Akamai Technologies Faces Challenges Ahead of Q3 Earnings

A report highlights Akamai Technologies' upcoming Q3 earnings, indicating expected profit growth, but warns of challenges in the CDN business. Increasing competition and market underperformance could potentially impact stock prices, with analysts holding a 'Moderate Buy' rating on the stock.

Date: 21-10-2024

AI Rating: 5

Akamai Technologies' market capitalization stands at $16.2 billion, positioning it as a significant player in the tech industry with services that enhance internet performance and security. As the company approaches its fiscal 2024 Q3 earnings release, scheduled for November 7, analysts forecast an EPS of $1.10, reflecting a 12.2% increase from $0.98 per share in the same quarter last year. However, it's worth noting that Akamai has only met earnings per share (EPS) estimates once in the past four quarters, raising concerns among investors.

Furthermore, the anticipated EPS for fiscal 2024 is projected at $4.42, a slight decline from $4.44 in fiscal 2023. However, the forecast for fiscal 2025 shows a promising 6.8% increase to $4.72.

Akamai's stock performance has been underwhelming, having dipped 9.9% year-to-date, contrasting sharply with the S&P 500 Index's 23% gains over the same period. This performance drop can be attributed to challenges in its legacy CDN business and the slow uptake of new security and computing services. Increased competition in the cybersecurity sector, along with difficulties in shifting its business model, further exacerbate investor concerns.

Despite these worries, Akamai experienced a 10.9% stock surge following the release of its Q2 earnings results, which were stronger than expected. The company reported $979.6 million in revenue for Q2, alongside an optimistic outlook for Q3 driven by rising demand for cybersecurity solutions amidst prevalent digital threats.

Current sentiment regarding Akamai's stock is a ‘Moderate Buy’ from analysts, with a consensus price target of $116.94, indicating a potential upside of 9.6% from current levels. It remains to be seen how forthcoming earnings will reflect on the stock, especially in light of the challenges noted in the report.

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