Akamai Surpasses Estimates - Analyst Blog
09 Febbraio 2012 - 10:30AM
Zacks
Akamai Technologies, Inc. (AKAM) reported
earnings of 35 cents per share in the fourth quarter of 2011, which
surpassed the Zacks Consensus Estimate of 31 cents. Earnings
increased 16.7% from 30 cents per share reported in the year-ago
quarter.
Reported earnings include stock-based compensation expense and
amortization of capitalized stock-based compensation, but exclude
amortization of other intangible charges and restructuring
charges.
The year-over-year growth was primarily driven by strong
revenues; partially offset by higher expenses, which dragged
margins in the reported quarter.
Revenue Performance
Total revenue in the quarter was $323.7 million, up 13.7% year
over year and surpassed the Zacks Consensus Estimate of $311.0
million. Total revenue also managed to achieve the higher end of
management’s guided range of $303.0 million to $315.0 million. The
better-than-expected result was primarily driven by continued solid
growth across its business segments.
Revenue from Akamai’s fastest-growing Enterprise vertical grew
23.0% year over year to $41.2 million, as more customers adopted
cloud services for their businesses.
Revenue from Commerce increased 20.0% year over year to $76.9
million, driven by an increase in the online shopping during the
holiday season. Public sector climbed 3.4% year over year to $15.2
million and Media & Entertainment jumped 11.5% to $137.4
million. Revenue from the High Tech vertical grew 9.0% year over
year to $53.0 million in the reported quarter.
Region wise, revenue from North America climbed 13.0% year over
year. International revenues jumped 15.0% year over year. Revenue
for the quarter witnessed robust growth across Europe and other
economies, except for Japan.
Operational Metrics
Gross profit increased 11.5% year over year to $221.2 million in
the reported quarter. However, gross margin contracted 140 basis
points (bps) year over year to 68.3% in the same period due to
unfavorable business mix.
Total operating expenses increased 12.9% year over year to
$137.5 million. The year-over-year growth in expenses was primarily
attributable to higher general & administrative expense (up
22.0% year over year) and research & development expense (up
10.1% year over year). However, sales & marketing expense
remained flat when compared with the prior year quarter.
Operating income on a non-GAAP basis was $83.5 million versus
$76.6 million in the year-ago quarter. Operating margin in the
quarter was 25.8% compared with 26.9% in the year-ago quarter.
Balance Sheet
Akamai exited the quarter with cash and cash equivalents
(including marketable securities and restricted marketable
securities) of $849.2 million compared with $687.6 million in the
prior quarter.
Akamai generated cash flow from operations of $135.9 million in
the reported quarter versus $116.3 million in the previous quarter.
During the fourth quarter, Akamai repurchased approximately 3.0
million shares for $76.0 million, at an average price of $26.38 per
share.
Guidance
Akamai expects revenue in the range of $305.0 million to $313.0
million (11.0% to 13.0% year-over-year growth) for the first
quarter of 2012. Management believes that seasonal pressure can
possibly drag the revenues down in the upcoming quarter.
Akamai expects gross margins to remain flat on a sequential
basis. Akamai expects adjusted EBITDA margin to be approximately
43.0%.
Earnings is expected to be between 36 cents and 39 cents per
share, including tax charge of $25 million to $30 million, based on
a GAAP tax rate of about 38% to 39%. Currently, the Zacks Consensus
Estimate (including stock-based compensation) for the fourth
quarter is pegged at 30 cents per share.
Akamai forecasts capital expenditure (excluding equity-based
compensation) of approximately $50 million for the forthcoming
quarter.
Our Take
We believe that increased usage of cloud computing technology
ensures higher adoption of value-added solutions, which will drive
strong top-line growth going forward. Moreover, strong demand for
security products, aggressive share repurchase and strategic
partnerships are positives for the stock over the long term.
Moreover, the acquisition of Cotendo and Blaze is expected to
strengthen Akamai’s dominant position in the dynamic site
accelerator (DSA) market.
However, weak traffic growth remains a concern, as Akamai
continues to face intense pricing pressure from competitors like
Level 3 Communications Inc. (LVLT),
Limelight Networks, Inc. (LLNW) and carriers such
as AT&T Inc. (T) and Verizon
Communications (VZ), who are developing their own content
delivery network. We believe this will hurt revenue growth going
forward.
We maintain our Neutral recommendation on a long-term basis
(6-12 months). Currently, Akamai has a Zacks #3 Rank, which implies
a Hold rating on a short-term basis.
AKAMAI TECH (AKAM): Free Stock Analysis Report
LIMELIGHT NETWK (LLNW): Free Stock Analysis Report
LEVEL 3 COMM (LVLT): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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