Akamai (AKAM) AI Stock Analysis

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Akamai

(NASDAQ:AKAM)

Rating:75Outperform

Price Target:

$89.00

▲(11.96%Upside)

Akamai's strong financial performance and positive earnings call sentiment are significant drivers of the score. Technical analysis and valuation suggest a balanced outlook, while recent corporate events bolster future growth prospects. However, challenges in delivery revenue and macroeconomic concerns temper the overall outlook.

Positive Factors

Market Opportunities

There is upside to the numbers if new products ramp quicker than expected and if a potential TikTok deal to keep assets operational in the US is reached.

Product Innovation

Akamai recently announced its Firewall for AI solution that prevents prompt injections, data leakage, hallucinations, etc. for AI apps, indicating a large opportunity with AI in the security business.

Revenue and Earnings

Akamai reported strong 1Q25 revenue growth of 2.9% vs Street’s 2.6%, with EPS of $1.70, above Street’s expectations of $1.57, partially driven by better-than-expected revenues and operating activities.

Negative Factors

Earnings and Guidance

The stock is trading lower in the aftermarket, likely reflecting disappointment over the deceleration in combined security and compute growth of 10%.

Growth Deceleration

Security and Compute growth rates are decelerating and margins are facing a slower ramp as AKAM looks to build out its smaller Compute and Security products.

Market Slowdown

Slowing growth in the Security segment is attributed to overall market slowdown, mostly in WAF, with expected 10% FY25 security growth.

Akamai (AKAM) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$11.65B

Dividend YieldN/A

Average Volume (3M)1.82M

Price to Earnings (P/E)26.8

Beta (1Y)0.73

Revenue Growth3.51%

EPS Growth-27.28%

CountryUS

Employees10,811

SectorTechnology

Sector Strength96

IndustrySoftware - Infrastructure

Share Statistics

EPS (TTM)1.70

Shares Outstanding146,206,380

10 Day Avg. Volume1,272,198

30 Day Avg. Volume1,821,407

Financial Highlights & Ratios

PEG Ratio-2.69

Price to Book (P/B)2.63

Price to Sales (P/S)0.00

P/FCF Ratio15.01

Enterprise Value/Market Cap1.31

Enterprise Value/Revenue1.73

Enterprise Value/Gross Profit10.50

Enterprise Value/Ebitda4.83

Forecast

1Y Price Target

$92.55

Price Target Upside16.43% Upside

Rating ConsensusHold

Number of Analyst Covering12

Akamai Business Overview & Revenue Model

Company DescriptionAkamai Technologies, Inc. is a leading provider of cloud services designed to deliver, optimize, and secure online content and business applications. Operating primarily in the technology sector, Akamai's core offerings include content delivery network (CDN) services, cloud security solutions, and edge computing capabilities. The company's extensive network of servers helps businesses enhance the speed, reliability, and security of their web applications and content delivery.

How the Company Makes MoneyAkamai generates revenue through several key streams, primarily focusing on its CDN services, cloud security solutions, and edge computing offerings. The company charges its clients based on data usage, subscription models, and service level agreements. Akamai's CDN services help clients deliver digital content quickly and efficiently, while its security solutions protect against cyber threats. Additionally, Akamai partners with major internet service providers and technology companies to enhance its service offerings, leveraging these partnerships to expand its market reach and customer base. These diverse revenue streams, combined with strategic partnerships, contribute significantly to Akamai's earnings.

Akamai Key Performance Indicators (KPIs)

Any

Revenue by Segment

Revenue by Segment
Analyzes revenue from different business units or product lines, highlighting which areas are driving growth and where the company might need to adjust its strategy.

Chart InsightsAkamai's Security and Compute segments are driving growth, with Security showing a robust 10% year-over-year increase, bolstered by strong demand for solutions like Guardicore and API security. Compute revenue is also on the rise, projected to grow 15% in 2025. However, Delivery revenue continues to decline, down 9% year-over-year, reflecting ongoing challenges. Despite macroeconomic and geopolitical concerns, Akamai's strategic focus on high-demand security and cloud solutions positions it well for future growth, although caution remains around the Delivery segment's performance.

Data provided by:

Main Street Data

Akamai Earnings Call Summary

Earnings Call Date:May 08, 2025

(Q1-2025)

% Change Since: -6.96%|

Next Earnings Date:Aug 07, 2025

Earnings Call Sentiment Neutral

Akamai showed strong growth in its security and compute segments, with notable customer acquisitions and industry recognition. However, delivery revenue declined, and there are concerns about macroeconomic and geopolitical impacts, as well as declining interest income. Overall, the company's performance was solid, but challenges remain.

Q1-2025 Updates

Positive Updates

Strong Start to Fiscal Year 2025

Akamai reported first-quarter revenue of $1.015 billion, up 3% year-over-year as reported and 4% in constant currency. Non-GAAP EPS was $1.07, up 4% year-over-year and 6% in constant currency, exceeding the high end of guidance.

Security and Compute Growth

Combined revenue from security and compute accounted for 69% of total revenue in Q1, growing 10% year-over-year as reported and 11% in constant currency. Security solutions, including Guardicore and API security, showed strong demand and growth.

Successful Customer Acquisitions and Partnerships

Akamai secured several large contracts and competitive takeaways for its Guardicore solution, including major financial institutions and government agencies. The company also signed contracts for API security with notable firms across various sectors.

Recognition and Awards

Akamai was named a leader in the Forrester Wave Web Application Firewall report and won a global Infosec Award for its API security solution at the RSA Security Conference.

Cloud Computing Momentum

Cloud computing revenue grew by 14% year-over-year, with significant deals signed, including a global live streaming service and a major cybersecurity provider. Akamai was named an emerging leader for GenAI specialized infrastructure by Gartner.

Negative Updates

Delivery Revenue Decline

Delivery revenue was $319 million, down 9% year-over-year as reported. Although better than expected, the company remains cautious about calling a bottom in delivery performance.

Macroeconomic and Geopolitical Concerns

Concerns among some customers about potential recession impacts and reliance on American companies for critical infrastructure were noted, though these have not yet impacted business.

US Public Sector Revenue Concerns

Less than 5% of revenue is derived from the US public sector, and there is potential for a few million dollars of revenue loss in the second half of 2025 due to federal budget cutbacks.

Interest Income Decline Expected

Interest income is expected to decline due to lower cash balances and anticipated lower investment yields as interest rates are projected to decrease.

Company Guidance

During Akamai Technologies' First Quarter 2025 earnings call, CEO Tom Leighton and CFO Ed McGowan provided guidance for the upcoming periods. The company reported a solid start to the year with first-quarter revenue reaching $1.015 billion, marking a 3% increase year-over-year and 4% in constant currency. Non-GAAP operating margin exceeded guidance at 30%, and non-GAAP earnings per share surpassed the high-end of the guidance range at $1.07, reflecting a 4% increase year-over-year and 6% in constant currency. Security and compute segments accounted for 69% of total revenue, with security revenue growing 10% year-over-year as reported. The company anticipates Q2 revenue between $1.012 billion and $1.032 billion and maintains a full-year 2025 revenue guidance between $4.050 billion and $4.2 billion. Akamai expects security revenue to grow about 10% in constant currency for 2025 and projects compute revenue growth of approximately 15%. They also highlighted the potential impact of global economic and political challenges, as well as steps taken to mitigate risks from tariffs.

Akamai Financial Statement Overview

Summary

Akamai's financial results reflect strong revenue growth and healthy profitability margins. The balance sheet is stable, with a moderate debt-to-equity ratio and strong equity support. Cash flow management is solid, though there's a slight challenge in free cash flow growth. Overall, Akamai demonstrates financial resilience and operational efficiency.

Income Statement

Positive

Akamai shows strong revenue growth, with a steady increase in total revenue over the years, reaching $4.02 billion in TTM. Gross profit margin remains robust at approximately 59.1% in TTM, indicating efficient cost management. However, the net profit margin has slightly decreased to 11.3% in TTM, suggesting increased expenses or other financial obligations affecting net income. The company's EBIT and EBITDA margins are healthy, reflecting operational efficiency.

Balance Sheet

Positive

The balance sheet reflects a moderate debt-to-equity ratio of 1.01 in TTM, indicating a balanced leverage position. Return on equity (ROE) stands at 9.9% in TTM, which is healthy but shows a slight decline. The equity ratio is strong at 45.9% in TTM, highlighting a stable financial structure with substantial equity backing assets.

Cash Flow

Positive

Akamai demonstrates solid cash flow management with an operating cash flow to net income ratio of 3.13 in TTM, indicating strong cash generation relative to net income. The free cash flow to net income ratio is 1.74, showing effective cash utilization. However, the free cash flow growth rate is slightly negative at -5.36%, suggesting minor challenges in cash flow expansion.

Breakdown	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	3.99B	3.81B	3.62B	3.46B	3.20B
Gross Profit	2.37B	2.30B	2.23B	2.19B	2.07B
EBITDA	1.26B	1.24B	1.26B	1.35B	1.16B
Net Income	504.92M	547.63M	523.67M	651.64M	557.05M
Balance Sheet
Total Assets	10.37B	9.90B	8.30B	8.14B	7.76B
Cash, Cash Equivalents and Short-Term Investments	1.60B	864.44M	1.11B	1.08B	1.10B
Total Debt	4.63B	4.54B	3.17B	2.86B	2.78B
Total Liabilities	5.49B	5.30B	3.94B	3.61B	3.51B
Stockholders Equity	4.88B	4.60B	4.36B	4.53B	4.25B
Cash Flow
Free Cash Flow	833.90M	618.40M	816.37M	859.33M	483.13M
Operating Cash Flow	1.52B	1.35B	1.27B	1.40B	1.22B
Investing Cash Flow	-798.68M	-1.85B	-622.31M	-646.90M	-1.04B
Financing Cash Flow	-679.63M	443.38M	-634.18M	-562.00M	-223.64M

Akamai Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price79.49

Price Trends

50DMA

78.40

Positive

100DMA

78.73

Positive

200DMA

87.28

Negative

Market Momentum

MACD

0.36

Negative

RSI

52.11

Neutral

STOCH

74.14

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AKAM, the sentiment is Neutral. The current price of 79.49 is above the 20-day moving average (MA) of 79.20, above the 50-day MA of 78.40, and below the 200-day MA of 87.28, indicating a neutral trend. The MACD of 0.36 indicates Negative momentum. The RSI at 52.11 is Neutral, neither overbought nor oversold. The STOCH value of 74.14 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for AKAM.

Akamai Risk Analysis

Akamai disclosed 32 risk factors in its most recent earnings report. Akamai reported the most risks in the "Finance & Corporate" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Akamai Peers Comparison

Overall Rating

UnderperformOutperform

Sector (63)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
FFIV	83 Outperform	$17.32B	28.42	19.89%	―	5.61%	26.65%
AKAM	75 Outperform	$11.65B	26.81	9.82%	―	3.51%	-27.28%
FTNT	74 Outperform	$80.28B	43.12	205.91%	―	13.83%	58.13%
ZS	72 Outperform	$45.00B	―	-2.68%	―	25.46%	49.20%
NET	69 Neutral	$69.12B	―	-7.35%	―	27.79%	56.19%
GDDY	67 Neutral	$23.66B	31.68	245.70%	―	7.93%	-56.44%
Sector *	63 Neutral	$34.93B	5.90	-12.00%	2.00%	5.61%	-19.55%

* Technology Sector Average

Performance Comparison

AKAM

Akamai

79.49

-18.79

-19.12%

FFIV

F5 Networks

299.24

95.60

46.95%

FTNT

Fortinet

104.77

46.73

80.51%

GDDY

GoDaddy

165.04

19.59

13.47%

Zscaler

290.07

110.72

61.73%

NET

Cloudflare

199.43

121.93

157.33%

Akamai Corporate Events

Executive/Board ChangesBusiness Operations and Strategy

Akamai Appoints New Board Members for Strategic Growth

Positive

Jul 8, 2025

On July 7, 2025, Akamai Technologies announced the election of Janaki Akella and Bas Burger to its Board of Directors, effective immediately. Akella and Burger bring extensive experience in technology leadership, global business transformation, and AI, which are expected to support Akamai’s continued innovation and expansion in cloud computing and cybersecurity. Their appointments are seen as a strategic move to enhance Akamai’s market position and capitalize on growth opportunities in these sectors.