Akamai
Technologies posted better-than-expected third-quarter financial results and boosted its outlook for the full year, driven by strength in the company’s security software business.
Akamai (ticker: AKAM) is best known for its content delivery network, but the company has expanded its reach to include security and cloud computing as its original business matured. Akamai said that 61% of revenue in the latest quarter was from those two newer parts of the business.
For the quarter, Akamai posted revenue of $965 million, above both its guidance range of $937 million to $952 million and the Wall Street consensus $944 million, as tracked by FactSet. On an adjusted basis, the company earned $1.63 a share in the quarter, above the Wall Street consensus of $1.50.
Under generally accepted accounting principles, the company earned $1.04 a share. Non-GAAP operating margin was 31%, up three percentage points from a year earlier.
“We had an excellent quarter at the top and bottom lines,” Akamai CEO Tom Leighton said in an interview with Barron’s. “Security performed very well, and compute was very strong.”
He noted that while the content delivery business hasn’t been growing lately the company added some new customers in the quarter from other content delivery networks that were exiting the business.
Leighton also said that the company has saved tens of millions of dollars a year from shifting computing function to its own cloud and away from larger cloud computing platforms.
Akamai’s security business had revenue in the quarter of $456 million, up 20% from a year earlier, and about $14 million above Wall Street estimates. Delivery revenue was $379 million, down 4%, and a little below expectations. The company’s compute segment had revenue of $130 million, a little better than expected.
For the December quarter, Akamai projects revenue of between $985 million and $1.005 billion; at the midpoint of the range that’s ahead of the Wall Street consensus of $987 million, with adjusted profits of $1.57 to $1.62 a share, above the Street at $1.54.
That brings Akamai’s new full-year revenue outlook to a range of $3.802 billion to $3.822 billion, with profits of $6.08 to $6.13 a share versus the old forecast of $5.87 to $5.95 a share.
Leighton is excited about the early results from its small but growing cloud computing business, which he noted added seven new data centers in the quarter, bringing the total to 24. He thinks that in the long run there’s an opportunity for the company to handle “mission critical apps for major enterprises,” in competition with the very large cloud vendors. Leighton say he sees a particular opportunity in media, gaming, and commerce areas where Akamai has traditionally been strong in content delivery.
Akamai said it bought back $113 million of common stock in the quarter.
Akamai shares were up 3.3% in late trading. Through Tuesday’s close, the stock is up 29% in 2023.
Write to Eric J. Savitz at [email protected]
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