Akamai Beats 2Q Estimates - Analyst Blog
26 Luglio 2012 - 12:15PM
Zacks
Akamai Technologies, Inc.
(AKAM) reported strong second quarter
earnings of 43 cents per share, up 23.4% from 35 cents earned in
the year-ago quarter. Earnings including stock-based compensation
expense and amortization of capitalized stock-based compensation,
but excluding amortization of other intangible and restructuring
charges, came in at 26 cents per share that surpassed the Zacks
Consensus Estimate by a couple of cents.
Quarter
Details
Total revenue increased 19.6% year
over year to $331.3 million and was higher than the Zacks Consensus
Estimate of $326.0 million. Total revenue also surpassed the higher
end of management’s guided range of $320.0 million to $330.0
million. The better-than-expected result was primarily driven by
continued solid growth across its business segments.
Public sector was the
fastest-growing (up 23.1% year over year) segment in the quarter,
followed by Commerce (up 21.3%), Media & Entertainment (up
19.4%), Enterprise (up 18.3%) and High Tech (up 18.0%). Higher
adoption of cloud infrastructure services (58% of the total
revenue), increased demand for optimization, performance and
security solutions and strong traffic growth on a year-over-year
basis were the main revenue drivers during the quarter.
Region wise, revenue from North
America climbed 23.0%, while international revenues jumped 11.0% on
a year-over-year basis in the quarter. Europe and Asia-Pacific
registered solid revenue growth during the quarter.
Gross profit increased 19.5% year
over year to $223.8 million in the reported quarter. Gross margin
remained flat on a year-over-year basis to 67.6% on higher
depreciation expense.
Total operating expenses surged
37.9% year over year to $151.4 million. The year-over-year growth
in expenses was primarily attributable to higher general &
administrative expense (up 26.1% year over year), research &
development expense (up 59.4% year over year) and sales &
marketing expense (up 43.6% year over year).
Operating income declined 6.6% year
over year to $72.4 million. Operating margin in the quarter was
21.9% compared with 28.0% in the year-ago quarter. Adjusted EBITDA
increased 13.4% year over year to $143.1 million in the quarter.
EBITDA margin stood at 43% in the quarter.
Net income increased 18.0% year
over year to $77.6 million in the quarter. Including stock-based
compensation expense and amortization of capitalized stock-based
compensation, but excluding amortization of other intangible
charges and restructuring charges, net income declined 4.2% year
over year to $50.0 million.
Akamai exited the quarter with cash
and cash equivalents (including marketable securities and
restricted marketable securities) of $496.6 million compared with
$404.5 million in the prior quarter. Akamai generated cash flow
from operations of $149.6 million in the reported quarter versus
$92.5 million in the previous quarter.
During the second quarter, Akamai
repurchased approximately 2.0 million shares for an average price
of $30.78 per share, totaling $67.0 million.
Guidance
Akamai expects revenue in the range
of $332.0 million to $342.0 million for the third quarter of 2012.
Akamai expects gross margin in the range of 67.0% to 68.0%. Akamai
expects adjusted EBITDA margin of 43.0%. Operating expense is
expected to increase by a couple of million from the second
quarter.
Earnings is expected to be between
40 cents and 42 cents per share, including tax charge of $27
million to $30 million, based on a GAAP tax rate of about 38% to
39%. Akamai forecasts capital expenditure (excluding equity-based
compensation) of approximately $60.0 million to $65.0 million for
the forthcoming quarter.
Our Take
We believe that Akamai’s second
quarter result continues to reflect growing pressure on margins,
particularly due to intense competition 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.
However, we believe that strong
demand for cloud infrastructure solutions, security and mobile
products, online video along with aggressive share repurchase and
strategic partnerships are positives for the stock over the long
term. Thus, 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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