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Akamai (AKAM) Q2 Earnings Top, Sales Up in Security & Compute
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Akamai Technologies, Inc. (AKAM - Free Report) , a global provider of content delivery network and cloud infrastructure services, reported better-than-expected second-quarter results. Non-GAAP earnings of $1.58 per share surpassed the Zacks Consensus Estimate by 4 cents.
Revenues improved 5% year over year to $979.58 million, surpassing the Zacks Consensus Estimate by $3 million. Growing customer engagement in the Security and Compute portfolio across various end markets primarily drove the outperformance. Integration of advanced AI capabilities to enhance customer experience is a tailwind.
Akamai Technologies, Inc. Price, Consensus and EPS Surprise
Net sales from the Security segment surged 15.2% year over year to $498.7 million. The figure beat our estimate of $497.8 million. Sales growth of various products, including DDoS prevention, Bot management, account and content protection app and API security, and zero trust enterprise security, drove the top line in this segment. The company is witnessing solid adoption of its Guardicore segmentation and web application solutions in various sectors.
German retailers like Delife, Douglas, Wagner, a global energy company, and a major airline in the United States have selected Akamai’s security solutions during the quarter. The company closed its acquisition of noname security for $452.3 million. The buyout has significantly improved its prospects in the fast-growing API security market.
The Delivery segment generated $329.4 million, down 13.2% year over year. The figure beat our estimate of $328 million. Macroeconomic and geopolitical headwinds led to a decline in traffic growth rates. Persistent uncertainty is pushing customers to increase focus on cost optimization and do-it-yourself solutions. However, the company still boasts a leadership position in the market, and management expects traffic to grow at a slower rate in the near term.
The Compute segment contributed $151.5 million in revenues, up 23.1% year over year. The figure beat our estimate of $149 million. The company secured multiple cloud computing deals during the quarter, which includes a major media and entertainment brand in the United States, one of Europe’s prominent cybersecurity companies and the video brand of the biggest Telco in Latin America.
Financial Position
In the June quarter, sales and marketing costs rose to $139.03 million from $136.55 million in the year-earlier quarter. Research and development costs increased to $113.35 million from $99.04 million in the year-ago quarter.
In the second quarter, Akamai generated $431 million in cash from operations compared with $366.3 million in the year-ago quarter. In the first six months of 2024, the company generated $307.1 million in cash compared to $225.9 million in the prior year period. The uptick was primarily driven by improved profitability and a shift in performance-based compensation programs for employees from cash-based to stock-based.
As of Jun 30, 2024, the company had $448 million in cash and cash equivalents, with $2.4 billion of convertible senior notes. Capital expenditure stands at $167.1 million.
In the second quarter, this Zacks Rank #3 (Hold) company bought back 1.4 million shares worth $128 million from its total $1.8 billion repurchase authorization for fiscal 2024.
Guidance
Management believes that challenging macroeconomic conditions and geopolitical unrest remain a major concern for the upcoming quarters. In the third quarter, the Delivery segment is likely to benefit from a modest uptick in traffic due to the Paris Olympic Games. Strong momentum in several end markets is expected to drive growth in the Security and Compute business.
For the third quarter of 2024, Akamai expects revenues in the range of $988-$1,008 million. Non-GAAP operating margin is projected at 29%. Non-GAAP earnings are forecasted in the range of $1.56-$1.62 per share. Capital expenditure is anticipated to be 17% of revenues.
Backed by solid momentum in several segments, Akamai has raised its guidance for 2024. Revenues are currently estimated at $3.97-$4.01 billion, up from $3.95-$4 billion projected earlier. Non-GAAP earnings are now projected in the range of $6.34-$6.47 per share, up from $6.20-$6.40 expected earlier. It expects a non-GAAP operating margin of 29%. Capital expenditure is likely to be around 16% of total revenues. Foreign exchange fluctuation will likely have a negative $20 million impact on fiscal 2024 revenues.
It is engaged in providing cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next-generation data center networks.
Ubiquiti Inc. (UI - Free Report) carries a Zacks Rank #2 (Buy) at present. The company offers a comprehensive portfolio of networking products and solutions for service providers and enterprises.
Its excellent global business model, which is flexible and adaptable to evolving changes in markets, helps it to beat challenges and maximize growth. The company’s effective management of its strong global network of more than 100 distributors and master resellers has improved its visibility for future demand as well as inventory management techniques.
CommScope Holding Company, Inc. (COMM - Free Report) , sporting a Zacks Rank #1 at present, delivered an earnings surprise of 65.22% in the last reported quarter.
It is a premier provider of infrastructure solutions, including wireless and fiber optic solutions, for the core, access and edge layers of communication networks. The company has created a niche market for itself, helping customers scale network capacity, delivering better network response time and performance, and simplifying technology migration.
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Akamai (AKAM) Q2 Earnings Top, Sales Up in Security & Compute
Akamai Technologies, Inc. (AKAM - Free Report) , a global provider of content delivery network and cloud infrastructure services, reported better-than-expected second-quarter results. Non-GAAP earnings of $1.58 per share surpassed the Zacks Consensus Estimate by 4 cents.
Revenues improved 5% year over year to $979.58 million, surpassing the Zacks Consensus Estimate by $3 million. Growing customer engagement in the Security and Compute portfolio across various end markets primarily drove the outperformance. Integration of advanced AI capabilities to enhance customer experience is a tailwind.
Akamai Technologies, Inc. Price, Consensus and EPS Surprise
Akamai Technologies, Inc. price-consensus-eps-surprise-chart | Akamai Technologies, Inc. Quote
Segment Performance
Net sales from the Security segment surged 15.2% year over year to $498.7 million. The figure beat our estimate of $497.8 million. Sales growth of various products, including DDoS prevention, Bot management, account and content protection app and API security, and zero trust enterprise security, drove the top line in this segment. The company is witnessing solid adoption of its Guardicore segmentation and web application solutions in various sectors.
German retailers like Delife, Douglas, Wagner, a global energy company, and a major airline in the United States have selected Akamai’s security solutions during the quarter. The company closed its acquisition of noname security for $452.3 million. The buyout has significantly improved its prospects in the fast-growing API security market.
The Delivery segment generated $329.4 million, down 13.2% year over year. The figure beat our estimate of $328 million. Macroeconomic and geopolitical headwinds led to a decline in traffic growth rates. Persistent uncertainty is pushing customers to increase focus on cost optimization and do-it-yourself solutions. However, the company still boasts a leadership position in the market, and management expects traffic to grow at a slower rate in the near term.
The Compute segment contributed $151.5 million in revenues, up 23.1% year over year. The figure beat our estimate of $149 million. The company secured multiple cloud computing deals during the quarter, which includes a major media and entertainment brand in the United States, one of Europe’s prominent cybersecurity companies and the video brand of the biggest Telco in Latin America.
Financial Position
In the June quarter, sales and marketing costs rose to $139.03 million from $136.55 million in the year-earlier quarter. Research and development costs increased to $113.35 million from $99.04 million in the year-ago quarter.
In the second quarter, Akamai generated $431 million in cash from operations compared with $366.3 million in the year-ago quarter. In the first six months of 2024, the company generated $307.1 million in cash compared to $225.9 million in the prior year period. The uptick was primarily driven by improved profitability and a shift in performance-based compensation programs for employees from cash-based to stock-based.
As of Jun 30, 2024, the company had $448 million in cash and cash equivalents, with $2.4 billion of convertible senior notes. Capital expenditure stands at $167.1 million.
In the second quarter, this Zacks Rank #3 (Hold) company bought back 1.4 million shares worth $128 million from its total $1.8 billion repurchase authorization for fiscal 2024.
Guidance
Management believes that challenging macroeconomic conditions and geopolitical unrest remain a major concern for the upcoming quarters. In the third quarter, the Delivery segment is likely to benefit from a modest uptick in traffic due to the Paris Olympic Games. Strong momentum in several end markets is expected to drive growth in the Security and Compute business.
For the third quarter of 2024, Akamai expects revenues in the range of $988-$1,008 million. Non-GAAP operating margin is projected at 29%. Non-GAAP earnings are forecasted in the range of $1.56-$1.62 per share. Capital expenditure is anticipated to be 17% of revenues.
Backed by solid momentum in several segments, Akamai has raised its guidance for 2024. Revenues are currently estimated at $3.97-$4.01 billion, up from $3.95-$4 billion projected earlier. Non-GAAP earnings are now projected in the range of $6.34-$6.47 per share, up from $6.20-$6.40 expected earlier. It expects a non-GAAP operating margin of 29%. Capital expenditure is likely to be around 16% of total revenues. Foreign exchange fluctuation will likely have a negative $20 million impact on fiscal 2024 revenues.
Stocks to Consider
Arista Networks, Inc. (ANET - Free Report) sports a Zacks Rank #1 (Strong Buy) at present. In the last reported quarter, it delivered an earnings surprise of 8.25%. You can see the complete list of today’s Zacks #1 Rank stocks here.
It is engaged in providing cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next-generation data center networks.
Ubiquiti Inc. (UI - Free Report) carries a Zacks Rank #2 (Buy) at present. The company offers a comprehensive portfolio of networking products and solutions for service providers and enterprises.
Its excellent global business model, which is flexible and adaptable to evolving changes in markets, helps it to beat challenges and maximize growth. The company’s effective management of its strong global network of more than 100 distributors and master resellers has improved its visibility for future demand as well as inventory management techniques.
CommScope Holding Company, Inc. (COMM - Free Report) , sporting a Zacks Rank #1 at present, delivered an earnings surprise of 65.22% in the last reported quarter.
It is a premier provider of infrastructure solutions, including wireless and fiber optic solutions, for the core, access and edge layers of communication networks. The company has created a niche market for itself, helping customers scale network capacity, delivering better network response time and performance, and simplifying technology migration.