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Should You Stay Cautious About AKAM Stock Despite AI Cloud Momentum?
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Key Takeaways
Akamai's security growth and surging CIS business support its shift toward cloud and AI workloads.
Anthropic committed $11.6B over seven years to Akamai's cloud, with potential to expand by another $9B.
AKAM faces margin compression, delivery weakness and rising capex that could pressure earnings and cash flow.
Akamai Technologies Inc. (AKAM - Free Report) is increasingly transforming itself from a traditional content delivery network provider into a cybersecurity and cloud infrastructure player. Solid security demand, rapid growth in Cloud Infrastructure Services (CIS) and rising exposure to artificial intelligence (AI) workloads support its long-term prospects.
However, declining profitability, persistent weakness in the delivery business and significantly higher infrastructure investments suggest that investors should remain cautious about the stock.
Security Business & Cloud Infrastructure: Key Growth Avenues
Akamai’s security portfolio continues to provide stability to the overall business. Second-quarter 2026 security revenues increased 10% year over year to $604 million and accounted for more than half of total revenues. Growing demand for application security, API protection and protection against increasingly sophisticated cyberattacks should support this segment over the long run.
Cloud Infrastructure Services is emerging as one of Akamai’s fastest-growing businesses. CIS revenues surged 39% year over year to $99 million in the second quarter. Through the first half of 2026, Akamai signed several multi-year CIS contracts with an aggregate value of more than $2.8 billion. The expanding contract pipeline indicates growing customer acceptance of Akamai’s distributed cloud platform.
Image Source: Zacks Investment Research
Anthropic Deal Strengthens AI Opportunity
Akamai’s expanded relationship with Anthropic significantly enhances its exposure to AI infrastructure demand. Anthropic committed $11.6 billion over seven years to utilize Akamai’s distributed cloud infrastructure, with the potential for the agreement to expand by an additional $9 billion.
The deal provides solid long-term revenue visibility and validates Akamai’s strategy of positioning its infrastructure closer to workloads and end users.
Delivery Business & Margin Contraction: Major Concerns
Despite strength in security and cloud, Akamai’s legacy delivery operations remain a drag. Revenues from delivery and other cloud applications declined 6% year over year to roughly $396 million in the second quarter. Continued erosion in this business could offset part of the growth generated by newer cloud offerings.
Akamai’s profitability trends are also less encouraging. Second-quarter revenues increased 5% year over year to $1.1 billion, but non-GAAP earnings declined 8% to $1.59 per share. Adjusted EBITDA fell 6%, while non-GAAP operating margin contracted to 25% from 30% in the year-ago quarter.
The divergence between revenue growth and earnings performance highlights the increasing cost burden associated with Akamai’s ongoing transformation.
Rising Capex Could Pressure Cash Flow
The company’s AI infrastructure expansion requires substantial capital investment. Akamai expects approximately $5.5 billion of total capital expenditures related to the Anthropic commitment, including around $1.7 billion of incremental capex in 2026.
Capital intensity was high even before the expanded Anthropic agreement. Second-quarter capital expenditures totaled $347 million, representing approximately 32% of revenues compared with 21% in the prior-year period. Sustained elevated spending could weigh on free cash flow and returns on invested capital, particularly if cloud capacity utilization ramps more slowly than expected.
Price Performance
Akamai declined 5% over the past six months against the industry’s growth of 14.2%. It has underperformed peers like trivago N.V. (TRVG - Free Report) and Sprout Social, Inc. (SPT - Free Report) . While TRVG has gained 59.7%, SPT jumped 74.5% during this period.
Six-Month AKAM Stock Price Performance
Image Source: Zacks Investment Research
2026 Outlook Offers Limited Near-Term Upside
Management currently expects 2026 revenues between $4.45 billion and $4.53 billion. While security and cloud growth should support the top line, continued delivery weakness and elevated infrastructure expenses could restrict meaningful earnings expansion in the near term.
Estimate Revision Trend
Earnings estimates for AKAM for 2026 have moved down 4.6% to $6.62 over the past year, while the same for 2027 has decreased 8.6% to $6.79. The negative estimate revision depicts bearish sentiment about the stock’s growth potential.
Image Source: Zacks Investment Research
Should Investors Buy AKAM Stock?
Akamai’s long-term strategic direction remains encouraging. Cybersecurity demand is healthy, CIS is expanding rapidly and the Anthropic partnership significantly strengthens the company’s position in AI infrastructure.
However, the investment case is accompanied by meaningful risks. With declining earnings estimates, the stock is witnessing negative investor sentiment. Margin compression, declining earnings, delivery weakness and sharply rising capital requirements could limit upside until the benefits of Akamai’s cloud investments become more visible.
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Should You Stay Cautious About AKAM Stock Despite AI Cloud Momentum?
Key Takeaways
Akamai Technologies Inc. (AKAM - Free Report) is increasingly transforming itself from a traditional content delivery network provider into a cybersecurity and cloud infrastructure player. Solid security demand, rapid growth in Cloud Infrastructure Services (CIS) and rising exposure to artificial intelligence (AI) workloads support its long-term prospects.
However, declining profitability, persistent weakness in the delivery business and significantly higher infrastructure investments suggest that investors should remain cautious about the stock.
Security Business & Cloud Infrastructure: Key Growth Avenues
Akamai’s security portfolio continues to provide stability to the overall business. Second-quarter 2026 security revenues increased 10% year over year to $604 million and accounted for more than half of total revenues. Growing demand for application security, API protection and protection against increasingly sophisticated cyberattacks should support this segment over the long run.
Cloud Infrastructure Services is emerging as one of Akamai’s fastest-growing businesses. CIS revenues surged 39% year over year to $99 million in the second quarter. Through the first half of 2026, Akamai signed several multi-year CIS contracts with an aggregate value of more than $2.8 billion. The expanding contract pipeline indicates growing customer acceptance of Akamai’s distributed cloud platform.
Image Source: Zacks Investment Research
Anthropic Deal Strengthens AI Opportunity
Akamai’s expanded relationship with Anthropic significantly enhances its exposure to AI infrastructure demand. Anthropic committed $11.6 billion over seven years to utilize Akamai’s distributed cloud infrastructure, with the potential for the agreement to expand by an additional $9 billion.
The deal provides solid long-term revenue visibility and validates Akamai’s strategy of positioning its infrastructure closer to workloads and end users.
Delivery Business & Margin Contraction: Major Concerns
Despite strength in security and cloud, Akamai’s legacy delivery operations remain a drag. Revenues from delivery and other cloud applications declined 6% year over year to roughly $396 million in the second quarter. Continued erosion in this business could offset part of the growth generated by newer cloud offerings.
Akamai’s profitability trends are also less encouraging. Second-quarter revenues increased 5% year over year to $1.1 billion, but non-GAAP earnings declined 8% to $1.59 per share. Adjusted EBITDA fell 6%, while non-GAAP operating margin contracted to 25% from 30% in the year-ago quarter.
The divergence between revenue growth and earnings performance highlights the increasing cost burden associated with Akamai’s ongoing transformation.
Rising Capex Could Pressure Cash Flow
The company’s AI infrastructure expansion requires substantial capital investment. Akamai expects approximately $5.5 billion of total capital expenditures related to the Anthropic commitment, including around $1.7 billion of incremental capex in 2026.
Capital intensity was high even before the expanded Anthropic agreement. Second-quarter capital expenditures totaled $347 million, representing approximately 32% of revenues compared with 21% in the prior-year period. Sustained elevated spending could weigh on free cash flow and returns on invested capital, particularly if cloud capacity utilization ramps more slowly than expected.
Price Performance
Akamai declined 5% over the past six months against the industry’s growth of 14.2%. It has underperformed peers like trivago N.V. (TRVG - Free Report) and Sprout Social, Inc. (SPT - Free Report) . While TRVG has gained 59.7%, SPT jumped 74.5% during this period.
Six-Month AKAM Stock Price Performance
Image Source: Zacks Investment Research
2026 Outlook Offers Limited Near-Term Upside
Management currently expects 2026 revenues between $4.45 billion and $4.53 billion. While security and cloud growth should support the top line, continued delivery weakness and elevated infrastructure expenses could restrict meaningful earnings expansion in the near term.
Estimate Revision Trend
Earnings estimates for AKAM for 2026 have moved down 4.6% to $6.62 over the past year, while the same for 2027 has decreased 8.6% to $6.79. The negative estimate revision depicts bearish sentiment about the stock’s growth potential.
Image Source: Zacks Investment Research
Should Investors Buy AKAM Stock?
Akamai’s long-term strategic direction remains encouraging. Cybersecurity demand is healthy, CIS is expanding rapidly and the Anthropic partnership significantly strengthens the company’s position in AI infrastructure.
However, the investment case is accompanied by meaningful risks. With declining earnings estimates, the stock is witnessing negative investor sentiment. Margin compression, declining earnings, delivery weakness and sharply rising capital requirements could limit upside until the benefits of Akamai’s cloud investments become more visible.
With a Zacks Rank #3 (Hold), AKAM appears to be treading in the middle of the road, and new investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.