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Cloud Stocks: Akamai’s Security Solutions Thriving

Posted on Monday, Aug 17th 2020

Since the onset of the pandemic, Akamai (NASDAQ: AKAM), the intelligent edge platform for securing and delivering digital experiences, has recorded high traffic levels and strong demand for its cloud security solutions and gaming. Last month, it reported a strong second quarter that beat estimates.

Akamai’s Financials

Akamai has become an indispensable part of the internet, supporting remote work, home entertainment, online banking, home deliveries, logistics, security systems, and commercial transactions of all kinds for billions of people around the world as they cope with a pandemic. The Akamai intelligent edge platform has grown to include over 300,000 servers in over 4,000 locations and nearly 1,500 network partners at the edge of the internet. Peak traffic on the Akamai platform exceeded 100 terabits per second every day in the second quarter. Akamai now works with more than 220 of the world’s largest OTT and broadcasting companies, as well as with 24 of the world’s 25 most popular video game publishers.

Revenue grew 13% to $795 million. GAAP net income was up 42% to $162 million or $0.98 per diluted share. Adjusted net income was up 29% to $227 million or $1.38 per diluted share. Analysts forecast adjusted earnings of $1.21 per share on revenue of $767 million.

Cash, cash equivalents and marketable securities was $2.4 billion as of June 30, 2020.

Web Division revenue was $404 million, up 7%. Media and Carrier Division revenue was $390 million, up 19% driven by very strong traffic growth in OTT video, gaming, and software downloads. Cloud Security Solutions revenue was $259 million, up 27%. Revenue from Internet Platform Customers was $51 million, up 10%.

US revenue was $444 million, up 6%. International revenue was $351 million, up 22%.

Not all was rosy though. Travel and hospitality and commerce and retail were some of the worst hit web verticals by COVID-19. Q2 was negatively impacted by approximately $14 million related to a combination of contract restructurings and elevated bad debt reserves, mostly in travel.

For Q3, the company expects to see its typical seasonal summer traffic moderation and forecast revenue in the range of $760 million to $785 million or up 7% to 11%. It expects the ban of 59 Chinese-based Web applications in India to negatively impact Q3 revenue by approximately $15 million sequentially. Akamai delivers traffic for approximately 30 of those applications. It also expects internet platform customer revenue to decline by $4 million to $5 million in Q3 primarily due to two of its largest platform customers renewing at new pricing levels in June. It also expects foreign exchange to have a positive $6 million impact on Q3 revenue compared to Q2 levels and no impact on a year-over-year basis.

Akamai’s New Offerings

During the quarter, Akamai’s cloud security solutions achieved $1 billion run rate on an annualized basis, a milestone that’s been reached by only a handful of cybersecurity businesses. Its cloud security solutions are used by thousands of enterprises, including 30 of the world’s top 35 banks; 17 of the world’s top 20 e-commerce sites; eight of the world’s top 10 asset managers; and the majority of the world’s largest airlines, hotels, insurance firms, and consumer goods companies.

The revenue in security was driven by its flagship services, Kona Site Defender, which provides Web application firewall capabilities, stops the attackers from taking over a website or corrupting it or stealing data. Its Bot Manager continues to be its fastest-growing product, which foils theft of login credentials. It is used by over 600 of the world’s major enterprises. DDoS mitigation platform Prolexic is also gaining traction.

To further strengthen its cloud security solutions, Akamai recently released Akamai Page Integrity Manager, which is designed to protect websites and end users from malware infected content that resides on third-party sites. Nearly half of the content on a typical website originates from third parties and attackers are embedding malware in this content to steal users’ credit cards and other personal data. Page Integrity Manager provides visibility and intelligence to help organizations stay ahead of this rapidly growing attack, and it has received strong positive feedback from early adopters. Akamai will be upselling this solution to over 2000 customers who use its web application firewall products.

Akamai has also expanded its offerings inorganically. Earlier this year, Akamai announced that it had closed an asset purchase transaction with Palo Alto -based Instart. As part of the deal, Akamai acquired customer contracts and intellectual property from Instart for an undisclosed sum. Instart was a product innovation leader in the CDN segment and had raised $140 million since being set up in 2010. Its financial details are not disclosed. Akamai plans to transition these customers to its platform.

.Its stock is trading at $107.90 with a market cap of $17.56 billion. It hit a 52-week high of $116.39 in July and a 52-week low of $75.18 in March.

Photo: akangarooo /Flickr.com

This segment is a part in the series : Cloud Stocks


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