Akamai Continues to Perform

Last week on April 30, Akamai Technologies, Inc. (NASDAQ: AKAM) reported its first quarter results that beat profit estimates but missed revenue estimates by a million. Its shares were up 1.5%, or 55 cents, to $36.32 in after-hours trading. An earlier post profiling the company as part of the online video beneficiaries is available here.

Revenue grew 34% y-o-y and 2% q-o-q to $187 million. GAAP net income was $36.9 million, or $0.20 per diluted share, a whopping 92% y-o-y increase. Normalized net income was $75.6 million, or $0.41 per normalized diluted share, a 49% y-o-y increase and consistent with Q4 performance. Analysts estimated revenue of $188 million and earnings of $0.39 per share.

GAAP gross profit margin was 72%, down 0.5 a point from Q4 and 3 points from Q1 2007. The pricing pressure due to Level 3’s price cuts is the reason for the downward trend of the gross profit margins but the decline has moderated. Last quarter, it reported that 2007 gross margin was down 4 points y-o-y to 74%.

Revenue from outside the United States accounted for 25% of the revenue. In 2007, international revenue accounted for 23% of the revenue and Akamai expects this to be between 20 and 25% in 2008.

With its increasing focus on enterprise customers, average revenue per customer increased 21% y-o-y to $23,200 in the quarter. Its customers under long-term contracts increased by 27 in the quarter and 8% y-o-y to 2,672. Its net adds aren’t exactly increasing quarter by quarter and its churn is in the range of 3.5 -4%.

Based on its reasonably strong performance despite recession anxiety in the market, Akamai raised its normalized EPS guidance for 2008 from $1.65 to $1.70. It now expects normalized EPS for 2008 to be between $1.68 and $1.71 or normalized net income growth of 29% to 32%.

For Q2, it expects revenue in the range of $194 million to $199 million. Normalized EPS is expected in the range of $0.41 to $0.42.

In February, a jury ruled that its competitor Limelight Networks, Inc. is infringing all four of the claims that Akamai had asserted in its Internet content delivery patent. Akamai was awarded $45,526,946 in damages, plus interest.

Though the stock is picking up well from its 52-week low of $25.06, it is still not where it deserves to be. It is currently trading around $35 with a market cap of around $5.9 billion. This morning, following Microsoft’s withdrawal of its bid for Yahoo, Akamai is trading at $35.10, unaffected by the speculative forces driving the market.

Its been 10 years since Akamai was founded by Tom Leighton and Danny Lewin. Read my interview with Dr. Leighton available here. Danny Lewin died in a plain crash on 9/11.