Akamai Technologies ((AKAM)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Akamai Technologies’ recent earnings call revealed a generally positive sentiment, driven by robust revenue growth and earnings performance. The company showcased significant advancements in its cloud infrastructure and security services, although it acknowledged challenges in its delivery segment and legacy compute products. Additionally, anticipated cost increases are expected to impact future margins.
Revenue and Earnings Performance
Akamai reported impressive financial results with a revenue of $1.043 billion, marking a 7% year-over-year increase. The non-GAAP earnings per share stood at $1.73, reflecting a 9% year-over-year rise and surpassing the high end of the guidance range by $0.15. This performance underscores the company’s strong financial health and operational efficiency.
Cloud Infrastructure Services Growth
The cloud infrastructure services (CIS) segment was a standout performer, generating $71 million in revenue, which represents a 30% year-over-year growth. Akamai is optimistic about the future of this segment, projecting the CIS annual recurring revenue (ARR) to grow between 40% to 45% by the end of the year.
Security Segment Performance
Akamai’s security segment also delivered strong results, with revenue reaching $552 million, an 11% year-over-year increase. The demand for API security and Zero Trust enterprise security solutions was particularly strong, with combined revenue reaching $67 million, up 48% year-over-year.
New AI Gateway Solution
In a bid to enhance AI application performance, security, and cost-efficiency, Akamai introduced a new AI gateway solution. This innovation is designed to process requests closer to the user, thereby improving overall service delivery.
Delivery Revenue Decline
Despite overall positive results, Akamai’s delivery revenue saw a decline, falling to $320 million, down 3% year-over-year. However, this was still above expectations, indicating resilience in this challenging segment.
Legacy Compute Products
Revenue from legacy compute products, including image and video manager and NetStorage, was $100 million, a 4% year-over-year increase. However, these products are expected to face challenges moving forward due to a prior year’s one-time benefit.
Increased Costs Impacting Margins
Akamai anticipates increased colocation and related costs, which are expected to impact gross margins. The company is also investing more in sales and go-to-market strategies, which could affect future profitability.
Forward-Looking Guidance
Looking ahead, Akamai provided guidance for the third quarter, expecting revenue between $1.035 billion and $1.050 billion. For the full year, the company anticipates revenue between $4.135 billion and $4.205 billion, reflecting a 4% to 5% increase as reported and 3% to 5% in constant currency. This guidance underscores Akamai’s confidence in its growth trajectory despite existing challenges.
In conclusion, Akamai Technologies’ earnings call highlighted a strong performance in revenue and earnings, driven by growth in cloud infrastructure and security services. While challenges persist in the delivery segment and legacy products, the company’s forward-looking guidance remains optimistic, suggesting continued growth and innovation in the coming quarters.