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01/10 17:14
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presented mixed signals. Financial performance showed moderate growth, with a 3% revenue increase and solid security and compute revenue growth. However, delivery revenue declined, and macroeconomic risks, such as potential recession impacts and customer trust issues, pose concerns. The Q&A highlighted strong security demand but vague responses on revenue sustainability and sales changes. The share buyback is positive, but the guidance is weak, and interest income is declining. Overall, the sentiment is neutral due to balanced positive and negative factors, leading to a predicted stock movement of -2% to 2%.
Total Revenue $1.015 billion, up 3% year-over-year reported and up 4% in constant currency.
Compute Revenue $165 million, a 14% year-over-year increase as reported and 15% in constant currency.
Security Revenue $531 million, growing 8% year-over-year reported and 10% in constant currency.
Delivery Revenue $319 million, down 9% as reported and down 1% in constant currency.
Non-GAAP Net Income $256 million or $1.70 of earnings per diluted share, up 4% year-over-year as reported and up 6% in constant currency.
CapEx $226 million or 22% of revenue, slightly lower than guidance due to timing.
Cash and Cash Equivalents Approximately $1.3 billion.
Share Repurchase Spent approximately $500 million to buy back approximately 6.2 million shares.
Operating Margin Non-GAAP operating margin came in at 30%.
New Product Launch: Akamai announced its newest security offering, firewall for AI, designed to protect AI agents, AI-powered applications, LLMs, and AI-driven APIs from emerging threats.
API Security Solution: Akamai's API security solution won a global Infosec Award and saw strong interest, with contracts signed with numerous companies including a leading U.S. fintech provider and a major Canadian bank.
Cloud Inference Solution: Introduced Akamai Cloud inference solution, enhancing capabilities for AI applications and data-intensive workloads, achieving better throughput and lower latency.
Video Processing Units (VPUs): Akamai became the first provider to offer VPUs in the cloud, significantly improving performance for media companies.
Market Positioning in Security: Security and compute accounted for 69% of total revenue, growing 10% year-over-year, indicating a strong market position in cybersecurity.
Competitive Takeaways: Akamai achieved several large competitive takeaways for its Guardicore solution, including contracts with a major U.S. bank and a European government authority.
Recognition in Industry: Akamai was named a leader in the Forrester Wave Web Application Firewall report, achieving the highest score for multiple criteria.
Revenue Growth: First quarter revenue grew to $1.015 billion, up 3% year-over-year, with non-GAAP operating margin at 30%.
Cost Management: Lower-than-expected transition services costs and payroll taxes contributed to better-than-expected EPS of $1.07.
CapEx Management: Q1 CapEx was $226 million, slightly lower than guidance, with plans for higher expenditures in the first half of the year.
Sales Transformation: Sales transformation efforts are on track, focusing on new customer acquisition and improving installed base penetration.
Response to Economic Challenges: Akamai is monitoring global economic challenges and has taken steps to minimize tariff impacts, anticipating a $10 million CapEx impact.
Macroeconomic Trends: Concerns about a possible recession impacting customer spending later in the year.
Tariffs: Anticipated direct impact of approximately $10 million in CapEx due to tariffs, amortized over 6 years.
Customer Trust Issues: Some customers outside the U.S. are hesitant to rely on American companies for critical infrastructure.
Federal Sector Revenue: Potential loss of a few million dollars in revenue in the back half of 2025 due to federal cutbacks.
Interest Income Decline: Expected decrease in interest income by approximately $5 million per month starting in May 2025 due to lower cash balances and investment yields.
Foreign Exchange Volatility: Ongoing volatility in foreign exchange markets could impact revenue.
Pending TikTok Ban: Potential impact on revenue due to the pending ban affecting the company's largest customer.
Security Revenue Growth: Akamai expects security revenue growth of approximately 10% in constant currency for 2025.
Compute Revenue Growth: Akamai anticipates compute revenue growth of approximately 15% in constant currency for 2025.
Cloud Infrastructure ARR Growth: Akamai expects cloud infrastructure ARR year-over-year growth in the range of 30% to 45% in constant currency for 2025.
Zero Trust and API Security Solutions ARR Growth: Akamai expects combined ARR from Zero Trust and API security solutions to increase by 30% to 35% year-over-year in constant currency for 2025.
New Product Launches: Akamai announced new security offerings including a firewall for AI, generating strong customer interest.
Sales Transformation Efforts: Akamai is rebalancing its sales team to focus on new customer acquisition while maintaining strong customer relationships.
Q2 Revenue Guidance: Akamai projects Q2 revenue in the range of $1.012 billion to $1.032 billion, up 3% to 5% year-over-year.
Full Year 2025 Revenue Guidance: Akamai expects full year 2025 revenue of $4.050 billion to $4.2 billion, up 1% to 5% year-over-year.
Q2 Non-GAAP EPS Guidance: Akamai expects Q2 non-GAAP EPS in the range of $1.52 to $1.58.
Full Year 2025 Non-GAAP EPS Guidance: Akamai expects full year 2025 non-GAAP EPS in the range of $6.10 to $6.40.
CapEx Guidance: Akamai expects Q2 CapEx to be approximately $226 million to $236 million, representing 22% to 23% of projected total revenue.
Operating Margin Guidance: Akamai estimates non-GAAP operating margin of approximately 28% for Q2 and 18% to 19% for full year 2025.
Share Buyback Program: During Q1, Akamai spent approximately $500 million to buy back approximately 6.2 million shares. They ended the first quarter with approximately $1.5 billion remaining on their current repurchase authorization.
The earnings call reflects a positive sentiment with strong growth projections in compute and security revenues, a strategic partnership with NVIDIA, and a stable delivery business with pricing improvements. The Q&A session highlights opportunities in AI and API security, with strong demand and potential large deals in the pipeline. Despite the lack of share repurchases in Q3, the overall financial health and strategic positioning indicate a positive outlook for the stock price over the next two weeks.
Akamai's earnings call reveals strong growth prospects in security and compute revenues, with significant ARR growth expectations. The Q&A section highlights a positive competitive landscape shift, stable pricing, and increasing demand for API security. Despite some concerns about revenue recognition timing, the overall sentiment is bolstered by new product launches, strong customer interest, and strategic acquisitions like Edgio. The guidance for revenue and EPS also indicates a positive outlook, supporting a positive stock price movement prediction.
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