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On Friday, Evercore ISI analyst Amit Daryanani reduced the price target on Akamai Technologies (NASDAQ:AKAM) to $105 from the previous $110, while maintaining the Outperform rating on the company’s shares. According to InvestingPro data, Akamai, with a market capitalization of $14.78 billion, currently trades at a P/E ratio of 28.3x and shows a solid financial health score of "GOOD." Akamai’s December-quarter results were at the upper end of their revenue guidance, delivering a robust earnings per share (EPS) beat at $1,019.9 million and $1.66, compared to the street’s expectations of $1,015.4 million and $1.52. The company’s year-over-year growth was recorded at 2.5%, propelled by a 25% increase in Compute and a 14% rise in Security, despite an 18% decline in Delivery.
The EPS outperformance was attributed to stronger operating margins of 29.2%, exceeding street projections of 28.5%, due to a favorable mix and effective execution. With a robust gross profit margin of 59.39% and management actively buying back shares (as highlighted by InvestingPro), the company demonstrates strong operational efficiency. Noteworthy is that Security and Compute revenues comprised 69% of the total fourth-quarter revenue, with Security surpassing 50% of Akamai’s full-year revenue for the first time.
Akamai provided guidance for the March quarter and calendar year 2025 revenue below street expectations. The expected revenue increase of 2-3% for CY25 falls short of the anticipated 6-7%, impacted by around 100 basis points of foreign exchange headwinds, a 100-200 basis point loss of TikTok revenue, and a moderation in Security growth as some products reach maturity. The company also forecasted full-year margins to be lower at 28%, approximately 100 basis points below street expectations, as Akamai continues to adapt its go-to-market strategy and invest in ramping up new products in higher growth areas such as Security and Compute.
Akamai’s first $100 million-plus customer contract for cloud infrastructure is expected to further pressure margins as they expand services. The company anticipates the Delivery segment’s decline to ease in CY25, with a projected 10% year-over-year decrease and potential stabilization to a mid-single-digit decline in CY26. Security and Compute growth rates are expected to normalize at around 10% year-over-year for Security and reach mid-teens for Compute, decelerating from 25% in CY24.
In conclusion, Akamai is shifting its focus towards Security and Compute, transitioning from its traditional content delivery network (CDN) business. Despite the CY25 guidance being below expectations, the analyst suggests that the guidance is relatively risk-mitigated and believes that Akamai could benefit from a weaker US dollar, increased traffic growth, and a potential reversal of the TikTok ban. The price target has been adjusted to $105 to reflect the lower forward twelve-month EPS. With revenue growth of 4.7% and generally low price volatility, as noted in InvestingPro’s analysis, investors can access comprehensive insights and additional ProTips about Akamai’s future prospects through the platform’s detailed Pro Research Report, which is part of the coverage of over 1,400 US equities.
In other recent news, Akamai Technologies reported its fourth-quarter earnings, surpassing analyst estimates with an adjusted earnings per share of $1.66, compared to the expected $1.52. The company’s revenue for the quarter reached $1.02 billion, slightly above the projected $1.01 billion and marking a 3% increase year-over-year. Despite these positive results, Akamai’s guidance for the upcoming quarter and full year 2025 fell short of expectations, with projected Q1 EPS between $1.54 and $1.59, below the $1.61 consensus. The company’s forecasted revenue for Q1 was also lower than anticipated, ranging from $1 to $1.02 billion against the $1.04 billion expected by analysts.
For the full year 2025, Akamai anticipates earnings per share of $6.00 to $6.40, which is below the $6.82 consensus estimate, and revenue between $4 and $4.2 billion, compared to analysts’ expectations of $4.25 billion. Following these developments, Piper Sandler downgraded Akamai’s stock from Overweight to Neutral and reduced the price target to $100 from $112, citing concerns over the company’s initial 2025 guidance and long-term business framework. Piper Sandler noted challenges such as low growth in Akamai’s core Security segment and declining margins, despite acknowledging positive strides in Enterprise Infrastructure as a Service and delivery stabilization outside its TikTok-related business.
The firm’s analysts suggested a cautious approach, recommending that investors explore other opportunities until uncertainties surrounding Akamai’s operations and future plans are clarified.
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