Akamai Technologies announced its December quarter results, revealing a blend of positive growth in cloud computing and security software, offset by a decline in the company's legacy content-delivery-network business. The company also unveiled a new initiative called "Gecko," aimed at bringing cloud computing closer to the edge of the network.
In premarket trading on Wednesday, Akamai shares experienced a 4.3% decrease, reaching $119.65.
Q4 Revenue and Earnings
During the fourth quarter, Akamai reported a 7% increase in revenue, reaching $995 million. This falls within the anticipated range of $985 million to $1.005 billion, as communicated to investors. However, it slightly misses the consensus estimate of $999 million among Wall Street analysts.
On an adjusted basis, Akamai's earnings per share for the quarter amounted to $1.69, surpassing both the projected range of $1.57 to $1.62 and the Street's consensus estimate of $1.59 per share. According to generally accepted accounting principles, the company earned $1.03 per share.
Segment Performance
Akamai's security revenue for the quarter amounted to $471 million, reflecting an 18% increase. Although this figure is slightly below the Wall Street consensus forecast of $475 million, it demonstrates consistent growth in this area. The content-delivery segment generated $389 million in revenue, experiencing a 6% decline compared to expectations of $392 million. In contrast, the company's cloud-computing business, known as Compute, achieved revenue of $135 million, marking a 20% increase and exceeding the consensus estimate of $132 million.
Guidance for the March Quarter
For the upcoming March quarter, Akamai anticipates revenue in the range of $980 million to $1 billion, with the midpoint falling just short of the consensus expectations of $993 million. In terms of adjusted quarterly profit, the company predicts $1.59 to $1.64 per share, aligning with the Wall Street consensus estimate of $1.59.
Full-Year Guidance
Akamai's full-year guidance projects revenue growth between 6% and 8%, suggesting revenue of approximately $4.08 billion, slightly below the consensus estimate of $4.11 billion.
Management forecasts a 7% to 11% growth in adjusted earnings per share for the entire year, which translates to approximately $6.76 per share, slightly surpassing the consensus forecast of $6.71.
Akamai Expands Cloud Computing Capabilities to Edge Network
Akamai, a leading provider of content delivery and security solutions, has announced plans to integrate cloud computing capabilities into its edge computing network. This move is part of the company's strategy to compete with major cloud providers like Amazon, Microsoft, Google, and Oracle. By leveraging its existing content delivery network, which optimizes access times for media and e-commerce content, Akamai aims to bring cloud computing closer to end users.
CEO Tom Leighton emphasized the importance of the cloud business and security software in driving the company's overall revenue, which currently accounts for 60%. Looking ahead to 2024, Leighton outlined the company's goals of increasing profitability, expanding its market-leading security offerings, and extending its cloud computing platform to improve performance while reducing costs for customers.
Akamai has already begun rolling out its new cloud-computing capabilities, which have been applied in various areas such as AI inference, multiplayer gaming, social media, and content streaming. In an interview, Leighton revealed plans to offer the new service in 100 cities by the end of this year. While initially targeting sectors like media, commerce, financial services, and gaming, Akamai anticipates broad demand for its expanded cloud capabilities.
The company has named its new service "Gecko" as a reference to Generalized Edge Compute. Already available in several cities including Hong Kong, Kuala Lumpur, Johannesburg, Queretaro, Bogotá, Denver, Houston, Hamburg, and Marseille, Gecko extends cloud computing options to locations without a concentrated presence of hyperscaler providers.
In addition to the current applications, Akamai foresees future uses of its cloud computing service in data analytics, spatial computing, and the consumer and industrial internet of things sectors.
Akamai's stock has shown steady growth over the past year. As of Tuesday's market close, the shares had gained approximately 5%, with an impressive rally of about 46% over the last 12 months.
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