Deep Dives

Latest Financial Results and Segment Performance

Quarterly Earnings: Akamai’s most recent earnings (Q4 2024, ended Dec 31) showed mixed performance. Revenue was $1.02 billion, up roughly 3% year-over-year, with adjusted earnings per share (EPS) of $1.66 (slightly down from $1.69 a year ago) (siliconangle.com). Both top and bottom line slightly beat consensus estimates (analysts expected ~$1.01 billion revenue and $1.52 EPS) (siliconangle.com). Despite the revenue growth, the small decline in EPS indicates marginal pressure on profit margins, as costs rose faster than sales. Akamai’s gross margin remains healthy (~56% in 2024) and operating margin around 16%, but net profit margin is about 12.6% (finviz.com), suggesting profitability is solid but not expanding significantly.

Segment Performance: Akamai’s results reflect a shifting business mix: Notable trends: Akamai’s security and compute divisions now contribute the majority of revenue (about 69% combined) and are growing double-digits (gurufocus.com). However, the legacy media/content delivery segment is shrinking double-digits, dragging on overall growth. This reflects Akamai’s ongoing transition from a pure CDN provider toward a broader cloud and security platform. The company has been investing in new products (e.g. enhanced DDoS protection and an AI-powered security assistant introduced in Q4 (siliconangle.com)) to drive growth in security. Management highlighted these as part of Akamai’s evolution into a “leading cybersecurity and cloud solutions provider” (siliconangle.com).

Guidance: Forward guidance came in lower than expected, which was a key concern from the report. For Q1 2025, Akamai projects revenue of $1.00–$1.02 billion (roughly flat YoY) and adjusted EPS of $1.54–$1.59, both below Wall Street’s prior forecasts ($1.04 billion and $1.61 EPS) (siliconangle.com). For full-year 2025, the company guided $4.00–$4.20 billion in revenue (just +2–5% growth) and $6.00–$6.40 in EPS, significantly under consensus ($4.25 B and $6.82) (siliconangle.com). This implies only low-single-digit revenue growth and a slight EPS decline at the midpoint, signaling that Akamai expects continued weakness in its legacy businesses and ongoing margin pressures. Management attributed some of this cautious outlook to macroeconomic headwinds and foreign exchange impacts (the 2–3% 2025 revenue growth forecast is after a FX drag) (investing.com).

Pre-Earnings Context: Prior to the earnings release, AKAM stock had been underperforming the broader market. Over the past year, the stock fell around 8%, even as the S&P 500 climbed ~20%​ (wallstreetpit.com). In early 2025, Akamai shares had inched up about 2–3% year-to-date (still trailing the S&P’s ~4% gain)​ (wallstreetpit.com). The stock was trading near $98 just before the Q4 results, toward the lower end of its 52‐week range (which peaked around $113)​ (finviz.com).

Post-Earnings Selloff: The underwhelming 2025 guidance sparked a sharp selloff. In after-hours trading following the report, AKAM initially dropped ~5–7%​ (wallstreetpit.com) (siliconangle.com). The next day, the decline intensified: shares plunged about 18–21% at the lows, marking one of the stock’s worst single‐day drops in years. By midday, the stock traded around $77–$80, down from a $98 prior close​ (finviz.com). This is a new 52‐week low (previous low was ~$84) and roughly a 28% slide year‐to‐date (finviz.com) (finviz.com). The massive gap‐down reflects investors’ disappointment with Akamai’s growth outlook.

Trading Volume: The sell‐off was accompanied by very heavy trading volume, indicating a rush for the exits. Over 15.5 million shares changed hands the day after earnings​ (finviz.com), which is nearly 9× Akamai’s average daily volume (~1.7M). Such elevated volume (and a Relative Strength Index that dropped into the low‐20s, indicating oversold conditions​ (finviz.com) underscores how negative sentiment became immediately after the guidance miss. Many shareholders likely reacted to the flurry of analyst downgrades (detailed below) and the cautious outlook by unloading shares.

Investor reaction was decisively negative. The stock’s steep post‐earnings drop erased its YTD gains and then some, reflecting a reset in expectations. Akamai stock is now trading around multi‐year lows, suggesting that the market has priced in a lot of pessimism about its near‐term prospects.

Analyst Downgrades and Investor Sentiment

Following the earnings report and weak forward guidance, several Wall Street analysts moved to downgrade Akamai, exacerbating the pressure on the stock. These downgrades and their reasoning provide insight into investor sentiment, as analysts flagged concerns about Akamai’s growth and transition. Recent notable rating changes include:
 

• Piper Sandler: Downgraded AKAM from Overweight to Neutral and cut the price target from $112 to $100​ (markets.businessinsider.com). Piper’s analyst warned of “a lot of moving parts that create messiness ahead,” citing low growth, declining margins, higher needed capex, and uncertainty as Akamai undergoes a multi‐year cloud/security transition​ (markets.businessinsider.com). They noted that Akamai’s fastest‐growing segments (cloud computing, Zero‐Trust security, etc.) still represent a relatively small portion of the business, while the core CDN segment slows – hence investors “should look elsewhere until some of the dust settles”​ (markets.businessinsider.com). Piper also expressed skepticism about management’s new 3–5 year targets, calling the framework “optimistic” given past targets that were missed​ (markets.businessinsider.com).

• BofA Securities (Bank of America): Downgraded Akamai to a Neutral (Hold) rating with a $100 price target​ (news.futunn.com). BofA’s analysts pointed to the transitional challenges Akamai faces in shifting from legacy web delivery to newer areas like cloud computing and security. The downgrade reflects a more cautious view on growth – the firm noted Akamai’s guidance implies only ~3% revenue growth in 2025, and they see limited catalysts in the near term (especially as the legacy businesses stabilize or decline). Note: BofA’s specific commentary wasn’t publicly quoted, but the move to Neutral aligns with the broader skepticism on Akamai’s ability to re‐accelerate growth.

• TD Cowen: Downgraded the stock from Outperform to Market Perform (i.e. Buy to Hold), slashing the price target from $125 to $98​ (finviz.com). Cowen’s downgrade was likewise driven by the weaker 2025 outlook. They had expected better growth, and the guidance miss led them to adopt a more conservative stance. Cowen analysts likely share similar concerns about slowing security growth and the time it may take for cloud computing initiatives to meaningfully boost results (Cowen’s target implies the stock will hover around the high‑$90s, roughly where it traded pre‑drop).

• Craig-Hallum: Downgraded from Buy to Hold with a $90 target​ (markets.businessinsider.com) after what it called a “disappointing” FY25 guidance. Craig-Hallum highlighted several negative surprises in the outlook: notably a deceleration in the security business (slower security revenue growth than expected) and larger-than-anticipated headwinds in other areas​ (markets.businessinsider.com). The analyst pointed out that the slowdown in security is a key concern with long‑term implications, and felt this was underappreciated by management​ (markets.businessinsider.com). Additionally, they noted Akamai’s Compute segment saw the loss of some substantial legacy business, and the Delivery segment faced higher TikTok‑related traffic losses than expected​ (markets.businessinsider.com). (TikTok has been moving more of its content delivery in‑house, which hit Akamai’s CDN traffic.) These factors led Craig-Hallum to adopt a more cautious stance, as they believe the growth headwinds and competitive pressures will weigh on Akamai’s performance going forward.

Each of these downgrades underscores a common theme: waning confidence in Akamai’s near‑term growth story. The shift in analyst tone – from generally positive to neutral/negative – likely contributed to the sharp post‑earnings selloff. When multiple analysts lower ratings and price targets in unison, it can sour investor sentiment further by reinforcing the negatives. Indeed, the market reaction shows that investors are internalizing these concerns. The consensus price targets have come down (many now around $95–$105​ (news.futunn.com). (finviz.com), vs. $110+ prior), and the stock’s fall indicates a crisis of confidence. Going forward, Akamai will need to execute well on its cloud and security transition to win back bullish sentiment. Positive surprises (or stabilization in the declining segments) would be required to overturn the cautious outlook that analysts have now adopted.

Valuation vs. Industry Peers

After the recent drop, Akamai’s valuation looks relatively modest, especially compared to high-growth peers in cloud and security. Below is a comparison of key valuation metrics (price-to-earnings and price-to-sales) for Akamai versus some peers:
 

• Akamai (AKAM): After the selloff, AKAM trades around 2.9× trailing 12‐month sales (P/S ~2.9) (finviz.com). Its trailing P/E is about 24 (in line with the S&P 500 average of ~23 (finviz.com), but the forward P/E is only ~12 based on 2025 earnings guidance (finviz.com). This low forward P/E reflects the fact that earnings are expected to be roughly flat or down next year – the market is assigning a relatively low multiple to Akamai’s slow-growth profile. Akamai’s PEG ratio (P/E to growth) is elevated at ~4.8 (finviz.com), indicating the valuation is not cheap relative to its minimal growth. However, on an absolute basis, Akamai’s ~12× forward earnings and ~3× sales are far lower multiples than those of faster-growing cloud peers.

• Cloudflare (NET): Cloudflare is a younger competitor focused on cloud network and security services. It commands a lofty valuation – currently around 30× TTM revenue (P/S ≈ 31) (finviz.com). Cloudflare is not GAAP profitable yet (it had a net loss over the last year), so its trailing P/E is not meaningful (negative earnings). On a forward basis, Cloudflare is expected to just about break even or show a small profit next year; its forward P/E is extremely high (well over 100 – ~149 based on one estimate) (finviz.com). Investors are clearly pricing in high growth expectations for Cloudflare (its revenue has been growing ~40% YoY historically). By comparison, Akamai’s single-digit growth looks very slow, which explains the huge valuation gap. In short, Cloudflare trades at a premium valuation commensurate with its rapid growth and SaaS-like margins potential, whereas Akamai is valued more like a mature, low-growth tech company.

• Fastly (FSLY): Fastly is another edge cloud and CDN provider that competes with Akamai in content delivery. Fastly’s stock has struggled and it carries a lower valuation than Akamai. Its P/S is about 1.9 (finviz.com), reflecting investor skepticism after growth decelerated and major customers (like TikTok in prior years) left. Fastly is still unprofitable (negative earnings of -$1.15/share TTM) (finviz.com), so no meaningful trailing P/E. Even looking forward, Fastly is only expected to reach roughly breakeven EPS (~$0.02) next year, so its forward P/E is astronomically high (400+ if using that tiny forecasted profit) (finviz.com). Essentially, Fastly is valued at ~2× sales with no earnings – a “show me” story. The low sales multiple (1.9) shows the market has low expectations for Fastly’s growth and turnaround, especially compared to Cloudflare. Akamai’s ~3× sales multiple sits between Fastly’s and Cloudflare’s, reflecting its profitable status but slower growth.

• Security Software Peers: If we compare Akamai to pure-play cybersecurity firms (like Palo Alto Networks or CrowdStrike), we see those peers also trade at higher multiples than Akamai. For instance, Palo Alto Networks (a firewall and cloud security leader) trades around ~8× sales and ~45× forward earnings, and CrowdStrike (cloud endpoint security) around ~15× sales (with a rich P/E since it’s growing ~30%+). These higher multiples underscore that the market rewards growth. Akamai’s security business is growing (~14% YoY) (siliconangle.com), but since that is only part of the company, Akamai doesn’t get a pure security valuation. Instead, its overall valuation is weighed down by the shrinking CDN unit.

Akamai’s valuation is relatively low for the tech sector, at ~12× forward earnings and ~3× sales​ (finviz.com). This likely reflects a combination of factors: its growth is modest, its business is in transition, and investors are uncertain if it can successfully reaccelerate. Peers like Cloudflare (with aggressive growth potential) trade at dramatically higher multiples (30×+ sales)​ (finviz.com), while struggling smaller peers like Fastly trade at lower sales multiples but have yet to prove a path to profits​ (finviz.com) (finviz.com). By comparison, Akamai appears value-priced but for good reason – it’s a steadier, more mature business with lower growth. If Akamai can reignite growth in security/cloud and hit its targets, there could be upside given the low earnings multiple. Conversely, if challenges persist, its valuation could remain subdued. Investors are essentially in “wait-and-see” mode, which is reflected in the compressed multiple.

Macroeconomic and Geopolitical Factors Impacting Akamai

Akamai operates a globally distributed business, and its performance is influenced by broad economic conditions and geopolitical events. Several macro and world developments are affecting Akamai’s business and outlook:

Softening IT Spending: A key macro factor weighing on Akamai is the current economic slowdown and inflationary environment. High inflation and rising interest rates have led many businesses to tighten their IT budgets, which directly impacts demand for cloud and content delivery services​ (finimize.com). According to Akamai, some enterprise customers are cutting back or delaying projects in an effort to control costs amid economic uncertainty​ (finimize.com). This has contributed to “sluggish demand” in areas like Akamai’s cloud and CDN offerings. The company explicitly cited “economic uncertainties” and inflation pressures as reasons for lowering its 2025 revenue forecast​ (finimize.com). Essentially, in a weaker economy, clients are more cautious with spending on web infrastructure, which is a headwind for Akamai’s top-line growth.

Foreign Exchange Headwinds: As a global company (with significant international revenue), Akamai is also exposed to currency fluctuations. The U.S. dollar has been relatively strong, and this created a foreign exchange (FX) headwind that is dampening reported growth. In its guidance, Akamai noted that FX impacts will hold 2025 revenue growth to about 2–3% in USD terms​ (investing.com). In constant currency, the growth would be a bit higher. This means that even where underlying demand exists, a strong dollar translates into fewer dollars reported. Macroeconomic trends affecting currencies (like interest rate differentials between the U.S. and other regions) thus have a direct effect on Akamai’s financials. Investors are mindful that if the dollar remains strong, Akamai’s international revenues (over 30% of total) will be somewhat muted when converted to USD​ (investing.com).

Geopolitical Tensions and Cybersecurity: On the geopolitical front, rising global tensions and conflicts have a mixed impact on Akamai. On one hand, geopolitical conflicts are driving an increase in cyber attacks, which actually boosts demand for Akamai’s security services. For example, Akamai’s research has observed surges in Distributed Denial-of-Service (DDoS) attacks on financial institutions during periods of geopolitical strain​ (finviz.com). Recent world events – such as the war in Ukraine and other international conflicts – have led to a spike in state-sponsored and hacktivist cyberattacks. Akamai, as a major provider of cloud security and DDoS protection, stands to benefit as companies and governments bolster their defenses. The company has highlighted that geopolitical tensions are fueling cyber threats, underscoring the need for its web security solutions​ (finviz.com). In this sense, chaotic world events can increase security business opportunities for Akamai.

However, geopolitical issues can also pose challenges. For instance, U.S.–China tech tensions have had indirect effects: Chinese-owned TikTok, facing U.S. regulatory scrutiny, has been moving its data hosting and delivery in-house and to other providers – this resulted in a loss of traffic that hurt Akamai’s Delivery segment​ (markets.businessinsider.com). Additionally, export restrictions or government mandates about data localization (which are geopolitical in nature) could affect Akamai’s operations in certain regions. Thus far, the biggest geopolitical impact has been positive on the security side (more attacks to fend off), but negative on the delivery side (e.g. losing a major Chinese client’s business in the U.S.). It’s a reminder that international politics can alter the internet ecosystem in which Akamai operates.

Competitive Landscape and “AI Arms Race”: Another factor affecting Akamai’s future is the rapid technological change and competition in its industry, which has a global character. Notably, the “AI arms race” in cybersecurity is influencing Akamai’s strategic direction. Major competitors like Palo Alto Networks and CrowdStrike are leveraging artificial intelligence to enhance their security platforms​ (finimize.com). These firms are leaders in next-gen, AI-driven security and have been capturing enterprise customers. Akamai finds itself navigating this fierce competition – it must innovate (for example, integrating more AI/ML into its solutions) to keep pace. The company’s introduction of AI-powered security features (like an AI assistant for threat analysis) is one response​ (siliconangle.com). Still, the presence of well-funded rivals with cutting-edge AI capabilities is a headwind, as it forces Akamai to invest heavily to avoid losing relevance in the security arena. Finimize News noted that competitors’ advancements in AI are “reshaping the cybersecurity landscape,” and this partly explains why Akamai’s long-term framework may be viewed cautiously​ (finimize.com). In essence, global tech trends – especially the rise of AI in cloud and security – are a double-edged sword: they present an opportunity for Akamai to upgrade its services, but also a threat if the company lags behind.

Other Macro Trends: Additionally, broader internet usage trends post-pandemic are normalizing. The COVID-driven surge in online traffic has leveled off, which means Akamai’s CDN business no longer enjoys the extraordinary traffic growth of 2020/2021. At the same time, remote work and cloud adoption remain high, which supports demand for cloud infrastructure and security (a plus for Akamai). Global supply chain and energy issues have largely less impact on Akamai (as a software/cloud provider) compared to hardware tech firms, but any large-scale economic disruptions can indirectly affect client demand.

Macroeconomic and geopolitical factors present a mixed backdrop for Akamai:
 

• A challenging economy and strong dollar are near-term drags on revenue growth (finimize.com)(investing.com).
• Geopolitical conflicts are heightening cybersecurity needs, which Akamai can capitalize on (finviz.com)
• Technological competition (AI in security) is intensifying globally, pressuring Akamai to execute its transition quickly (finimize.com)

Akamai’s future performance will depend on how well it navigates these external factors. If IT spending rebounds with an improving economy or if cyber threats continue to rise, Akamai could see upside. Conversely, prolonged economic weakness or losing ground to nimble competitors are key risks. Investors will be watching world news – from central bank policies (impacting currency and spending) to cybersecurity incidents – as potential catalysts for Akamai in the coming quarters. The company’s ability to adapt to the macro/geopolitical climate while focusing on its cloud and security strategy will be crucial for restoring growth and investor confidence​ (finimize.com) (finimize.com).

Sources:
 

• Akamai Q4 2024 earnings highlights and segment data (siliconangle.com)(siliconangle.com); Full-year results and CEO statement (siliconangle.com).
• Guidance figures for Q1 and FY2025 vs. consensus (siliconangle.com).
• Market reaction and stock price/volume data (Finviz, etc.) (finviz.com)(wallstreetpit.com).
• Piper Sandler downgrade commentary (TheFly via TipRanks) (markets.businessinsider.com).
• BofA and other analyst rating changes (news.futunn.com)(finviz.com).
• Craig-Hallum analysis of guidance surprises (security slowdown, TikTok headwind) (markets.businessinsider.com).
• Peer valuation metrics from Finviz: Cloudflare and Fastly financial ratios (finviz.com)(finviz.com).
• Finimize Newsroom – summary of Akamai’s outlook cut due to economy and AI competition (finimize.com).
• Press release noting geopolitical-driven DDoS attack surge (finviz.com).