
For 2023, Akamai raised its revenue guidance to $3,765-$3,795 million from $3,740-$3,785 million estimated previously. It now expects a non-GAAP operating margin of 29% compared with the previous estimation of 28-29%. Non-GAAP earnings are now expected in the band of $5.87-$5.95 per share, up from $5.69-$5.84 per share. Capital expenditure is likely to be around 19% of total revenues.
It provides services and solutions to government segments and public safety programs, along with large enterprises and wireless infrastructure service providers. It develops and services both analog and digital two-way radio, voice and data communications products and systems for private networks, wireless broadband systems and end-to-end enterprise mobility solutions to a wide range of enterprise markets.
Workday Inc. (WDAY - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 13.05%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 18.02%.
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.
Meta Platforms Inc. (META - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 18.99%, on average, in the trailing four quarters. Meta is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like the photo and video-sharing app, Instagram, and the WhatsApp messaging app, owing to acquisitions.
Meta is considered to have pioneered the concept of social networking, which is why it enjoys a first-mover advantage in this market. As developed regions mature, Meta undertakes measures to drive penetration in emerging markets of South East Asia, Latin America and Africa.
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Akamai (AKAM) Q2 Earnings Beat Estimates on Higher Revenues
Akamai Technologies, Inc. (AKAM - Free Report) reported solid second-quarter 2023 results, with the bottom and the top line surpassing the respective Zacks Consensus Estimate. The company reported a top-line expansion year over year, driven by healthy demand trends in the Security and Compute verticals. Management’s emphasis on the emerging market of API security solutions and acquisition of Neosec to expand portfolio and expedite innovation also supported the top line.
Net Income
Net income on a GAAP basis was $128.8 million or 84 cents per share compared with $137.8 million or 85 cents per share in the year-ago quarter. Higher operating expenses negatively impacted the bottom line during the quarter.
Non-GAAP net income was $228 million or $1.49 per share compared with $216.4 million or $1.35 per share a year ago. The bottom line beat the Zacks Consensus Estimate by 8 cents.
Akamai Technologies, Inc. Price, Consensus and EPS Surprise
Akamai Technologies, Inc. price-consensus-eps-surprise-chart | Akamai Technologies, Inc. Quote
Revenues
Net sales in the June quarter totaled $935.7 million compared with $903.3 million reported in the prior-year quarter. Solid growth in the Compute and Security verticals boosted the top line. Despite declining trends, the company continues to boast a leadership position in the delivery segment by offering reliable, seamless online experiences to top brands. Revenues beat the Zacks Consensus Estimate of $932 million.
By product groups, Security Technology Group contributed $432.9 million in revenues, up from $380.7 million in the prior-year quarter. The 13.7% year-over-year growth was driven by strength in web application firewall, Bot Manager and segmentation solutions. The introduction of various products strengthened the security solution portfolio during the quarter. Net sales surpassed our estimate of $426.2 million.
Net sales from Delivery aggregated $379.7 million, down 8.9% from $416.7 million in the year-earlier quarter due to declining traffic growth rate among some large customers and the pricing impact of renewals. The segment’s revenues surpassed our estimate of $374.5 million.
Compute segment generated $123.1 million in revenues, up from $106 million in the prior-year quarter. Price increase combined with healthy demand trends for compute solutions led to 16.1% year-over-year growth. The top line fell short of our revenue estimate of $127.6 million.
Region-wise, net sales from the United States were $480.1 million, up 0.6% year over year. International revenues were $455.7 million, up from $426.2 million in the year-earlier quarter. Foreign exchange fluctuations had a negative impact of $6 million on revenues on a year-over-year basis.
Other Details
In the June quarter, Akamai’s total operation expenses rose to $785.9 million from $728.3 million reported in the prior-year quarter. Non-GAAP operating margin slightly improved to 29.2% from 29.1% recorded in the year-ago quarter. Adjusted EBITDA was relatively flat at $388.2 million, with respective margins of 41% and 43%.
Cash Flow & Liquidity
In the second quarter of 2023, Akamai generated $366.3 million in cash from operating activities compared with $341.4 million in the prior-year quarter. As of Jun 30, 2023, the company had $298.6 million in cash and cash equivalents with $758.3 million of operating lease liabilities. During the reported quarter, Akamai repurchased approximately 1.6 million shares for around $137 million.
Outlook
For the third quarter of 2023, Akamai expects revenues between $937 million and $952 million. The company expects a non-GAAP operating margin of 29%. Non-GAAP earnings are projected in the range of $1.48-$1.52 per share. Capital expenditure is anticipated to be in the band of $162-$170 million.
For 2023, Akamai raised its revenue guidance to $3,765-$3,795 million from $3,740-$3,785 million estimated previously. It now expects a non-GAAP operating margin of 29% compared with the previous estimation of 28-29%. Non-GAAP earnings are now expected in the band of $5.87-$5.95 per share, up from $5.69-$5.84 per share. Capital expenditure is likely to be around 19% of total revenues.
Zacks Rank & Other Stocks to Consider
Akamai currently has a Zacks Rank #2 (Buy).
Motorola Solutions, Inc (MSI - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 5.62%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 5.58%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
It provides services and solutions to government segments and public safety programs, along with large enterprises and wireless infrastructure service providers. It develops and services both analog and digital two-way radio, voice and data communications products and systems for private networks, wireless broadband systems and end-to-end enterprise mobility solutions to a wide range of enterprise markets.
Workday Inc. (WDAY - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 13.05%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 18.02%.
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.
Meta Platforms Inc. (META - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 18.99%, on average, in the trailing four quarters. Meta is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like the photo and video-sharing app, Instagram, and the WhatsApp messaging app, owing to acquisitions.
Meta is considered to have pioneered the concept of social networking, which is why it enjoys a first-mover advantage in this market. As developed regions mature, Meta undertakes measures to drive penetration in emerging markets of South East Asia, Latin America and Africa.