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Is Akamai Stock a Buy as AI Growth Outpaces Delivery and Margin Risks
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Key Takeaways
Akamai's Cloud Infrastructure Services revenue jumped 39%, while Security revenue rose 10%.
Akamai has secured more than $2.8 billion in multiyear cloud commitments year to date.
Delivery revenues fell 6%, while $346.5 million in quarterly capex weighed on profitability.
Akamai Technologies, Inc. (AKAM - Free Report) presents a trade-off between accelerating AI infrastructure and Security opportunities and the financial costs of pursuing those markets. Cloud Infrastructure Services and Security are growing at double-digit rates, while Delivery remains under pressure and higher infrastructure spending is weighing on profitability. Investors therefore need to assess whether Akamai can sustain its newer growth engines while offsetting weakness in its legacy business.
Akamai’s AI Pipeline Strengthens the Growth Case
Cloud Infrastructure Services revenue increased 39% year over year to $99.3 million in the second quarter. The company expects this business to grow at least 50% in 2026 and to accelerate in the fourth quarter and through 2027.
Akamai has signed more than $2.8 billion of multiyear Cloud Infrastructure Services commitments year to date, including a four-year agreement worth more than $600 million with a U.S. technology company for robotics development. Management now expects overall revenue growth to reach the low teens in 2027.
Akamai Security Adds Another Growth Engine
Security revenue rose 10% year over year to $604.4 million in the second quarter, with growth led by API Security and Guardicore Segmentation. Web Application Firewall demand also benefited from customers seeking protection against vulnerabilities associated with AI.
The acquisition of LayerX, now Akamai Workforce Protector, adds browser and AI usage controls to Akamai’s Zero Trust portfolio. The expansion gives the company another way to address security requirements as enterprises deploy AI applications and workloads.
Akamai’s Delivery Weakness Limits Upside
Delivery and other cloud applications revenue declined 6% year over year to $395.9 million in the second quarter. The segment has remained under pressure from pricing dynamics and changing traffic patterns.
Because Delivery remains a sizable part of Akamai’s business, its contraction limits the pace at which faster-growing Cloud Infrastructure Services and Security can lift consolidated revenue. Second-quarter total revenue increased 5% to $1.1 billion despite the sharp rise in Cloud Infrastructure Services.
Akamai’s Valuation Meets Rising Investment Needs
Akamai trades at 16.78X forward 12-month earnings, below the 20.2X multiple for its Zacks sub-industry. The valuation provides some support, but the company is spending heavily to expand its cloud and AI infrastructure, with capital expenditures reaching $346.5 million in the second quarter.
Image Source: Zacks Investment Research
Dropbox, Inc. (DBX - Free Report) is an Internet-Services provider and operates a global collaboration platform, while Trade Desk, Inc. (TTD - Free Report) provides a cloud-based platform for digital advertising buyers. Their business models differ from Akamai’s, but both provide additional context for investors evaluating technology companies within the broader Internet-Services group.
Akamai’s Rank Signals a Cautious Decision
Akamai currently carries a Zacks Rank #4 (Sell), with a Value Score of D, Growth Score of F, Momentum Score of A and VGM Score of D. The A Momentum Score points to favorable momentum characteristics, but the weaker Value, Growth and VGM Scores indicate less favorable characteristics across those styles.
The Zacks Style Scores are designed to complement the Zacks Rank rather than override it. The Style Score framework favors Zacks Rank #1 and #2 stocks with A or B Style Scores and states that a stock with a Zacks Rank #4 or #5 should not be bought even if its Style Score is A or B. For Akamai, the current mix supports a cautious stance while investors monitor whether AI infrastructure growth can translate into stronger consolidated results.
View the Zacks #1 Rank List
Image: Bigstock
Is Akamai Stock a Buy as AI Growth Outpaces Delivery and Margin Risks
Key Takeaways
Akamai Technologies, Inc. (AKAM - Free Report) presents a trade-off between accelerating AI infrastructure and Security opportunities and the financial costs of pursuing those markets. Cloud Infrastructure Services and Security are growing at double-digit rates, while Delivery remains under pressure and higher infrastructure spending is weighing on profitability. Investors therefore need to assess whether Akamai can sustain its newer growth engines while offsetting weakness in its legacy business.
Akamai’s AI Pipeline Strengthens the Growth Case
Cloud Infrastructure Services revenue increased 39% year over year to $99.3 million in the second quarter. The company expects this business to grow at least 50% in 2026 and to accelerate in the fourth quarter and through 2027.
Akamai has signed more than $2.8 billion of multiyear Cloud Infrastructure Services commitments year to date, including a four-year agreement worth more than $600 million with a U.S. technology company for robotics development. Management now expects overall revenue growth to reach the low teens in 2027.
Akamai Security Adds Another Growth Engine
Security revenue rose 10% year over year to $604.4 million in the second quarter, with growth led by API Security and Guardicore Segmentation. Web Application Firewall demand also benefited from customers seeking protection against vulnerabilities associated with AI.
The acquisition of LayerX, now Akamai Workforce Protector, adds browser and AI usage controls to Akamai’s Zero Trust portfolio. The expansion gives the company another way to address security requirements as enterprises deploy AI applications and workloads.
Akamai’s Delivery Weakness Limits Upside
Delivery and other cloud applications revenue declined 6% year over year to $395.9 million in the second quarter. The segment has remained under pressure from pricing dynamics and changing traffic patterns.
Because Delivery remains a sizable part of Akamai’s business, its contraction limits the pace at which faster-growing Cloud Infrastructure Services and Security can lift consolidated revenue. Second-quarter total revenue increased 5% to $1.1 billion despite the sharp rise in Cloud Infrastructure Services.
Akamai’s Valuation Meets Rising Investment Needs
Akamai trades at 16.78X forward 12-month earnings, below the 20.2X multiple for its Zacks sub-industry. The valuation provides some support, but the company is spending heavily to expand its cloud and AI infrastructure, with capital expenditures reaching $346.5 million in the second quarter.
Image Source: Zacks Investment Research
Dropbox, Inc. (DBX - Free Report) is an Internet-Services provider and operates a global collaboration platform, while Trade Desk, Inc. (TTD - Free Report) provides a cloud-based platform for digital advertising buyers. Their business models differ from Akamai’s, but both provide additional context for investors evaluating technology companies within the broader Internet-Services group.
Akamai’s Rank Signals a Cautious Decision
Akamai currently carries a Zacks Rank #4 (Sell), with a Value Score of D, Growth Score of F, Momentum Score of A and VGM Score of D. The A Momentum Score points to favorable momentum characteristics, but the weaker Value, Growth and VGM Scores indicate less favorable characteristics across those styles.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Style Scores are designed to complement the Zacks Rank rather than override it. The Style Score framework favors Zacks Rank #1 and #2 stocks with A or B Style Scores and states that a stock with a Zacks Rank #4 or #5 should not be bought even if its Style Score is A or B. For Akamai, the current mix supports a cautious stance while investors monitor whether AI infrastructure growth can translate into stronger consolidated results.