Will Top-Line Expansion Boost Akamai's (AKAM) Q4 Earnings?

Akamai Technologies, Inc. AKAM is scheduled to release fourth-quarter 2023 results on Feb 13, after the closing bell. In the last reported quarter, the company delivered an earnings surprise of 7.95%. It pulled off a trailing four-quarter earnings surprise of 6.89%, on average. The company is expected to witness a top-line expansion year over year, owing to healthy demand trends in several business verticals.

Factors at Play

During the quarter, Akamai announced that it has introduced its Client-Side Protection & Compliance product in the Microsoft Azure Marketplace. The solution offers comprehensive visibility into the client-side attack surface. It efficiently detects malicious script behavior in real time and swiftly alerts security teams to minimize threats.

The solution enables organizations to obtain PCI DSS v4.0 compliance with ease and provides businesses the assurance that end-user payment card data is safeguarded. Availability on Azure marketplace will significantly increase exposure of Akamai’s solution. This is likely to have a favorable impact on fourth-quarter results.

In the quarter under review, Akamai collaborated with GlobalLogic Inc., a Hitachi Group company, to develop a wide range of enterprise technology solutions. The strategic partnership aims to offer system integration, managed services and professional services across various industries, including media & entertainment, telecommunications, financial services, automotive and e-commerce.

Akamai announced that it has joined forces with Deloitte to develop an enterprise-ready solution that efficiently eliminates ransomware attacks. Deloitte is aiming to combine its expertise in cybersecurity and network forensics with Akamai’s Guardicore Segmentation solution to deliver Zero Trust microsegmentation and incident response services for Deloitte customers worldwide. These developments are likely to have supported the top line during the quarter.

Key Developments in Q4

In the quarter under review, Akamai announced that it has acquired some assets, including select content delivery customer contracts, from Lumen Technologies, Inc. Lumen customers will be able to leverage Akamai’s distributed cloud platform and also able to take advantage of the full portfolio of Akamai solutions. Notably, the procedure does not include the acquisition of Lumen’s personnel or technology. This is expected to improve revenues by $40-50 million in fiscal 2024. However, the company expects no material impact of the transactions on fiscal 2023 revenues.

Overall Expectations

Our estimate for revenues from the security segment is pegged at $478.6 million, suggesting 19.6% year-over-year growth. Our revenue estimate for the compute vertical is pegged at $130.5 million, indicating growth from $112.4 million reported in the prior-year quarter. Revenues from the delivery segment are projected at $380.6 million.

For the fourth quarter of 2023, the Zacks Consensus Estimate for revenues is pegged at $998 million, indicating year-over-year growth from $928 million. The consensus estimate for adjusted earnings per share stands at $1.59, suggesting growth from $1.37 reported a year ago.

Earnings Whispers

Our proven model predicts a likely earnings beat for Akamai this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is exactly the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +1.61%. The Most Accurate Estimate is pegged at $1.62, while the Zacks Consensus Estimate stands at $1.59. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Akamai Technologies, Inc. Price and EPS Surprise

Akamai Technologies, Inc. Price and EPS Surprise

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

Zacks Rank: Akamai carries a Zacks Rank #3.

Stocks to Consider

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

InterDigital, Inc. IDCC is set to release quarterly numbers on Feb 15. It has an Earnings ESP of +1.93% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Shopify SHOP is +1.02% and it sports a Zacks Rank of 1. The company is scheduled to report quarterly numbers on Feb 13.

The Earnings ESP for Watts Water Technologies WTS is +0.87% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Feb 12.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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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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