Akamai Q1 2014: Outperforms Yet Again!

  • Akamai beat revenue and EPS estimates in addition to its own guidance.
  • The company has issued a strong revenue guidance for Q2.
  • Akamai is attractive at its current price for long term investment.

Akamai Q1 2014 Outperforms Yet Again

Akamai (NASDAQ:AKAM) reported its Q1 2014 numbers on 1 May and maintained its track record of beating estimates. The company not only beat the top end of analysts’ revenue estimates, it also beat EPS estimates as a result of the strong revenue growth. We found Akamai attractive even before its Q1 result. Keeping in mind the latest quarter and its strong future guidance, we find the company even more attractive at its current price.

Akamai Q1 2014: Estimates vs Actuals

Akamai delivered a strong quarter to beat revenue and non GAAP EPS estimates, as well as its own guidance.




Q1 Revenue ($ million)

426 - 442



Non GAAP EPS ($)




Akamai’s recent acquisition Prolexic generated about $15 million in Q1. However, only about $7 million was added to Akamai’s tally owing to the mid quarter acquisition.

Akamai’s revenue growth beats expectations even after adjusting for the $7 million contribution from Prolexic. The company’s stronger than expected EPS was driven by strong revenue growth.

Akamai Q1 2014: Key Financials

Akamai recorded its fastest Y/Y (over Q1 2013) growth in 8 quarters, clocking a revenue growth of 23.2% Y/Y. Further, the company recorded a sequential revenue growth of 4% (over Q4 2013) for Q1, typically a quarter with a sequentially lower revenue.

Excluding the impact of the Prolexic acquisition, Akamai clocked a Y/Y growth of 21.3% and a sequential growth of 2.4%.

Akamai Revenue and profit margin trend

Profitability remained around its highest levels with operating and net profit margins coming at 26.6% and 18.4% respectively. The company recorded operating and net income of $120.8 million and $72.8 million respectively.

Akamai generated $89 million (20% of revenue) of cash from operations. After having raised funds via the issue of convertible senior notes, the company ended the quarter with cash, cash equivalents and marketable securities worth $1.4 billion.

Revenue growth was driven largely by higher than expected traffic in its ‘Media Delivery Solutions’ and strong growth in the company’s ‘Performance and Security Solutions’ segment partly due to the Prolexic acquisition.

  • Media Delivery Solutions: Grew 18.6% Y/Y to contribute 47.4% of total revenue
  • Performance & Security Solutions: Grew 26.4% Y/Y to contribute 43.7% of revenue
  • Service & Support Solutions: Grew 48.2% Y/Y to contribute 9% of revenue

Though Akamai’s ‘Service & Support Solutions’ grew the fastest among the three segments, the impact of the same was minimal, owing to the relatively small revenue base of the segment.

Akamai’s Q2 2014 Guidance

Akamai’s Q2 revenue guidance of $464 - $478 indicates a strong growth of 23-26% Y/Y.

Even after adjusting for revenue contribution from Prolexic, Akamai’s recent acquisition, growth projections remain strong, with revenue growing at 19-22% Y/Y. This calculation assumes a $15 million revenue contribution, based on Prolexic’s Q1 figures disclosed by the company.

Akamai expects to deliver a non GAAP EPS of $0.53-0.57 a share, taking into account a 2% addition in shares outstanding, taking the tally to 182 million shares in total.

Akamai Company Valuation Post Q1 2014

Since its 52 week high of $63.15 a share earlier in 2014, the company’s stock price has fallen by close to 16% as part of a broad based tech-stocks pull-back.

At its current price, Akamai is trading at a Price/Earnings (P/E) multiple of 32.1, even after its stock price has grown at an attractive 5 year Compounded Annual Growth Rate (CAGR) of 18% indicating that its earnings have kept pace with stock price growth.

Akamai’s business prospects are tied to the inevitable growth of the internet. The company’s exceptional track record of steady growth and profitability, coupled with its strong future guidance make the stock an attractive long-term investment post the recent pullback.

Akamai has been part of our top internet stock picks since 15 November 2013, and has returned over 16% since.

To see our bull-bear rating on Akamai, click here for Akamai stock rating.

To see Akamai’s latest stock price movement, click here (NASDAQ:AKAM)

Show Full Article
5 2
Is this article helpful ?    

Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

show more

Comments on this article and AKAM stock

user profile picture
Hi, thanks for sharing the article. The article actually pertains to periods preceding Q1 2014. The change in depreciation policy was for 2013, starting Q1 2013 and ending Q4 2013.

Since the company extended the life of certain assets from 3 to 4 years, the depreciation for those assets had been accounted for largely in the first 3 years, implying lower depreciation in year 4 (2013), pushing up profit margins in the period. So, profit margins should actually have looked weaker relatively in Q1 2014.

Further, gross profit margins (excluding impact of depreciation) jumped from 61.3% in 2012 (average of 4 quarters) to 67.5% in 2013 (average). This jump is bigger than the jump in net profit margins, indicating that the impact of the policy is negligible.

As for Q1 2014, the company has clocked gross margins of 69.2%. Incidentally, 69.2% was its highest gross margin in 2013, which shows that the company has done well in spite of the expiry of the policy.

To sum up, this should not worry investors! Thanks again for sharing on this page. We love to hear from readers and hope to hear from you again soon. Do write back for further discussion.
Do share this awesome post