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Why Is Akamai Technologies (AKAM) Up 3.5% Since Last Earnings Report?
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A month has gone by since the last earnings report for Akamai Technologies (AKAM - Free Report) . Shares have added about 3.5% in that time frame, underperforming 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 Q2 Earnings Beat Estimates on Higher Revenues
Akamai 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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Akamai Technologies has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Akamai Technologies has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Akamai Technologies belongs to the Zacks Internet - Services industry. Another stock from the same industry, Etsy (ETSY - Free Report) , has gained 24.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Etsy reported revenues of $636.3 million in the last reported quarter, representing a year-over-year change of +7%. EPS of $0.64 for the same period compares with $0.58 a year ago.
Etsy is expected to post earnings of $0.78 per share for the current quarter, representing a year-over-year change of +1.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.3%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Etsy. Also, the stock has a VGM Score of B.
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Why Is Akamai Technologies (AKAM) Up 3.5% Since Last Earnings Report?
A month has gone by since the last earnings report for Akamai Technologies (AKAM - Free Report) . Shares have added about 3.5% in that time frame, underperforming 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 Q2 Earnings Beat Estimates on Higher Revenues
Akamai 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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Akamai Technologies has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Akamai Technologies has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Akamai Technologies belongs to the Zacks Internet - Services industry. Another stock from the same industry, Etsy (ETSY - Free Report) , has gained 24.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Etsy reported revenues of $636.3 million in the last reported quarter, representing a year-over-year change of +7%. EPS of $0.64 for the same period compares with $0.58 a year ago.
Etsy is expected to post earnings of $0.78 per share for the current quarter, representing a year-over-year change of +1.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.3%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Etsy. Also, the stock has a VGM Score of B.