Akamai Technologies, Inc. (
reported third quarter earnings of 27 cents per share, up 17.4%
from 23 cents earned in the year-ago quarter. Earnings including
stock-based compensation expense and amortization of capitalized
stock-based compensation, but excluding amortization of other
intangible and restructuring charges, came in at 30 cents per
share that beat the Zacks Consensus Estimate by a penny.
Total revenue jumped 22.5% year over year to $345.3 million,
which was well ahead of the Zacks Consensus Estimate. Total
revenue also surpassed management's guided range of $332.0
million to $342.0 million. The better-than-expected result was
primarily driven by continued solid growth across its business
Cloud infrastructure solutions increased 22.0% year over year,
while content delivery solutions jumped 23% year over year in the
reported quarter. Higher adoption of cloud infrastructure
services (58% of the total revenue), increased demand for
optimization, performance and security solutions and strong
traffic growth on a year-over-year basis were the main revenue
drivers during the quarter.
Media & Entertainment was the fastest-growing (up 23.1%
year over year) segment in the quarter, followed by Enterprise
(up 21.6%), Commerce (up 20.5%), Public sector (up 19.6%) and
High Tech (up 17.4%).
Region wise, revenue from North America climbed 23.0% while
international revenues jumped 30.0% on a year-over-year basis in
the quarter. Europe and Asia-Pacific registered solid revenue
growth during the quarter.
Gross profit surged 24.8% year over year to $235.3 million in
the reported quarter. Gross margin expanded 110 basis points
(bps) year over year to 68.1%.
Total operating expenses surged 26.1% year over year to $150.0
million. The year-over-year growth in expenses was primarily due
to higher general & administrative expense (up 7.2% year over
year), research & development expense (up 42.9% year over
year) and sales & marketing expense (up 39.3% year over
Operating income soared 22.5% year over year to $85.4 million.
Operating margin in the quarter remained flat on a year-over-year
basis at 24.7%. Adjusted earnings before interest, taxes,
depreciation, and amortization (EBITDA) increased 27.9% year over
year to $156.5 million in the quarter. EBITDA margin stood at 45%
in the quarter.
Net income increased 14.1% year over year to $48.2 million in
the quarter. Including stock-based compensation expense and
amortization of capitalized stock-based compensation, but
excluding amortization of other intangible charges and
restructuring charges, net income increased 15.6% year over year
to $53.9 million.
Akamai exited the quarter with cash and cash equivalents
(including short-term marketable securities) of $465.2 million
compared with $496.6 million in the prior quarter. Akamai
generated cash flow from operations of $141.5 million in the
reported quarter versus $149.6 million in the previous
Akamai expects revenue in the range of $373.0 million to
$385.0 million for the fourth quarter of 2012. Akamai expects
GAAP gross margin of approximately 70.0%. Akamai expects adjusted
EBITDA margin of 45.0%. Operating expense is expected to be in
the range of $14.0 million to $16.0 million.
Earnings are expected to be between 48 cents and 52 cents per
share, including tax charge of $34 million to $38 million, based
on a GAAP tax rate of about 39%. Akamai forecasts capital
expenditure (excluding equity-based compensation) of
approximately $60.0 million to $65.0 million for the forthcoming
We believe that strong demand for cloud infrastructure
solutions, security and mobile products, online video along with
aggressive share repurchase and strategic partnerships are
positives for the stock going forward.
However, intense competition from
Level 3 Communications Inc. (
Limelight Networks, Inc. (
and carriers such as
AT&T Inc. (
Verizon Communications (
, who are developing their own content delivery network, remains
the major concern.
Thus, we maintain our Neutral recommendation on a long-term
basis (6-12 months). Currently, Akamai has a Zacks #2 Rank, which
implies a Buy rating on a short-term basis.
AKAMAI TECH (AKAM): Free Stock Analysis
LIMELIGHT NETWK (LLNW): Free Stock Analysis
LEVEL 3 COMM (LVLT): Free Stock Analysis
AT&T INC (T): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
To read this article on Zacks.com click here.