Yahoo Finance Why Is Akamai Technologies (AKAM) Up 8.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Akamai Technologies (AKAM). Shares have added about 8.6% in that time frame, outperforming 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 catalysts.
Akamai Beats Q1 Earnings Estimates, Top Line Rise Y/Y
Akamai reported healthy first-quarter 2023 results, with the bottom and the top line beating the respective Zacks Consensus Estimate. Portfolio expansion through product innovation and solid demand in Security and Compute verticals led to the top-line growth year over year. The company’s acquisition strategy is also enhancing the robustness of its portfolio and driving commercial expansion.
Net Income
On a GAAP basis, net income in the reported quarter was $97.1 million or 62 cents per share compared with $133.4 million or 82 cents per share in the year-ago quarter. Despite net sales growth, higher operating expenses induced a year-over-year decline.
Non-GAAP net income in the quarter was $218.3 million or $1.40 per share compared with $224.8 million or $1.39 per share a year ago. The bottom line surpassed the Zacks Consensus Estimate by 8 cents.
Revenues
During the quarter, Akamai registered revenues of $915.7 million, up from $903.6 million reported in the prior-year quarter. Net sales growth in Compute and Security businesses supported the top line. The company’s strategy of portfolio expansion through innovation and strategic acquisition boosted the top line. Revenues beat the Zacks Consensus Estimate of $910 million.
By product groups, Security Technology Group revenues were $405.6 million, up 6% year over year, driven by solid performance from Guardicore and high demand for lab solutions. Revenues from Delivery amounted to $394.3 million, down 11% from $444.1 million reported in the year-ago quarter. Compute revenues increased 49 % year over year to $115.8 million from $77.9 million in the prior-year quarter, owing to the growing demand for various cloud computing services. The acquisition of Ondat Technology, a U.K.-based cloud storage company, increased the robustness of its portfolio and supported the gains from this segment.
Region-wise, U.S. revenues were $473.8 million, down 1% year over year. International revenues were $441.9 million, up 5%. Foreign exchange fluctuations had a negative $21 million impact on revenues on a year-over-year basis.
Other Details
Non-GAAP operating margin fell to 29%, down 1% year over. Adjusted EBITDA was $375.7 compared with $391.3 million in the year-ago quarter, with respective margins of 41% and 43 %. In the March quarter Akamai’s total operation expenses rose to $789.1 million from $730.3 million reported in the prior year quarter.
Cash Flow & Liquidity
In first-quarter 2023, Akamai generated $233.5 million in cash from operating activities compared with $222.5 million in the prior-year quarter. As of Mar 31, 2023, the company had $298.8 million in cash and cash equivalents with $735.8 million of operating lease liabilities. During the reported quarter, Akamai repurchased approximately 4.6 million shares for around $349 million.
Outlook
For the second quarter of 2023, Akamai expects revenues between $923 million and $937 million. Management expects a non-GAAP operating margin of 28.5%. Non-GAAP earnings are envisioned in the range of $1.38-$1.42 per share.
For 2023, Akamai expects revenues between $3,740 million and $3,785 million. It expects a non-GAAP operating margin of 28-29%. Non-GAAP earnings are expected in the band of $5.69-$5.84 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 5.79% due to these changes.
VGM Scores
Currently, Akamai Technologies has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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. It comes with little surprise Akamai Technologies has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Akamai Technologies is part of the Zacks Internet - Services industry. Over the past month, DoorDash, Inc. (DASH), a stock from the same industry, has gained 2%. The company reported its results for the quarter ended March 2023 more than a month ago.
DoorDash, Inc. reported revenues of $2.04 billion in the last reported quarter, representing a year-over-year change of +39.8%. EPS of -$0.41 for the same period compares with -$0.48 a year ago.
For the current quarter, DoorDash, Inc. is expected to post a loss of $0.42 per share, indicating a change of +41.7% from the year-ago quarter. The Zacks Consensus Estimate has changed +1.4% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for DoorDash, Inc. Also, the stock has a VGM Score of D.
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