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Investing.com -- Morgan Stanley (NYSE:MS) downgraded Akamai Technologies (NASDAQ:AKAM) to Underweight from Equal-weight, citing near-term growth challenges and limited margin expansion as the company undergoes a multiyear transition to become a cloud provider.
The brokerage said Akamai’s top-line growth is likely to remain in the single digits over the next 12–18 months, with earnings per share expected to rise just 6% through 2026, well below the 16% median across Morgan Stanley’s small- and mid-cap coverage.
Akamai’s content delivery business, still roughly one-third of revenue, is under pressure as slowing internet traffic volumes offset modest pricing improvements.
Meanwhile, its security business which is about 50% of sales, has matured, with growth decelerating to 10% year-over-year in constant currency, down from prior high-teens levels.
While the company’s emerging cloud computing segment shows long-term promise, Morgan Stanley said it lacks the scale to offset current headwinds and will require sustained investment to compete with hyperscalers and regional providers.
With limited near-term catalysts and constrained margin upside, Morgan Stanley expects the stock to underperform relative to peers.
“We assume coverage of Akamai at UW (from EW prior) as we believe top-line growth will remain squarely in single-digits with limited opportunities for margin expansion,” analysts at Morgan Stanley said.