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Factors to Consider Ahead of Akamai's (AKAM) Q2 Earnings

Akamai Technologies AKAM is scheduled to release second-quarter 2019 results on Jul 30.

Notably, the company has surpassed the Zacks Consensus Estimate in the trailing four quarters, the average beat being 8.29%.

Q1 at a Glance

Akamai had delivered non-GAAP first-quarter 2019 earnings of $1.10 per share beating the Zacks Consensus Estimate by 8 cents. The figure also surged 39% from the year-ago quarter (up 42% adjusted for foreign exchange).

Revenues of $706.51 million outpaced the Zacks Consensus Estimate of $698.36 million and improved 6% from the year-ago quarter (up 8% adjusted for foreign exchange).
 
Guidance & Estimates for Q2

For second-quarter 2019, Akamai envisions revenues between $688 million and $702 million. The corresponding Zacks Consensus Estimate is pegged at $695.69 million, indicating an improvement of almost 5% from the year-ago quarter.

Non-GAAP earnings are envisioned in the range of 97 cents to $1.02 per share. Meanwhile, the Zacks Consensus Estimate for second-quarter earnings is pegged at $1.01, up 1% in the past 30 days. The consensus suggests growth of about 21.7% from year-ago quarter.

Let's see how things are shaping up for this announcement.

Factors at Play

Solid demand for Kona Site Defender, Nominum services, Bot Manager and Prolexic Solutions are anticipated to drive Cloud Security Solutions revenues in the to-be-reported quarter. The Zacks Consensus Estimate for Cloud Security Solutions revenues for the second quarter is currently pegged at $195 million, compared with first quarter’s reported figure of $190.1 million.

Akamai Technologies, Inc. Price and EPS Surprise

 

Akamai Technologies, Inc. Price and EPS Surprise

Akamai Technologies, Inc. price-eps-surprise | Akamai Technologies, Inc. Quote

Synergies from the Nominum acquisition (completed in Nov, 2017) are enabling the company to enhance the Enterprise Threat Protector solution, and expand presence among carrier and enterprise customers.

Growing influence of the company’s security solutions among media customers is also noteworthy. Akamai recently rolled out Enterprise Defender to enable customers in addressing malware prevention and secure app access across multiple cloud platforms.

Notably, the Zacks Consensus Estimate for Media and Carrier Division revenues for the second quarter are currently pegged at $321 million, compared with first-quarter reported figure of $330.2 million.

Further, Janrain acquisition strengthened Akamai’s security solutions portfolio. The integration of Janrain’s Identity Cloud with Intelligent Edge Platform now allows Akamai to provide enhanced secure services to its CIAM customers, in turn bolstering engagement. This is expected to drive the top line in the second quarter. In fact, in the first quarter, Janrain contributed $4 million to security revenues.

Moreover, Akamai is benefiting from robust adoption of its Intelligent Edge Platform. During the quarter under review, Akamai announced that Hotstar, India's notable streaming platform, utilized Intelligent Edge Platform to enable viewers stream Vivo IPL and recorded notable viewership.

Recently, Akamai also rolled out Edge Cloud to aid businesses with real-time in-application messaging services, which is expected to generate incremental revenues.

Strong growth in demand for High Definition video over the Internet is driving bandwidth requirements, thereby accelerating demand for the company’s solutions and aiding revenues. Markedly, Akamai recently integrated its content delivery network (CDN) with Microsoft Azure services to make it easier for media organizations to build video offerings in cloud and monetize the same.

However, stiff competition in the CDN market and associated pricing pressure is likely to weigh on profitability.

Notably, the Zacks Consensus Estimate for CDN and other solutions revenues for the second quarter are currently pegged at $501 million, compared with first-quarter reported figure of $516.4 million.

Moreover, increasing bandwidth costs are a headwind.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

Akamai has a Zacks Rank #4 (Sell) and an Earnings ESP of -1.54%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some stocks you may consider, as our proven model shows that these have the right combination of elements to post an earnings beat this quarter.

Clearway Energy CWEN has an Earnings ESP of +15.00% and sports a Zacks Rank #1. The company is slated to report second-quarter 2019 results on Aug 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Warrior Met Coal HCC has an Earnings ESP of +8.66% and a Zacks Rank #2. The company is scheduled to report second-quarter 2019 earnings on Jul 31.

CGI Group GIB has an Earnings ESP of +1.27% and a Zacks Rank #2. The company is set to report third-quarter 2019 earnings on Jul 31.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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